Category: Risk Management

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.

Ameripact Announces Due Diligence Packet for Real Estate Market
Due DiligenceRisk Management

Ameripact Announces Due Diligence Packet for Real Estate Market

Ameripact, the real-estate service platform, today released its latest home-buying efficiency and money-saving tool, the Due Diligence Packet, a lender quality portfolio of unbiased information that includes everything a buyer needs to quickly close on a home sale.

“The mission of the Due Diligence Packet is very simple. It creates trust, reduces risk, and provides unprecedented convenience to agents, home sellers, and homebuyers,” explained Ameripact CEO and founder, Haresh Sangani. “We strongly believe that this is the natural direction the real estate marketplace has to move towards. The technology is there, the consumers and brokers are hungry for it, and the right business model is finally here.”

The Ameripact Due Diligence Packet equips homebuyers with the following information upfront:

• The Summary Report

• The Title Report

• The Certified Residential Appraisal

• The Licensed Inspection

• Earnest Money Protection

This benefits all parties, encouraging more offers, reducing the chances for future renegotiations, and reducing the risk of time and money lost from transactions falling through after having been mutually accepted. Ameripact is so confident in the Due Diligence Packet, they back it up with the industry’s first Earnest Money Protection.

“‘Ameripact is not only great to work with but the Ameripact Certified properties consistently receive multiple offers from qualified buyers of 10-15% over listing price with no inspection or appraisal contingencies. My sellers are happy and I’m impressed,” said Shawn Lee, Managing Broker, Big Sound Homes Team, Keller Williams Realty GSRE. Beyond helping agents attract cleaner and better offers, the Ameripact Due Diligence Packet service creates another venue for marketing their listed properties.

“The Ameripact Due Diligence Packet is only the first of many technology enabled services we have in the works. We will continue to offer additional solutions to fill the gaps in the real estate equation,” said Sangani.

Christie Administration Wants Claim Extension for Businesses
Natural CatastropheRisk Management

Christie Administration Wants Claim Extension for Businesses

The Christie Administration has urged the Federal Emergency Management Agency (FEMA) to grant New Jersey residents and businesses who suffered property damage or destruction in Superstorm Sandy an additional six-month extension to file a complete flood insurance claim, or proof of loss, in connection with the storm. The Administration is asking that the filing deadline be extended from April 28, 2014 to October 28, 2014.

“Superstorm Sandy was the worst natural disaster to strike New Jersey in a generation, and the process of rebuilding has been expensive and complicated. Homeowners and business owners simply need more time to file their final flood insurance claims,” said Governor Christie. “Many property owners have begun to rebuild only to find there was more damage than they originally thought.”

A proof of loss is a form used by the policyholder to support the amount they are claiming under the policy, which must then be signed, sworn and submitted to the insurance company with proper supporting documentation. An extension of the filing deadline would give homeowners and business owners additional time to evaluate newly discovered damages and costs, obtain proper documentation, and submit detailed information in a supplemental proof of loss.

FEMA has twice extended the deadline for New Jersey residents to file a proof of loss. In November 2012, FEMA extended the 60-day timeframe for filing Superstorm Sandy-related proof of loss documents to October 29, 2013, one year from the date Superstorm Sandy struck New Jersey. In October 2013, the deadline was extended another six months to April 28, 2014. If FEMA grants the State’s request to extend the deadline a third time, New Jersey residents and business owners would have until October 28, 2014 to submit a proof of loss.

Governor Christie’s letter also reiterated a previous request for FEMA to clarify the interplay between the extended proof of loss deadline and the one-year statute of limitations for filing litigation relating to flood insurance claims. Under current FEMA policy, consumers have a one-year time limit to file litigation resulting from unresolved claims. The Administration sent a letter to FEMA in December 2013 asking that the agency to interpret the one-year time period as beginning after the denial or partial disallowance of a claim following the submission of proof of loss documents. The clarification requested by the Christie Administration would mean that the one-year window for residents to file Sandy related lawsuits over flood insurance claims would not begin until after a claim was denied following the submission of the
proof of loss.

World Bank Helps Solomon Islands with Disaster Resilience
Natural CatastropheRisk Management

World Bank Helps Solomon Islands with Disaster Resilience

The agreements will officially launch two new projects for Solomon Islands, one to improve electricity supply and reliability in Honiara, and the second to help protect communities against growing risks from climate change and natural disasters.

“This launch will kickstart two very important projects for our country – projects that will help improve electricity supply, a priority for the Government and people of Solomon Islands, and that will enable communities to be better prepared for climate change and natural hazards,” said Rick Houenipwela, Minister of Finance and Treasury for Solomon Islands.

“I am pleased to be launching these projects on behalf of the World Bank as it continues to expand its support for Solomon Islands, by way of projects that support national priorities, such as reducing risks from climate change and natural disasters, and improving power supply for households and businesses,” said Franz Drees-Gross, World Bank Country Director for the Pacific Islands.

The Community Resilience to Climate Change and Disaster Risk in Solomon Islands Project (CRISP) will invest US$9.1m in climate and disaster risk information and early warning systems, which can save lives in the event of a tsunami or other natural hazard, as well as community projects in climate change adaptation and disaster risk reduction, such as climate proofed buildings, in up to four provinces.

The agreement was also signed for US$13m in new financing for the Sustainable Energy Project (SISEP), which is working to improve the reliability and efficiency of electricity supply for the 65,000 residents of Honiara.

“Efficient, affordable and reliable electricity access is essential for every aspect of development from running hospitals to doing business, while the Climate and Disaster Resilience Project is vitally important in a country where communities face very real, very present threats from natural disasters and climate change, especially in the remote Outer Islands,” said Drees-Gross.

The SISEP project began in 2008 and has supported the financial turn-around of the Solomon Islands Electricity Authority (SIEA), and improvements in power reliability in Honiara. During the course of SISEP, the annual total length of time that a customer is without power in Honiara has fallen by more than 80 percent, from 864 hours in 2007 to 124 hours in 2012.

This new funding will build on SISEP’s achievements and enable investments to further strengthen power systems, in particular through improvements to the grid in Honiara.

SISEP is being funded through US$13m in grants and low-interest credits from the International Development Association (IDA). CRISP is funded through a US$7.3m grant from the Global Environment Facility for Least Developing Countries, with a further US$1.8m from the Global Facility for Disaster Risk Reduction and Recovery Grant through the European Union Asian, Caribbean and Pacific Natural Disaster Risk Reduction Program.

Ximen Due Diligence Agreement with Huldra
Due DiligenceRisk Management

Ximen Due Diligence Agreement with Huldra

The agreement has been reached for the purposes of determining the feasibility and conditions of a proposal for the acquisition of Huldra Silver.

The transaction is subject to approval from the court and the creditors in the CCAA proceeding and the TSX Venture Exchange. Ximen intends to commence legal, financial and commercial due diligence shortly.

Ximen Mining Corp. is a publicly listed company trading on the TSX Venture under the symbol ‘XIM’, and is also listed on the Frankfurt, Munich and Berlin Stock Exchanges in Germany under the symbol ‘1XM’ and a German Securities Number of ‘A1W2EG’.

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, 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.”