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General Insurance Newsletter Friday 28th June 2019

28 Jun 2019

Insurance News

Arthur J. Gallagher has agreed to purchase a minority stake in a Czech Republic-based insurance Broker. Gallagher will acquire the stake in Prague-headquartered Renomia a.s. Founded in 1993 by Jirina Nepalova and her sons, Jiri and Pavel, Renomia is the largest independent Broker based in the Central and Eastern European (CEE) Region, with more than 1,500 colleagues serving clients under the brand through its franchise partner network. Renomia, which primarily serves commercial clients, has full-scale broking operations in seven countries – the Czech Republic, Slovakia, Romania, Hungary, Serbia, Bulgaria and Croatia – as well as an extensive franchise network in the rest of the CEE region, Gallagher said.

Centuries-old Lloyd’s of London is keeping up with the times. In line with The Future at Lloyd’s strategy, the world’s (re)insurance market has introduced a product innovation facility designed to “insure the uninsurable” by combining underwriting and innovation. With £53 million in capacity, the facility will trial new types of insurance for complex and non-standard risks. The initiative is spearheaded by senior underwriters from Tokio Marine Kiln (TMK), Beazley, MS Amlin, Talbot, Liberty Specialty Markets, Hiscox, Ascot, Chubb, Chaucer, Brit, Antares and Apollo. “The Product Innovation Facility formalises underwriting at the centre of the Lloyd’s innovation ecosystem,” noted Lloyd’s head of innovation Trevor Maynard.

More news...“Extreme but necessary.” Those were the words used by CEO John Neal to describe Lloyd’s of London’s actions on the back of allegations over drunken and inappropriate behaviour. The world’s oldest insurance market has taken the step to suspend one of its members amid increased scrutiny of allegations of bullying and sexual harassment. Neal remarked on a “couple of incidents where we have taken action and forced a suspension”. He outlined that one was in regards to alcohol use and involved a member making inappropriate remarks while on a business trip – that member was suspended for a month. Now reports suggest a second member will be suspended in connection to an internal email at firm Guy Carpenter which remarked that a female colleague “enjoys a glazed ring” in a ‘joking’ reference to doughnuts. Lloyd’s has established a “helpline” allowing members to raise concerns.

AXA have introduced twenty AI bots this year to help staff across the business with repetitive admin tasks, which will save our teams 18,000 hours of work a year. Harry, Bert and Lenny (yes, they all have names!) in the claims teams read customer correspondence and pair it with the right record, for example. This is something that usually takes our human staff around four minutes but Harry, for instance, can carry it out in less than 42 seconds. The huge added benefit is that this is freeing up really valuable time for people to do much more interesting, rewarding tasks. The bots have been a great success and, as you would expect, AXA are looking what other areas of the business that AI can help. So, there is no doubt, going forward, that AI will have an increasing role to play but they absolutely agree that establishing the ethical foundation is a critical first step.

In other news...from 1970 to 2019 emerging Asian countries bore the brunt of natural disasters to the tune of US$1.5 trillion in losses, according to the Asian Development Bank. The Insurance Development Forum (IDF), which is chaired by AXA’s Denis Duverne, believes revving up public-private collaboration is what will close the protection gap.“The insurance industry and the public sector need to accelerate their collaboration into action,” said AXA board and IDF chairman Duverne during the International Insurance Society’s Global Insurance Forum in Singapore. “We need to drive concrete significant measures to extend the use of insurance and related risk reduction capabilities to help build greater resilience to climate risk and natural catastrophes in countries where it is needed most.”

QBE recently launched a report, in collaboration with Airmic, entitled "Turning Data Into Information". The report looks at how data analytics can help when it comes to risk management and insurance. Cécile Fresneau, UK Executive Director of QBE European Operations, explained that it was necessary because she believes many companies don’t properly understand data. “Even industries that talk about being literate in big data, they talk a bigger game than what they actually do,” she explained. “I think it’s not just on Risk Managers, I think it’s just generally. People start with a lot of ambition around doing data and analytics and sometimes miss some of the very basic hurdles.”

In further news...Leeds insurance Broker McCarron Coates, with the backing of QBE, has rolled out a new offering that supports the Freight Transport Association’s (FTA) “Van Excellence” scheme. Available exclusively to either current members or new joiners of the scheme, the bespoke QBE-underwritten policy covers any size of fleet whose drivers go through the training and auditing of best practice conducted by Van Excellence trainers and inspectors. Depending on the policyholder’s preference, the coverage can pay for the cost of the first year membership, a half-day’s training from the FTA or a Van Excellence audit, or a year’s subscription to the Guide to Van Excellence. The product also includes access to relevant apps such as telematics and CheckedSafe.

Pension Insurance Corporation (PIC) has had a big first half. “This has been a record-breaking first half for PIC both in terms of the amount of new business transacted and longevity risk re-insured,” said Chief Origination Officer Jay Shah, whose firm so far this year has reinsured £7 billion of longevity reinsurance and concluded £5.8 billion of buyouts and buy-ins with the trustees of defined benefit pension schemes. “On the longevity reinsurance we are especially pleased to have insured such a large amount of deferred lives. This is a significant development for the reinsurance market, where we are now starting to see the standardisation of these types of deals, which we have had for several years for pensioner deals.” PIC, which wrote its first longevity reinsurance contract in 2008, cited the reinsurance of nearly £1.5 billion of deferred, or non-pensioner, lives for the period.

We’re barely halfway through 2019 but it’s already looking to be a momentous year for LV= General Insurance. The general insurance business, which will be wholly owned by Allianz UK once the purchase from Liverpool Victoria Friendly Society completes, has bagged a major accolade at the 2019 Which? Awards. LV=GI beat shortlisted companies John Lewis Financial Services, M&S Bank and NFU Mutual and was named insurance provider of the year.

Banco Santander is paying Allianz nearly €1 billion to see the end of a bancassurance deal. In 2011 Allianz entered into an exclusive long-term alliance with Banco Popular, bringing to life the joint venture Allianz Popular SL which involved life insurance, pensions and asset management. The tie-up also featured the distribution of non-life insurance products to the Spanish market. Last year Banco Popular was merged into Banco Santander after being snapped up by the latter in 2017. Now Banco Santander and Allianz have agreed to terminate the non-life distribution agreement in addition to the sale of the German Insurer’s 60% stake in the joint venture. The transaction is worth €936.5 million.

Terrorism insurance is one policy on the market that could save a client a lot of heartache, yet woefully few people know enough about it. However, according to CEO and Managing Director of Beech Underwriting Geoff Stilwell, claiming ignorance of Terrorism insurance simply isn’t a legitimate excuse anymore. “Ignorance is no excuse. Because it’s been out there for donkey’s years,” he said. “You know what I’d be saying to these people? This is your livelihood." New research conducted by Comres on behalf of Pool Re backs up Stilwell’s beliefs. Only approximately 1 in 5 businesses in the UK have Terrorism insurance and of those who don’t have it, 22% said it was because they thought there was a “very small” chance they would need the cover.

Zurich Insurance is the subject of a lawsuit from a major hotel chain looking to claim damages for an active shooter event two years ago that left 58 people dead and 850 injured. According to its lawsuit against the Insurer, MGM Resorts International said that more than 4,000 people are seeking damages from the company related to the Las Vegas Strip mass shooting incident in 2017.“MGM is aware of in excess of 4,000 claimants who are seeking compensation from MGM for their claims arising out of the (shooting),” the lawsuit read. “MGM disputes any liability arising out of the event.” The hotel company alleges Zurich has failed to pay the promised legal costs and thus breached its contract. MGM Resorts even noted that the defense costs left unpaid by the Insurer cost “many millions of dollars.”

Insurance Brokers with charity clients can now have an even clearer picture of the risks the sector needs protection against, thanks to Ecclesiastical’s first Charity Risk Barometer. The study examined the top risks being faced by charities – from the short-term ones all the way to those likely to have an impact in the next half decade. “These are challenging times for the sector – uncertainty is the new norm and new risks are emerging all of the time,” stated the Insurer’s charity director Angus Roy. “It is imperative that charities spend more time thinking about not only the potential rewards, but also the risks they are facing, now and in the future."

The wait is over and the judges have selected the shortlist for the UK Broker Awards. The standard was high and each category impressed. The judges battled it out to whittle down a shortlist for each category. The awards will take place at The Brewery, in London, on 13 September.

Fitch Ratings has cautioned that the introduction of price caps could depress industry profits. The warning follows a proposal by the Competition and Markets Authority (CMA) to introduce price caps on rolling contracts in multiple markets. The department is aiming to remedy the ‘loyalty penalty’ that existing customers pay above new customers. Price disparities across five markets, including insurance, are estimated to cost customers £4bn per year. In a statement published on 24 June, Fitch highlighted insurance as an industry that is already struggling with weak profitability.

The Financial Services Compensation Scheme (FSCS) has revealed that it paid a total of £473m in compensation to 425,760 customers of failed firms during 2018/19. This is compared to the £405m the scheme paid out in compensation in the previous year. In FSCS’s Annual Report and Accounts published, it reported that it raised levies on 49,224 regulated financial services firms, with a total levy income of £517m, to fund the costs of compensation and of running the scheme.

Nigel Phillips, Commercial Director of CDL Group, has stated that a focus on organic growth over the past five years has been a driver behind the software house’s rise in profits in 2018. Phillips said: “What we have been particularly trying to focus on is delivering that sort of proactive customer experience by using data and these types of technology like machine learning and deliver the right products that consumers really want.” The business reported an increase in pre-tax profit of 4% as well as a rise in turnover for the year ending 30 September 2018.

Acturis Group has posted a rise in pre-tax profit for the year ended 30 September 2018, to £31.5m from £22.8m in 2017. The software house also reported a 28% increase in revenue to £79.8m (2017: £62.2m) and a rise in operating profit from £23m last year to £31.3m in 2018. The document also revealed that Acturis paid a total of £3.5m for Surrey-based ICE InsureTech, which it bought in November 2017. The deal followed the acquisitions in Germany of Lutronik Software for £898,075 in June 2017, Assfinet and NAFI as well as Nordic Insurance Software in Denmark.

 

Market Movers and Shakers

Mark Walker, who left QBE in December 2018, has made an industry comeback via Berkshire Hathaway Specialty Insurance (BHSI). The former QBE Hong Kong Chief Executive has been tapped to join BHSI in London in his capacity as Head of Customer and Broker Engagement for the UK. At QBE Walker most recently served as Head of SME, Affinity & Digital, Asia-Pacific. A seasoned Executive, the BHSI recruit was with RSA in the UK and emerging markets from 1998 to 2015.

Price Forbes has launched a new Security Risks practice following the hire of three highly experienced experts with backgrounds in international risk management, military operations and insurance broking and underwriting. The new practice will provide a new service aimed at corporates and organisations of all sizes and across all sectors, arranging pro-active, pre-incident cover that sits above existing traditional insurance policies with access to a panel of international incident response specialists as well as traditional security product lines. The new team is led by Head of Security Risks, Alistair Fox OBE, a former Army Colonel who served as a Royal Engineer bomb disposal and search expert before heading up operations for political and security risks at a major insurance Broker. Joining Alistair are Executive Director Sam Aiken and Director Ashley Coles.

RSA UK&I has hired Rachel Conran as Chief Underwriting Officer for (CUO) its Global Risk Solutions (GRS) business. Conran will join RSA on 8 July 2019 and will be based in Luxembourg. She has worked in insurance for 25 years, previously as CUO for Allianz’s Global Corporate and Specialty division between 2009 and 2016.

Richard Watson has announced he will retire from his role as Chief Underwriting Officer at Hiscox on 31 December 2019. The provider noted that the search for his replacement has begun, adding that both internal and external candidates will be considered. Watson has been with Hiscox for 33 years and during his time at the company, he also worked as CEO of Hiscox Global Markets and CEO of Hiscox USA. In addition, Watson has spent five years as a Hiscox board member. Hiscox stated that he will also step down from the company’s board on 31 December 2019. Following his retirement, Watson will continue to serve the company as an advisor and as a member of subsidiary boards.

The Chartered Insurance Institute (CII) has appointed the former Personal Finance Society (PFS) President, Nick Turner, as President of the overall body’s board. The move for Turner, currently Chairman of NFU Mutual subsidiary, MISL, has paved the way for Aon UK CEO, Julie Page, to join the CII board as deputy president. The professional body also announced that its members had voted in favour of modernising its by-laws. The changes won the support of members at the CII’s annual general meeting, which took place in York. The by-law changes will now be put to Privy Council for final approval to form part of the professional body’s constitution.

 

All information provided in this Market Digest has been gathered from multiple General Insurance Media sources and individual company press releases.

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