Category: Insurance

ACE Packages New Multinational Insurance Solution for UK and Ireland Customers
InsuranceRisk Management

ACE Packages New Multinational Insurance Solution for UK and Ireland Customers

This cover will be spanning, traditionally separate lines of business, for UK and Ireland based companies with one or more overseas subsidiaries. The cover has been designed by a specially-created project team, selected from across the region and from multiple disciplines, responding to the latest broker and client research.

During 2014, the ACE project team spoke with around 30 UK broker organisations to identify how multinational insurance solutions could be better structured to support the changing needs of their clients as they expand internationally. The common themes that emerged from this research were the need for flexibility, coherence and easily-tailored solutions, combined with the importance of seamless coverage across a client’s international operations and traditional insurance lines. Emphasis was given to the importance of clear and relevant solutions for those organisations that are just beginning to trade internationally or operate in a limited number of overseas territories.

ACE Multinational Partner has been designed to meet these needs as well as the requirements of the Insurance Act 2015, due to take effect next year. At the heart of the new proposition is a recognition of the importance of a globally compliant insurance programme in an increasingly complex regulatory and compliance environment.

Detailed benefits include:

– ACE’s broadest-ever cover as standard and available across a range of lines of business, including property, business interruption (including money, goods in transit, contract works and machinery breakdown), general liability (including environmental liability), employers’ liability, computer, global terrorism.

– Flexible cover to suit all sizes of clients.

– Simple, customer-friendly and jargon-free wording.

– Removal of insurer avoidance remedy for innocent non-disclosure.

– No basis of contract clause (See related ACE press release for full details1).

– Standard policy is warranty free.

– Access to local underwriters across the UK and Ireland, empowered to make underwriting decisions.

– Access to ACE’s global network and local regulatory and compliance know-how – including the ACE Worldview online portal which offers 24/7 real-time programme information.

– Dedicated relationship managers, underwriting, claims and engineering personnel around the world.

– Multinational training and support for brokers throughout the region, where they want it.

Sally Blyfield, ACE Multinational Partner project leader for the UK and Ireland at ACE said:

“Recent ACE research2 shows that the vast majority of European companies believe their risk profile has become more multinational over the past three years. With a mounting array of international regulations bringing ever more complex compliance requirements, they are increasingly at risk of fines, reputational damage and the potential for invalidated claims if their insurance programmes fail to perform as expected. ACE Multinational Partner provides trusted ‘belt and braces’ protection backed-up by comprehensive global service, and we have packaged it in a way that we are confident will work effectively for companies of all sizes and industries.”

Phil Sharpe, Chief Operating Officer for the UK and Ireland at ACE said:

“When we spoke to brokers about their clients’ multinational insurance needs last year, compliance with local insurance standards, advice and support managing international risks and access to on-the-ground account and claims assistance were among the priorities they highlighted. Through our own operations in 54 countries, a global network spanning 200 territories and a team of 2,000 claims handlers around the world, ACE has the right people in the right places to deliver the high level of responsiveness our clients demand and deserve, while minimising cultural and language barriers and time zone issues.”

The Business Elite UK CEO of the Year 2016
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The Business Elite UK CEO of the Year 2016

Celebrating its tenth anniversary since writing its first policy in January 2006, Dewsall has built a business which now writes premiums of over £100m annually, insuring businesses across nine European countries, providing a range of products to SMEs across many sectors.

When asked what he thought he would achieve back in 2006, Dewsall explains: “Europe was going through many changes and I had worked successfully across a number of insurance markets. It was clear to me that with the right brand and capital backing, we could build a service offering that would be defined by quality and trust. We set about building Gable from a standing start, creating a product portfolio that was designed to meet what the customer required. It was about offering bespoke products through a selected distribution network of brokers around Europe who we could work with and build a trusted brand in the insurance sector.”

Clearly, customers liked what they saw, and Gable now provides a range of commercial insurance products through specialist brokers in the UK, France, Italy, Ireland, Denmark, Norway, Germany, Sweden and Spain.

Gable commenced underwriting in the UK market with its construction liability insurance products. Over subsequent years since then it has consistently expanded its product range and the number of European markets in which it operates, achieving uninterrupted growth in both premiums written and insurance profits.

“Since inception we have managed our growth carefully, balancing the requirements of our customers with the management of risk. Ultimately, we are there to support our customers with bespoke products that can allow them to do what they are good at. Over the last ten years we have seen many different situations where businesses that we insure have required swift action by us to help them get back on their feet after an event which threatens their business. At the same time, we have managed to qualify our overall risk by the purchase of reinsurance from world-wide A-rated reinsurers” he continues.

Dewsall and his team have certainly delivered on the promise to customers, with high upper quartile retention rates supporting year-on-year growth in the business, allied with a series of new products. Gable has also carefully built a network of trading relationships with a range of specialist brokers in each of the countries in which it has expanded into, providing bespoke products such as Deposit Guarantees, Commercial Bonds, Latent Defect and its core range of Commercial Combined products.

Gable produced another year of growth in 2015 with the underlying business producing a strong core underwriting performance, achieved against a backdrop of challenging markets. Commenting on Gable’s 2015 performance, Dewsall comments: “As always, we have remained focussed on delivering high service levels to our customers whilst managing underwriting profits, delivering a strong and growing cash position which has continued to increase by over 40% on 2014.”

Where does Gable go from here?

Dewsall reveals that his team will continue to focus on building Gable’s brand reputation in each of the markets in which it now operates and continue to listen carefully to what its customers are asking for.

“Clearly we have the key advantage derived from our efficient underwriting platform, affording us the ability to write profitable business across multiple sectors and differentiate through service, product specification, claims handling and settlement to our customers. This has allowed us to grow the business while still maintaining our pricing discipline. There are still a number of markets where we are being asked to provide new bespoke products, there is still much to play for, despite the changes to the regulatory regime across the EU which is a challenge to everyone in the insurance business.

We know that we can build significantly on what we have already achieved, so in essence, it will be more of the same for us” he explains.Gable’s distribution is focused on exclusive distribution relationships in different territories and markets, utilising its networks of brokers, building some commercial partnerships with some major broking networks along the way. Gable’s European business outside of the UK accounts for over 50% of gross written premiums, with an increasingly diversified book of business.

“Our continued strong growth is driven by our bespoke products provided through our expanding European wide distribution channels. Although the economic environment in general remains challenging, I believe we have excellent momentum and can foresee continued expansion supported by our European broker network. The fundamentals of our business are sound and underpin our optimism and growth ambitions for the future” he enthuses.

About William Dewsall

William Dewsall has over 30 years’ experience in the European insurance market having worked at Jardine Glanville (UK) and Alexander Stenhouse. In 2000 he established his own underwriting agency, writing insurance risks in the UK and worldwide on behalf of a number of insurers including Italian giant, Assicuriazoini Generali. He was instrumental in developing policy wordings for the Contractors and Liability insurance sector, credited in the foremost sector reference ‘Construction Insurance and UK Construction Contracts’. He is registered with the FCA as an approved person for insurance activities.

Company: Gable Holdings Inc
Name: William Dewsall, CEO
Email: [email protected]
Website: www.gableholdings.com
Telephone: +44 (0) 20 7337 7460

Leading Dutch Insurance Group Aegon Invests in Microfinance
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Leading Dutch Insurance Group Aegon Invests in Microfinance

Aegon began investigating the potential of microfinance investments in 2014. The Aegon The Netherlands Risk & Capital Committee which approved the mandate concluded that microfinance was a good fit within Aegon’s portfolio, stating that: “In the current low interest rate environment the returns from microfinance are attractive, the risks and durations are acceptable, and there is essentially no correlation with other asset classes Aegon invests in.”

The biggest single challenge, according to Marcel van Zuilen, a portfolio manager at Aegon Asset Management, was reporting requirements. “Solvency II introduced far-reaching ‘look-through’ reporting requirements. Microfinance funds need to report on their investments in a great amount of detail so that the investor can demonstrate to the regulator that it is compliant. If you consider that data needs to come from microfinance institutions in places like Cambodia, Nigeria and some 100 other countries you realize that’s no simple task.”

To truly understand the microfinance investment chain and to select the microfinance funds that can handle Aegon’s demands necessitated the development of a new area of expertise, which according to Harald Walkate, Global Head of Responsible Investment at Aegon Asset Management, can now also be leveraged to service Aegon and external investment clients in a sustainable manner.

A solid track record and diversified investment products

Swiss-based responsAbility looks back on a 13-year track record of successful microfinance investments. Managing a whole series of investment solutions, responsAbility is the world’s largest private investor in the area of microfinance. At the end of 2015, responsAbility-managed investment vehicles had USD 1.9 bn of capital invested in 314 financial institutions across 76 developing and emerging countries. responsAbility has been active in the Dutch market since January 2016. The largest microfinance fund in the world, which is managed by responsAbility, is now available for retail distribution in the Netherlands along with the vehicles dedicated to institutional investors.

Building on its solid experience in the area of microfinance, responsAbility has since expanded its operations to cover other development-related sectors such as energy and agriculture. In the financial year 2015, responsAbility grew its assets under management by 22% to CHF 3 billion. As was the case each year since 2011, this reflects inflows of new assets totalling around USD 500 million – of which 50% stemmed from retail investors, 31% from institutional investors and 19% from public sector investors. In 2015, a total of 12 responsAbility investment vehicles invested almost USD 1 billion in 522 financial institutions, agricultural companies and energy firms – carrying out more than 700 transactions in this context.

Alexandre Coquet, Head of Sales France & Benelux, stated: “We are pleased to welcome Aegon to our funds’ investor base, especially since their decision to invest followed a very thorough evaluation process. To successfully develop and manage development investments, what is needed first and foremost is a sound knowledge of local markets. Around 150 experts working at our 9 offices across 4 continents identify new investment opportunities on an ongoing basis, thus laying the foundations for the continued successful development of our business.”

For further information, please visit: http://www.aegon.com/Home/ and http://www.responsability.com/investing/

U.S. Foreclosure Activity Decreases 6 Percent in August
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U.S. Foreclosure Activity Decreases 6 Percent in August


RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its August 2015 U.S. Foreclosure Market Report™, which shows a total of 109,561 U.S. properties with foreclosure filings — default notices, scheduled auctions and bank repossessions — in August, down 12 percent from the previous month and down 6 percent from a year ago. The 6 percent year-over-year decrease in August followed five consecutive months with year-over-year increases.

The report also shows one in every 1,205 U.S. housing units had a foreclosure filing in August.
“Foreclosure starts in August continued to search for a new floor below even pre-recession levels, indicating the housing recovery of the past three years is built on a solid financing foundation,” said Daren Blomquist, vice president at RealtyTrac. “But the continued rise in bank repossessions indicates more batches of bank-owned homes will be rippling through the housing market over the next three to 12 months as lenders list these properties for sale.

“This influx of bank-owned inventory may be good news for an inventory-challenged housing market, but buyers and investors interested in purchasing these bank-owned homes should understand they tend to be lower-value properties in areas where house values have not recovered as quickly and are more likely to have deferred maintenance issues that will need to be addressed,” Blomquist noted. “The average estimated market value of REO properties nationwide is now 33 percent below the average market value of non-distressed properties, and homes that were repossessed in the second quarter of this year on average had been languishing in the foreclosure process for 629 days.”
Foreclosure starts drop to lowest level since November 2005

A total of 45,072 U.S. properties started the foreclosure process for the first time in August, down 1 percent from previous month and down 19 percent from year ago to lowest level since November 2005. So far in 2015, foreclosure starts have averaged 49,362 per month, below the pre-crisis average of 52,279 per month in 2005 and 2006.
Foreclosure starts decreased from a year ago in 30 states, including California (down 29 percent from year ago), Florida (down 40 percent), New Jersey (down 38 percent), Texas (down 17 percent), and Maryland (down 26 percent).
Counter to the national trend, foreclosure starts increased from a year ago in 19 states, including New York (up 20 percent), Virginia (up 16 percent), Missouri (up 77 percent), and Massachusetts (up 61 percent) and Minnesota (up 20 percent).

Bank repossessions increase from a year ago in 36 states
There were a total of 36,792 U.S. properties repossessed by lenders through foreclosure (REO) in August, down 22 percent from previous month but still up 40 percent from a year ago, the sixth consecutive month with REOs increasing on a year-over-year basis. Bank repossessions in August were still well above their pre-crisis average of 23,119 per month in 2005 and 2006, but well below their peak of 102,134 in September 2010.
Bank repossessions increased from a year ago in 36 states, including Florida (up 23 percent), California (up 31 percent), Texas (up 168 percent), Ohio (up 35 percent), and New Jersey (up 295 percent).
“Foreclosure sales from the Trustee still require cash at the time of sale, so as a result lower-priced properties to mid-priced properties tend to sell for close to full value. Higher-priced foreclosures, while rare, can sometimes present an opportunity. With stricter lender requirements we are most likely a few years away from foreclosures truly having an impact on home values in the area,” said Greg Smith, owner/broker at RE/MAX Alliance, covering the Denver market in Colorado where foreclosure activity was down 45 percent from a year ago.
Counter to the national trend, bank repossessions decreased from a year ago in 13 states, including Georgia (down 55 percent), Illinois (down 22 percent), Wisconsin (down 7 percent), Connecticut (down 36 percent), and Kentucky (down 45 percent).

Scheduled foreclosure auctions drop to nine-year low
A total of 41,308 U.S. properties were scheduled for a future foreclosure auction in August, down 14 percent from the previous month and down 19 percent from a year ago to the lowest level since May 2006 — a more than nine-year low. Scheduled foreclosure auctions in August were about one-fourth of their peak of 158,105 in March 2010 but still above their pre-crisis average of 33,634 a month in 2005 and 2006.
Despite the national decrease, scheduled foreclosure auctions increased from a year ago in 23 states, including New Jersey (up 38 percent), Pennsylvania (up 18 percent), New York (up 64 percent), South Carolina (up 38 percent), and Massachusetts (up 21 percent).

Nevada, Maryland, New Jersey post highest state foreclosure rates
Nevada foreclosure activity increased 4 percent from a year ago in August — driven largely by a 233 percent jump in bank repossessions — and the state posted the nation’s highest foreclosure rate for the first time since September 2014. One in every 507 Nevada housing units had a foreclosure filing in August, more than twice the national average.
Maryland foreclosure activity was unchanged from a year ago despite a 429 spike in bank repossessions, and the state posted the nation’s second highest foreclosure rate for the third month in a row. One in every 534 Maryland housing units had a foreclosure filing in August.

New Jersey foreclosure activity increased 3 percent from a year ago — driven largely by a 295 percent year-over-year increase in bank repossessions and 38 percent year-over-year increase in scheduled foreclosure auctions — and the state posted the nation’s third highest state foreclosure rate for the third month in a row. One in every 539 New Jersey housing units had a foreclosure filing in August.

Florida’s foreclosure rate dropped out of the top three highest among the states for the first time since June 2012 thanks in part to a 33 percent year-over-year decrease in foreclosure activity in August to the lowest level since April 2007.
South Carolina foreclosure activity increased 11 percent from a year ago in August, boosting the state’s foreclosure rate to the fifth highest nationwide. One in every 863 South Carolina housing units had a foreclosure filing in August.

Other states with foreclosure rates ranking among the top 10 nationwide in August were Illinois at No. 6 (one in every 921 housing units with a foreclosure filing), North Carolina at No. 7 (one in every 970 housing units), New Mexico at No. 8 (one in every 1,005 housing units), Indiana at No. 8 (one in every 1,037 housing units), and Ohio at No. 10 (one in every 1,037 housing units).

Land Insurance Industry Boosted Thanks to Merger
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Land Insurance Industry Boosted Thanks to Merger

The merger is just part of the South Carolina based brokerage firm’s expansion across the US. The company will merge with Mississippi Land & Lakes, a Meridian based real estate company that has decades of experience in timberland, farmland, forestry consulting and recreational land sales and management. The firm is considered one of the premier recreational design and development companies in the Southeastern United States, making it an influential partner for National Land Realty.

Cathy Haguewood, a broker for MLL, stated that the merger was a real lifeline for the business. ‘We have been looking for a new real estate partner for 18 months, and are thrilled to be joining the National Land Realty team. I haven’t seen another company with such professionalism and attention to detail, in addition to their world-class marketing program.’

The two businesses offer complimentary services, with Mississippi Land & Lakes’ unique recreational consulting services set to integrate well with National Land Realty’s industry-leading marketing and brokerage services. Jason Walter, CEO of National Land Realty said of the merger: ‘This merger continues National Land Realty’s expansion across the country, bringing more opportunities for our land sales and investment customers. Not only does the Meridian team have a wealth of real estate experience, they also offer comprehensive recreational design and development services, which includes lake and lodge development, roads and wildlife food plot layout and construction.’

Life Insurers Challenged by Competitive Landscape
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Life Insurers Challenged by Competitive Landscape

Chief financial officers (CFOs) at North American life insurance companies say they continue to face sizable competitive challenges to their profitability, yet only a small number (20%) believe they are well prepared to respond to this competitive environment.

Life insurers cited competition (61%) and cost management (61%) as the top challenges to their profits this year, and seem only somewhat better prepared (46%) to address the cost pressures, according to a Life Insurance CFO Survey conducted by global professional services company Towers Watson’s (NASDAQ: TW).

Insurers also acknowledge that the competitive environment (78%) is the biggest challenge to their growth objectives, and the majority rank the economic environment (56%) and regulatory landscape (56%) as the main impediments to meeting their risk objectives. In response to their various challenges, insurers are trying several measures, such as expanding into new products or markets (44%), increasing distribution (39%), and implementing or improving risk management processes, including financial discipline, and risk and capital processes (39%).

“Life insurers face difficult market conditions characterized by moderate return on equity, flat to sluggish sales growth and protracted low interest rates. These threats make countering their competitive challenges even more daunting,” said Elinor Friedman, Towers Watson’s Life Insurance practice leader for the Americas. “Insurers have significant work ahead, yet they have opportunities, too. By developing an organized, comprehensive strategy that firmly connects growth and profit objectives with risk goals, they can counter these strong competitive challenges and exert more control over their business.”

The survey established that CFOs are grappling with technology implementation even as they continue to understand the competitive benefits it provides. They ranked technology limitations (56%) as the primary internal obstacle in realizing their profit goals, and information technology (83%) as the greatest cost and expense management challenge, which far outpaced regulatory and accounting compliance (44%). Nearly three-fifths (59%) said the effective use of technology to create value with customers is their leading distribution-related challenge.

“Operationally, the survey showed that insurers need to utilize technology more effectively,” said Friedman. “This spans multiple functions of their business, from financial modeling, pricing and product development, to distribution and customer service. With the right technology and financial models in place, life insurers can turn data into discernible information, which will help them better understand and serve their customers, and improve top- and bottom-line growth.”

The survey also revealed that insurers’ satisfaction level with their financial models varied by use and that the full benefits of their models have not been realized. While three-quarters expressed a high level of confidence with model results for cash-flow testing and over half (56%) for valuation, insurers are less enthusiastic about other functions, such as hedging (36%) and pricing (22%). Further, insurers are only moderately satisfied with the timeliness of their models. At best, half are extremely pleased with their hedging models, but their satisfaction trails off to a low of 9% for their economic capital or capital

Insurers Say Predictive Modeling Is Boosting Their Profits
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Insurers Say Predictive Modeling Is Boosting Their Profits

Towers Watson first surveyed P&C insurers on their predictive modeling techniques in 2009; since then, a growing proportion of insurers have reported positive impacts on rate accuracy (98% of insurers in 2014 versus 68% 2009), loss ratios (91% versus 57%) and profitability (87% versus 57%).

The survey shows that the increasing percentage of insurers currently using predictive modeling for underwriting, risk selection, rating and pricing continues the long-term growth trend across every line of business compared to last year. For personal lines, auto experienced the most growth (97% in 2014 versus 80% 2013). Two commercial lines (property and auto) sustained year-to-year increases of 19 percentage points in the use of modeling. Specialty lines exhibited the largest increase (44% versus 13%).

Concurrent with insurers’ confidence that the value of predictive modeling for their business is growing, the survey notes its applications are being deployed more broadly across the enterprise, beyond just risk selection and pricing. While less than 30% report they are currently using predictive models to evaluate fraud potential, claim triage, litigation potential or target marketing, an additional 36% anticipate doing so over the next two years across all those applications.

“Insurers’ profitability in the competitive P&C market is hard earned,” said Brian Stoll, director, P&C practice, Towers Watson. “However, many are recognizing the value of predictive modeling to favorably impact loss costs, expenses and premium growth. In fact, more than nine out of 10 (92%) personal lines carriers say sophisticated risk selection and rating techniques are an essential driver of performance, while 86% of small to midsize commercial lines tell us it’s either an essential or a very important driver.”

Insurers say price integration (overlay of customer behavior and loss cost models in setting prices) is one area where progress has been slow. Two-thirds aren’t using price integration for any products, while most have not yet moved on to price optimization for products.

“The disparity between insurers’ optimal use of price integration techniques and the actual level of implementation is surprising. Insurers may be missing the strong competitive advantage that model integration provides,” said Klayton Southwood, director, P&C practice, Towers Watson.

In other notable findings, nearly two-thirds (65%) of respondents characterize their companies as data-driven organizations. For insurers that don’t, access to data and data warehouse constraints are the primary reasons, as opposed to philosophical considerations or disinterest. Carriers exhibit varying levels of adoption of approaches commonly considered to be characteristic of data-driven organizations.

Personal auto carriers are making progress with usage-based insurance (UBI) offerings, with nearly one-quarter (23%) having launched products or planning to in the next year. Further, a clearer road map is emerging for insurers to implement UBI in their auto operations — nearly three in five personal auto (59%) and commercial auto (58%) insurers say they’re in planning stages or considering adoption.

Report Identifies Key Risks for Financial Institutions Across EMEA
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Report Identifies Key Risks for Financial Institutions Across EMEA

 Aon Risk Solutions, the global risk management business of Aon plc, released an EMEA focused industry report today, highlighting the top risk factors facing EMEA financial institutions. As the industry contends with increasingly complex challenges and new emerging risks, this Aon report provides comprehensive industry analysis to assist financial institutions in proactively managing risk.

The 2014 EMEA Financial Institutions Industry Report offers insight into three key areas: risk priorities, the insurance market and risk management. Highlighting differences between EMEA and global trends including a key divergence in views about technology and liquidity risk, the report identifies the key areas of concern to EMEA-based financial institutions, and demonstrates that managing risk is key to achieving growth and profitability in an increasingly challenging environment.

The report is based on Aon’s Global Risk Management Survey and its Global Risk Insight Platform (GRIP), proprietary Aon data and analytics systems that deliver deep insight based on the collective opinion of risk professionals and insurance placements across the globe.

Enrico Nanni, Chief Commercial Officer, Financial and Professional Services at the Aon Global Broking Centre, said “In today’s global environment, financial institutions face increasingly complex challenges ranging from regulatory scrutiny of risk and capital ratios, through to sustained economic pressure and rising litigation. In addition, the concern around potential technology failures and constant threats of data breaches from cyber-attacks means the stakes for financial institutions have never been higher.

Mr Nanni added, “It is important that we share Aon data and insights with our clients, to ensure they are receiving the right guidance on risk mitigation and can proactively address their business risks. This free industry report is a compact illustration of the analytical insight Aon clients utilise to better manage risk.”

RenaissanceRe to Acquire Platinum Underwriters for US$1.9bn
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RenaissanceRe to Acquire Platinum Underwriters for US$1.9bn

RenaissanceRe Holdings Ltd. and Platinum Underwriters Holdings, Ltd. announced today that the companies have entered into a definitive merger agreement under which RenaissanceRe will acquire Platinum. Under the terms of the transaction, the common shareholders of Platinum will receive US$76.00 per common share in stock and cash, or approximately US$1.9bn. RenaissanceRe expects the transaction to be accretive to book value per share and earnings per share and that the combined company will have substantial financial strength and flexibility post-closing.

Kevin J. O’Donnell, President and Chief Executive Officer of RenaissanceRe, commented: “We are very pleased to have entered into the definitive agreement to acquire Platinum. It is a well-run company and its integration with RenaissanceRe will benefit our combined companies’ clients through an expanded product offering and broker relationships. It will also accelerate the growth of our US specialty and casualty reinsurance platform and as a result, create enhanced value for our shareholders.”

Mr. O’Donnell continued: “Platinum is a company we know well as we supported its formation and initial public offering in 2002. Platinum’s disciplined approach to underwriting and risk management is a strategic and cultural fit for RenaissanceRe and its book of business will be integrated within our risk management framework. After the transaction closes, we anticipate our combined company will continue to have the very strong capital and liquidity position you have come to expect from RenaissanceRe.”

The aggregate consideration for the transaction will consist of 7.5 million RenaissanceRe common shares, valued at approximately US$761m, and US$1.16bn of cash. The cash consideration will be funded through a pre-closing dividend from Platinum, RenaissanceRe available funds and the proceeds from the issuance of new senior debt.

The acquisition price of US$76.00 represents a 24% premium to Platinum’s closing price per common share as of November 21, 2014. At closing, Platinum shareholders will receive a US$10.00 per share special pre-closing dividend and will be entitled to elect to receive, for each Platinum share held, either (i) US$66.00 in cash, (ii) 0.6504 RenaissanceRe common shares or (iii) 0.2960 RenaissanceRe common shares and US$35.96 in cash. All elections will be subject to proration such that RenaissanceRe issues exactly 7.5 million common shares. Following completion of the transaction, Platinum’s existing shareholders will own approximately 16% of RenaissanceRe’s outstanding shares.

RenaissanceRe’s senior management team, led by Kevin O’Donnell, and eleven member Board of Directors will remain in place. The combined company will retain RenaissanceRe’s name and headquarters.

For the twelve months ended September 30, 2014, the two companies had pro forma gross premiums written of US$2.0 bn. Shareholders’ equity will increase from US$3.7bn to US$4.5bn and total cash and invested assets will increase from US$7.0bn to US$9.4bn on a pro forma basis. RenaissanceRe expects to achieve approximately US$30m of run-rate annual cost savings and to realize meaningful capital efficiencies from the combination.

The agreement has been unanimously approved by both companies’ Boards of Directors. The transaction is expected to close in the first half of 2015 and is subject to customary regulatory approvals as well as the approval of Platinum’s shareholders.

FCA: Small Firms Need to Better Manage Financial Crime Risks
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FCA: Small Firms Need to Better Manage Financial Crime Risks

The Financial Conduct Authority (FCA) has found that many small banks and commercial insurance intermediaries fail to effectively manage financial crime risk. The two reviews published today follow related work by the FCA’s predecessor on banks in 2011 and intermediaries in 2010.

While the reviews found some firms had made good progress in addressing areas of weakness and saw examples of good practice, there were significant shortcomings at other firms. The FCA has proposed further guidance for all firms to ensure that expectations are clear.

Tracey McDermott, FCA director of enforcement and financial crime, said:

“Firms must take their responsibility to reduce the risk of financial crime seriously. Significant improvements are still required in this area.

“To do that successfully requires firms to use their judgement and common sense. That is not about box ticking or wholesale de-risking. It is about firms getting the basics right – understanding their customers, the risks they pose and managing those risks proportionately and sensibly.”

The FCA reviewed ten commercial insurance intermediaries and 21 banks – ten of these firms (five banks and five intermediaries) were also part of the 2010 and 2011 thematic reviews. The FCA found:

● Despite extensive work over recent years to address key issues, there were significant and widespread weaknesses in most banks’ anti-money laundering systems and controls, and in some banks’ sanctions controls. Although senior management engagement had improved, a third of banks had inadequate resources; staff often had weak knowledge of money laundering risks; and some overseas banks struggled to reconcile their group policies with higher UK requirements. Since the FCA’s review, several banks have replaced their Money Laundering Reporting Officers; four firms have temporarily restricted their business whilst they correct the weakness in their controls; and the FCA has instructed three banks to undertake an independent review of their systems and controls (a skilled person’s review); and two firms have been referred to the enforcement division for investigation.

● Overall, most intermediaries’ controls failed to manage bribery and corruption risk effectively. While some intermediaries’ policies on remuneration, hospitality and training had improved since the last review, bribery and corruption risk assessments were often too narrow and many firms failed to take a rounded view of the risks associated with individual relationships. Half of the third party and client files reviewed were inadequate and senior management oversight was often weak.

These reviews, enforcement action, and proposed new guidance – which updates the FCA’s financial crime guide for firms – reflect the FCA’s objectives to ensure markets work well, enhance the integrity of the UK financial system and ensure consumers are appropriately protected.

Germany and UK Agree Joint IP Rules Proposal
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Germany and UK Agree Joint IP Rules Proposal

The proposal is based on the Modified Nexus Approach proposed by theOECD, which requires tax benefits to be connected directly to R&Dexpenditures, but amends these rules to address concerns expressed by some countries and seeks to address outstanding issues in relation to qualification of expenditures, grandfathering and tracking qualifying R&Dexpenditure.

The proposal is designed to bridge different views of OECD and G20 member countries on the application of the modified nexus approach. Germany and the UK will present this to the OECD Forum on Harmful Tax Practices and seek formal approval by the OECD and G20 at the January meeting of the OECD’s Committee on Fiscal Affairs.

Both Germany and the UK remain fully committed to the successful conclusion of the BEPS negotiations by the end of 2015, and to making the necessary progress on all Actions within this project in order to do so. The proposal was developed through bilateral discussions between the two countries, seeking to achieve a balance between maintaining countries’ ability to offer such regimes and preventing misuse of them.

The proposal seeks to achieve this through reinforcing the nexus approach to ensure substantial activity is undertaken in the jurisdiction offering the relief, whilst better reflecting the commercial realities of R&D investment by business. It also makes necessary provision for transitional arrangements between existing and new rules, and proposes further work to develop practical means of implementing the Modified Nexus Approach.

Announcing the proposal, Chancellor of the Exchequer George Osborne said:

“This is a great deal for Britain – we protect our vital scientific research while making sure there are international rules that stop aggressive tax avoidance. Our joint proposal balances the need to allow countries that wish to have these regimes to do so, whilst ensuring that they operate by rules that prevent abuse. This demonstrates the strength of our commitment to the BEPS project that we both helped initiate, and our determination to ensure that we conclude this by the end of 2015.”

Finance Minister Wolfgang Schäuble said:

“We have reached an important agreement on patent boxes. Preferential tax treatment of intellectual property must be dependent on substantial economic activity. More and more countries are speaking out against allowing too much leeway for large multinationals to minimise their taxes. Just because something is legal, does not mean it is fair in tax terms. Multinationals must contribute their fair share to public budgets – just like any other company has to.”

Former Swinton Execs Fined and Banned from Senior Roles
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Former Swinton Execs Fined and Banned from Senior Roles

The Financial Conduct Authority (FCA) has fined three former senior executives of Swinton Group Limited (Swinton) £928,000. The FCA’s action follows previous enforcement action taken against Swinton: in 2013 it was fined £7.4m after it adopted an aggressive sales strategy that resulted in mis-sales of monthly add-on insurance policies; and in 2009 the firm was fined £770,000 for failures in its sales of PPI.

Peter Halpin (former chief executive) is also banned from acting as chief executive of a financial services firm, while Anthony Clare (former finance director) and Nicholas Bowyer (former marketing director) are banned from performing significant influence functions at financial services firms.

Tracey McDermott, director of enforcement and financial crime at the FCA, said:

‘A culture was allowed to develop within Swinton that pushed for high sales and increased profit without regard to the impact on the firm’s customers. We expect firms to put customers at the heart of their business. These three directors should have recognised the risk to customers and redressed the balance so that the drive to maximise profits did not jeopardise the fair treatment of customers.

‘Those with significant influence within firms are responsible for setting the tone and the culture; they set the example that others will follow. Today’s enforcement action should serve as a timely reminder to those at the very top of firms that the FCA is determined to hold individuals to account where they fall short of the standard we require.’

The FCA has found that a sales-focused culture in Swinton was encouraged by Clare and Bowyer driving a business strategy that was designed to boost the firm’s profits in 2011. The three former directors did not recognise the risk of this culture developing or take reasonable steps to prevent it.

Swinton’s participating directors (including these three directors) stood to gain a bonus of approximately £90million under the directors share scheme if operating profits reached £110million in 2011. Halpin, Clare and Bowyer would have benefited significantly under the scheme had these results been achieved.

Details of the findings against the three individuals are as follows.

Peter Halpin Halpin has been fined £412,700 in addition to a ban from acting as a CEO of an FCA authorised firm because of a lack of competence in his FCA approved CEO role. The FCA found that Halpin failed to ensure that Swinton’s management information was adequate for the firm to identify compliance issues with the sales of the monthly add-ons and to ensure its customers were being treated fairly. He also failed to respond to warning signals about those sales and, when he did act, his actions did not go far enough. He should have stepped back and considered whether, when taken together, those warnings pointed to fundamental problems with Swinton’s sales of the monthly add-ons.

Halpin also failed to recognise the risk that the potentially lucrative incentive scheme for Swinton’s executive directors could give rise to a culture within Swinton that increased the risk of mis-selling.

Anthony Clare Clare has been fined £208,600 and is now banned from holding a position of significant influence in an FCA authorised firm because of a lack of competence as an FCA approved director. In addition to his role as finance director, Clare had oversight for the firm’s compliance department and a particular responsibility for ensuring that Swinton treated its customers fairly.

Similarly to Halpin, Clare also missed warnings of compliance problems with the monthly add-on products and failed in his responsibility to ensure Swinton’s compliance department was producing accurate and representative management information. Further, Clare was involved in specific decisions concerning the development of Swinton’s breakdown and home emergency insurance policies and did not recognise the risk to customers that arose from these decisions.

As finance director, Clare was instrumental in the creation and implementation of a business strategy to maximise Swinton’s operating profits in 2011. Clare should have seen the risk that this strategy was leading to a sales-focused culture that acted to the detriment of the fair treatment of customers. Despite his responsibilities, he missed the warning signs.

Nicholas Bowyer Bowyer has been fined £306,700 and banned from performing any significant influence function at an FCA authorised firm, again because of a lack of competence as an FCA approved director.

As marketing director, Bowyer played a central role in the development and launch of the monthly add-on policies and was responsible for their design, development and marketing. He was involved in a number of decisions which were not fair to consumers.

Bowyer was also integral to the successful delivery of the directors’ strategy to maximise Swinton’s profits in 2011 and encouraged a culture to develop within Swinton that prioritised sales to the detriment of customers. Crucially, Bowyer did not appreciate that – although he was not part of Swinton’s compliance framework – he still had a personal responsibility as an FCA approved director to consider the fair treatment of customers in every decision he took in performing his role.

All three former directors settled at an early stage of the FCA’s investigation and therefore qualified for a 30 per cent discount on their fines.

Risk Appetite Reaches Record Highs
InsuranceRisk Management

Risk Appetite Reaches Record Highs

Risk appetite among the chief financial officers (CFOs) of the UK’s largest companies has reached a seven year high, according to the Deloitte CFO Survey for Q3 2014.

Deloitte’s survey, which gauged the views of 118 CFOs of FTSE 350 and other large private UK companies, suggests that risk appetite is being supported by a rebound in the US economy, UK growth and easy access to finance.
72% of CFOs say now is a good time to take risk onto their balance sheets, up from 65% in Q2 2014 and three times the level (23%) seen in Q3 2012.

However, CFOs’ perceptions of economic and financial uncertainty rose in the third quarter for the first time in two years. 56% said the level of financial and economic uncertainty facing their business was above normal, high or very high, up from 49% in Q2 2014. Scotland’s independence referendum seems to have been a dominant factor. Perceptions of risk amongst CFOs completing the survey before the result were twice as high as for those who responded after.

Sentiment about the euro area has deteriorated markedly, with a net percentage of -39% seeing improving prospects for the region, down from +54% in Q1 2014. Confidence in emerging markets continued to decline, with a net balance seeing an improvement of -13%. By contrast CFOs are upbeat on prospects for the UK, a net balance of +85% reported improved growth prospects.

CFOs have become significantly more positive about official policy in the UK which is seen as increasingly conducive to the long term success of businesses. 97% said that the Bank of England’s monetary policy was appropriate, up from 91% in Q4 2012. 94% approved of the government’s labour market policies, up from 88% in Q4 2012. Tax policy was endorsed by 90% of CFOs, up from 75% in Q4 2012 while public spending plans were backed by 89%, up from 58% two years ago. 73% saw the government’s immigration policy as being appropriate, a rise from 60% in Q4 2012.

However, policy remains a prominent concern for business, more so than economic worries. CFOs ranked the 2015 general election and a future UK referendum on EU membership ahead of deflation, weakness in the Euro area and higher interest rates as risks to their businesses.

Credit conditions continued to improve. A net 83% of CFOs said that credit is easily available and a net 82% said that credit was cheap, the highest levels recorded in the past seven years. CFOs remain confident about growth with a net 90% expecting revenues to increase in the next 12 months.

Ian Stewart, chief economist at Deloitte, said: “With a resurgent US economy, good growth in the UK and plentiful liquidity, CFOs have shrugged off the effects of rising uncertainty and weakness in Europe, sending corporate risk appetite to a seven year high. Expectations for corporate revenues and margins remain close to the four year high seen in Q2.

“Large corporates face few obstacles to raising finance, credit is cheaper, and more available, than at any time in the last seven years. In reversal of the situation during the credit crunch, CFOs say that financing conditions are one of the key factors enabling companies to raise investment spending.

“CFOs have become more positive about official policy – from government, regulators and the Bank of England. Confidence has risen in eleven separate areas of policy, and most markedly on public spending, tax policy, immigration and financial regulation.

“But it’s not all plain sailing for the corporate sector, perceptions of economic and financial uncertainty rose for the first time in two years. Weakness in the euro area economy, events in the Middle East and Ukraine and, particularly, the Scottish referendum have created new uncertainties. Political risk has eclipsed worries about the economy as concerns for CFOs.”

Friday the 13th: Unluckier for Some
InsuranceRisk Management

Friday the 13th: Unluckier for Some

The age old superstition about falling prey to bad luck on Friday the 13th does in fact ring true for some motorists according to new data from Aviva, the UK’s largest insurer. Analysis of 10 years of claims data reveals that motor collision claims increase by an average of 13% on Friday 13th, compared to other days in the same month.

This unlucky day spookily sees more bumps and shunts than normal no matter what time of year Friday 13th falls on – be it a cold winter, rainy spring or sunny summer.

And although around two-thirds of people (63%) admit to holding some superstitious beliefs, just one quarter of us (26%) believe that Friday 13th is an unlucky day, according to research from the insurer.

Half of us (50%) admit to using the phrase “touch wood” to prevent bad things from happening, while two-fifths (43%) avoid walking under ladders and more than one in three (36%) avoid opening an umbrella indoors.

The top five superstitions that people believe in:

1. 50% use the phrase “touch wood” in the hope that something bad won’t happen

2. 43% avoid walking under ladders

3. 36% avoid opening an umbrella indoors

4. 30% will not place a pair of new shoes on a table

5. 26% believe Friday the 13th is an unlucky day.

When it comes to drivers, almost one in ten (9%) said that that they keep a lucky charm in their car and 5% said they believe getting bird mess on their car is a good omen.

Heather Smith, marketing director of general insurance at Aviva, said: “Friday the 13th is traditionally a superstitious day for many but it’s spooky to see motor claims rise by an ‘unlucky’ 13%.

“While we don’t wish to cause a bout of friggatriskaidekaphobia (fear of Friday the 13th) among the population, we hope these figures will help encourage people to take extra care today, whatever they might be doing.

 

New CEO at Lockton UAE
InsuranceRisk Management

New CEO at Lockton UAE

Lockton, the largest privately held insurance broker in the world, and 9th largest overall, has announced the appointment of Ian Walton as Chief Executive Officer of Lockton Insurance Brokers (LLC), UAE. Walton will be responsible for developing and managing Lockton’s expanding client base in the UAE.

Wael Khatib, Senior Partner & Chairman, Lockton (MENA) Ltd, said: “We are delighted to welcome Ian to our senior management team. Ian’s extensive experience complements our distinctive approach that delivers practical and reliable solutions to our clients, providing an important opportunity to meet and exceed their unique and diverse needs.”

Commenting on his role and appointment, Walton said: “I am thrilled to be joining Lockton, and look forward to working closely with their clients and continuing to provide the level of service and advice for which the company is renowned.”

Prior to his appointment, Ian held senior international positions in both the insurance broking and underwriting sectors, with over 25 years’ working experience in the UAE and the Middle East.

More than 4,950 professionals at Lockton, which was founded in 1966 in Kansas City, Missouri, provide 35,000 clients around the world with risk management, insurance and employee benefits consulting services that improve their businesses.

Unit-Linked Guarantees "Could be £4 Billion a Year Market"
InsuranceRisk Management

Unit-Linked Guarantees “Could be £4 Billion a Year Market”

The unit-linked guarantee market is set to nearly treble to £4 billion a year by the end of 2015 as the Budget reforms highlight the continuing need for certainty on capital and income, insurance firm MetLife believes.

It estimates the current market is worth between £1.2 billion and £1.5 billion a year with providers and advisers focusing on pension pots worth more than £50,000.

However, the Budget reforms ending the need to buy an annuity and allowing retirement savers to access defined contribution funds however and whenever they like from April 2015 onwards will drive increased innovation and attract more providers into the market.

MetLife’s own analysis shows around 33% of single life annuities and 45% of joint life annuities are bought for premium sizes of more than £30,000 could benefit from unit-linked guarantee solutions. Unit-linked guarantees are also suitable for the 21,000-plus new drawdown customers a year looking for certainty on income and capital.

Association of British Insurers’ data shows annuity sales were already in decline before the Budget – having already fallen 16% in 2013 to 353,000 individual sales worth around £11.9 billion.

MetLife’s research among advisers shows 62% believe products offering guarantees on capital and income have become more attractive following the Budget reforms. Retirement savers are concerned about the risks of outliving their pension savings, research shows with 41% saying they are worried about running out of money underlining the need for certainty about income and capital.

Dominic Grinstead, Managing Director at MetLife UK, said: “Sales of guaranteed products which offer flexibility and certainty will take a much bigger share of the retirement income market in the future as innovation and competition increases.

“The current annuity market will change massively but the good things about annuities including guaranteed income for life and no risk of running out of money should be retained which is where unit-linked guarantees can play a major role.

“Clearly unit-linked guarantees are not suitable for all, but they enable advisers and clients to guarantee income and capital now and retain flexibility and freedom in the future as their circumstances change.”

 

Bulk Annuity Market Should be Priority for Insurers
InsuranceRisk Management

Bulk Annuity Market Should be Priority for Insurers

More insurers should focus on the bulk annuity market if they expect to write fewer individual annuities under the new pensions regime announced in the recent budget, says American global professional services firm Towers Watson. The firm’s latest research into the bulk annuity market shows 2013 was dominated by three big players, with one insurer alone writing half of the market’s total premiums.

Towers Watson’s latest Settlement in Focus highlights that, in 2013, eight insurers wrote 186 bulk annuity deals worth more than £7.2 billion. £3.7 billion was written by one insurer, with two other insurers writing £1.4 billion and £1.3 billion respectively. Towers Watson advised on over half the £7.2 billion total, having advised on deals ranging from £5 million to £1.5 billion. The research also shows that sub-£10 million bulk annuity deals outnumbered those over £10 million, suggesting the insurers who focus on medical underwriting have the opportunity to significantly increase their share of the total number of deals written.

Sadie Hayes, transaction specialist at Towers Watson said: “The last year has shown a move towards an even greater domination of the market by a few insurers. Rothesay Life’s recent announcement of its planned acquisition of MetLife appears to compound this effect further. Counteracting this, Just Retirement’s and Partnership’s share of the market may increase as medical underwriting takes off, perhaps becoming the norm for smaller schemes.

“With the recent budget announcement on removing the forced annuitisation of defined contribution (DC) pots, we expect to see more insurers redirecting capital from their individual annuity business to their bulk annuity business.”
According to Towers Watson, there are currently five insurers which operate in both the individual annuity and bulk annuity markets, of which two wrote their first bulk annuity deals in 2013. A larger number of insurers currently operate in the individual annuity market, and with the predicted decline in this business, many are already considering a move into the bulk annuity space according to the firm.

Sadie Hayes said: “Besides those insurers which already operate in both the individual and bulk annuity markets redirecting more capital towards their bulk annuity businesses, we also expect there to be a number of new entrants to the bulk annuity market in the next few years. These insurers will need to develop their new business process, administration and the financial systems to write this business. This will help to meet the expected increase in demand from pension schemes for these products.”

Insurance Stress Test Launched
InsuranceRisk Management

Insurance Stress Test Launched

The European Insurance and Occupational Pensions Authority (EIOPA) has launched an EU-wide stress test for the insurance sector.

The test package comprises two modules. The core module of the exercise includes two adverse market scenarios, covering financial asset stresses (sovereigns, corporate bonds and equities) as well, as shocks to real estate assets prices’ and interest rates stresses. The adverse market scenarios are complemented by a set of independent insurance-specific shocks covering mortality, longevity, insufficient reserves and catastrophe shocks. The second module addresses the impact of a low yield environment and is a follow-up to EIOPA’s Opinion on Supervisory Response to a Prolonged Low Interest Rate Environment. The adverse market scenarios have been developed in cooperation with the European Systemic Risk Board (ESRB).

It is envisaged that the stress test will cover at least 50% of the market share in each country both of life and non-life segments. Its results will provide a clear vision on the resilience of the insurance sector to different shocks and identify issues that require further supervisory response.

The technical basis of the stress test is the new insurance regulatory regime Solvency II, which will apply as of 1 January 2016. Simultaneous with the launch of the exercise, EIOPA publishes the Solvency II Technical Specifications for the preparatory phase that will provide a ground for undertakings to value assets and liabilities and to calculate solvency or minimum capital requirements and own funds.

The exercise will be run in close cooperation with national supervisory authorities (NSAs). The NSAs will collect data from undertakings in July 2014 and validate the information before it is aggregated at the EU level. To improve consistency in the calculations, during August and September 2014, EIOPA in cooperation with NSAs will conduct an EU-wide validation of the data received. Results of the stress test analysis will be disclosed in November 2014.

Data Breaches Lead to Drop in Sales
InsuranceRisk Management

Data Breaches Lead to Drop in Sales

Consumers avoid doing business with an organization that has suffered a data breach at an alarming rate, according to a new study.

Financial and banking institutions, healthcare providers and retailers stand to have significantly increased expenses and lose up to one-third of its customer or patient base after a data breach, says the study, which was conducted by Javelin Strategy & Research and commissioned by sensitive data management solution provider, Identity Finder.
It found that 33 percent of consumers will shop elsewhere if their retailer of choice is breached, 30 percent of patients will find new healthcare provider if hospital or doctor’s office is breached and 24 percent of consumers will switch bank or credit card provider if the institution is breached.

“A significant proportion of affected consumers discontinue or reduce their patronage post-breach,” said Al Pascual, Senior Analyst of Security, Risk and Fraud at Javelin Strategy & Research. “That’s real money lost in customer churn and reduced sales, and certainly demonstrates how the reputation of the organization hits the bottom line. It’s noteworthy that about a third of people will go as far as to find a new doctor, if their provider is breached, as we all know healthcare services can be a big hassle to change.”

US retailer Target recently quantified the reputational damage and sales impact of their recent data breach and stated it resulted in significantly reduced revenue following the announcement on December 19, 2013. However, the fiscal impacts expanded well beyond sales. Target saw stock prices drop and estimates $61 million (£36.3 million) in expenses to investigate the breach, offer credit-monitoring services, increase call centre staffing and procure legal services.

After a breach, not only will revenue go down, but also expenses will go up, the study claims, pointing to data which supports a significant increase in post-breach expenses such as compliance, legal, and victim reparation costs. The research finds identity protection services alone are a common cost to each industry, with 54 percent of healthcare providers offering victims protection, 40 percent of financial and banking institutions offering victims protection and 30 percent of retailers offering victims protection.

“Businesses are experiencing pressure to protect sensitive data not only from industry and government regulators, but also customers and shareholders. Consumer behaviour indicates that data breaches impact both expenses and revenue,” said Todd Feinman, CEO at Identity Finder.

“Organizations must be more proactive in preventing a breach by understanding where a data leak can originate. By discovering and managing sensitive information at its source and not at the perimeter or after the fact, businesses can identify risk, change employee behaviour, and justify where to spend security dollars.”

Nearly 80% of European Insurers on Track to Implement Solvency II by 2016
InsuranceRisk Management

Nearly 80% of European Insurers on Track to Implement Solvency II by 2016

Nearly 80% of European insurers expect to meet the requirements of Solvency II—the EU Directive that codifies and harmonises the EU insurance regulation, primarily concerning the amount of capital that EU insurance companies must hold to reduce the risk of insolvency—before January 2016, according to EY’s European Solvency II Survey 2014. Overall, Dutch, UK and Nordic insurers are the best prepared, while French, German, Greek and East European (CEE) insurers are less confident.

The survey of 170 insurance companies, conducted in the Autumn of 2013, is an update of EY’s 2012 pan-European survey and spans 20 countries including Europe’s largest insurance markets. The findings reveal a consistently high state of readiness to implement the Pillar 1 quantitative requirements and fulfil most of Pillar 2 (systems of governance) but Pillar 3, the reporting requirements, still presents a major challenge, with almost 76% of respondents saying they have yet to meet most or all of the requirements.

Martin Bradley, EY’s Global Insurance Risk and Regulation Leader, said: “Postponing the Solvency II regulatory deadline to 2016 has bolstered insurer confidence that they can meet the requirements in the time frame. However, as companies become more realistic about their implementation readiness, it is clear that some are less prepared than they had expected – many simply delayed their plans by at least one year, which might cause them issues now. While insurers are sending a strong message that they are seeking to improve their risk management effectiveness, they have a long way to go in terms of reporting, data and IT readiness.”

Insurance fraud up 19% over 2012
InsuranceRisk Management

Insurance fraud up 19% over 2012, Says Aviva

Aviva, the UK’s largest insurer, detected over £110 million worth of insurance fraud in 2013 – a 19% increase compared with 2012.

The insurer’s figures show that insurance fraud is a diverse crime and can range from exaggerating genuine claims or injuries to entirely fictitious claims and accidents. Increasingly, insurance fraud is carried out by third parties – people who are not insured with Aviva but who are making a claim against an Aviva customer—for example for spurious injuries as a result of an accident—and also by organised gangs.

Tom Gardiner, Head of Fraud at Aviva, said: “Our priority is to pay genuine claims quickly and fairly while offering a great service to our customers. Last year in the UK, for example, Aviva settled over 910,000 claims worth £2.65 billion. We identified fraud on less than 1.9% of claims we received.

“However, a combination of factors including the economic climate, social attitudes toward insurance fraud as a ‘victimless crime’, and a lack of effective deterrents are increasing the frequency of insurance fraud. The good news is that we are constantly improving our ability to prevent and detect fraud, helping to keep premiums down for innocent policyholders. The ABI estimates fraud adds £50 to the cost of insurance premiums.”

The most common type of fraud in the UK, according to Aviva, is motor injury fraud, which represents 54% of Aviva’s total detected claims fraud costs. Over 50% these are from organised so-called “cash for crash” claims.
Organised fraud is often linked to wider gang-related crime, which Aviva says puts innocent motorists at risk, diverts scarce emergency service resources away from real need, and has a significant impact on premiums and the public purse.

“We are witnessing a trend toward third party, injury and organised fraud. For example, in 2013, we identified fraud in one in nine third party injury claims,” said Gardiner.

Aviva is currently investigating 5,500 suspicious injury claims linked to known fraud rings – an increase of 20% since 2012. The Insurance Fraud Bureau estimates that one in seven personal injury claims are linked to suspected “cash for crash” claims, with the total annual cost to insurers for such claims estimated at £392 million every year.

Insurers Open Up to External Managers
InsuranceRisk Management

Insurers Open Up to External Managers

As returns on sovereign bonds sink to their lowest, opportunities proliferate for managers to do business for the general accounts of insurance companies.

Cerulli’s Associates’ inaugural European Insurance Industry 2014: Allocators in a State of Flux report finds that low interest rates and high guarantees on traditional insurance contracts are pushing European insurance companies to diversify their investment portfolios away from core fixed-income strategies. However, insurers’ investment appetite is limited by the strong regulatory environment under Solvency II.

Diversification is likely to happen within the fixed-income pocket-high yield, credit, infrastructure debt. Insurers will need external managers with the right investment expertise as well as a strong understanding of the insurance world to have access to these strategies.

“Being an expert in European credit is simply not enough,” said David Walker, associate director at Cerulli. “Asset managers need to show insurers they know their business model inside out. Having a team dedicated to the insurance business greatly helps in achieving this kind of credibility in front of the client.”

A total of 75% of managers based in Europe agree that insurers are outsourcing more of their assets. Competition in the space is intense.

Insurer-affiliated managers have an advantage owing to their insurance background for managing their parent group assets. However, it is difficult for them to win business from other insurers because of the perceived conflict of interest.

“Even the strong captive French and Italian markets are slowly opening up to third-party managers. Insurance companies increasingly want to be seen as independent by their board and their clients. They are also realizing that, by sticking with their captive, they might miss out on some investment opportunities. This is where third-party managers can strike,” said Sabrina Lacampagne, an analyst at Cerulli and the main author of the report. 

The research also discusses which markets are the most addressable to third-party asset managers, and how insurers are selecting their managers.

Managers need to target these clients with an investment solution that encompasses local regulatory, tax, and accounting restrictions, and is also adapted to each insurer’s specific balance sheet situation.

Paul Williams New Brightside CEO
InsuranceRisk Management

Paul Williams New Brightside CEO

Specialist insurance broker, Brightside, has announced that Paul Williams has joined the Board as Chief Executive Officer.

As announced on 28 November 2013, Paul joins Brightside from Towergate Partnership Ltd, Europe’s largest independently owned insurance intermediary writing in excess of £2 billion of gross written premiums per annum, where he was a Director on the Retail Executive Committee responsible for all insurer and market relationships across the broking businesses.

Following Paul Williams’ arrival, the company remains focused on delivering compelling customer propositions, significant and sustainable growth and shareholder value. His breadth of leadership experience and market knowledge significantly strengthens the Group’s ability to achieve these objectives.

On joining Brightside, he said: “Brightside has a history of rapid growth with considerable opportunity for further policy and profit growth without the underwriting risk of an insurer. As a new CEO, it is essential to ensure continuity in the implementation of the Company’s growth plan.

“Initially, I will focus on a number of key areas to grow the profitability of the book. These will include; negotiating deals with key insurers, expanding our insurer panel and redefining our insurance capacity through the introduction of Delegated Authority and Managing General Agent agreements to augment the Group’s income streams. As well as continued strengthening of our validation techniques, which reduce our insurer partners’ exposure to fraud, to allow us to offer more competitive rates to our customers.

“In addition, there are several exciting new partnerships planned for 2014, the first of which, with RatedPeople.com, the UK’s largest online trade recommendation service, was announced last week.

“These partnerships are key to developing our distribution and we will continue to concentrate on markets where we have strength and scale, particularly in the motor and SME arenas where we have developed expertise online and through our UK based call centres. Using our Quote Exchange platform we will use our technological advances to introduce additional niche brands to our portfolio.”