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General Insurance Newsletter Friday 29th May 2020

29 May 2020

Brit, the global specialty Insurer and Reinsurer, has launched a High Net Worth proposition - Private Client. Brit Private Client has been set up to work with Brokers operating in the High and Ultra-High Net Worth markets, and their clients. Brit described the offering as “a credible new alternative”. According to the Provider, it will combine Brit’s brand and reputation in claims and service with a team of highly regarded market practitioners. The team is led by Tara Parchment, Head of Private Clients, who brings over 25 years of experience in the HNW & UHNW market.

Mactavish has called for a complete overhaul of how Broker remuneration is communicated to clients after it published a report revealing that Brokers receive as much as 80% of their remuneration from Insurers. According to the Consultancy, this presents a “huge conflict of interest” as only 20% of Broker revenue is composed of fees from their clients. The report, Broker Conflicts, also showed that much of a Broker’s revenue is directly linked to the price of premiums and Mactavish flagged that Brokers are benefitting from rising insurance costs. With prices currently being driven up by the coronavirus crisis, the consultancy stated that the hardening market was “making things worse”. The British Insurance Brokers’ Association has stated that it “wholeheartedly disputes” issues raised by Mactavish in this report. In response, Biba stated: “Brokers are the agent of the client as well as the Insurer and one of their fundamental roles under the Insurance Distribution Directive is to act in their customer’s best interests - which is exactly what they do. “Remuneration by way of commission is actually beneficial for customers who are able, because the Broker is paid in this way, to receive advice before having to commit to buying a particular insurance policy.”

Ardonagh Group reported an income of £160.1m for the first quarter of 2020. This compares to £157.6m in the same period last year. Adjusted Ebitda grew to £43.6m a 10.9% uptick on the £39.3m reported in 2019. Operating costs also fell 1.5% to £116.5m.

The Financial Services Compensation Scheme (FSCS) has confirmed that Brokers will pay an £18m levy for 2020/21. This is an increase on the £12m paid out last year by Distributors. Earlier this year the body indicated the Broker levy for 2020/21 would shoot up to £23m but the revised figure has settled at £18m. The FSCS explained: “As the Investment Provision class is not now expected to breach its class limit, the General Insurance Distribution class will not need to contribute to the retail pool. “This has the effect of reducing the levies payable by firms in the General Insurance Distribution class by £5m to £18m. The class will benefit from a Provider contribution of £6m from the General Insurance Provision class.”

BIBA has produced a useful infographic for insurance Broker PI renewals. The insurance market has hardened, and it is becoming more difficult to place Brokers’ Professional Indemnity insurance. Some insurance markets have stopped writing new business and others are excluding COVID-19. It is important that Brokers comprehensively protect themselves against potential errors and omissions claims…To download the BIBA produced infographic CLICK HERE.

By Miles, the UK’s first real-time pay-by-mile Car insurance Provider, has successfully raised £15m in a Series B funding round led by CommerzVentures. Existing investors Octopus Ventures, Insurtech Gateway and JamJar investments also continued their support committing further investment. The Insurtech company is on a mission to make Car insurance fairer for the UK’s 19 million lower mileage drivers - those who drive less than 7,000 miles a year - by offering a more flexible way to pay for Car insurance cover that ensures you only pay for the miles you drive.

As part of a new surveying services hub, Loss Adjustor QuestGates will soon be introducing a new subsidence claims development academy. To ultimately be based within its Northampton office, the idea is that the hub will provide valuation and validation expertise as well as projecting managed perils, while supporting third party Property and tree root Liability services.

M&G plc is financially strong.” That was the declaration made by Insurer and Asset Manager M&G Plc, when it issued a business update ahead of its annual general meeting (May 27) in London. According to the former Prudential Plc unit, its shareholder Solvency II coverage ratio has remained “comfortably above” the company’s risk appetite throughout the coronavirus crisis, standing at 168% as of March 31. As a further indicator of M&G’s financial strength, its previously announced dividend payments worth £410 million will go as scheduled on May 29. The amount spans the ordinary dividend of 11.92 pence per share plus a special demerger dividend of 3.85 pence.

In other news... Digital wrap and wealth management platform Ascentric, which has been part of mutual life insurance and pensions giant Royal London for about 13 years, will have a new owner in the form of M&G Plc. The sale, financial details of which were not disclosed, comes following a comprehensive strategic review led by Royal London Chief Executive Barry O’Dwyer. Designed for UK Independent Financial Advisers, Ascentric has assets under administration of £14 billion.

Two major casualties had an impact on North P&I Club’s underwriting figures for the policy year ending February 20, the club said. However, the period also saw the launch of new products, member retention at 99% and more tonnage insured than ever before. North also received an “A” financial strength rating for the 15th consecutive year. “Rising claims based on greater market share and weak pricing pointed towards an underlying combined ratio for North of 108% -- closely aligned with International Group of P&I Clubs counterparts – but North’s exposure on the Grande America and Golden Ray casualties helped push the figure to 125.8%,” North said.

Lloyd’s of London has not forgotten Brexit – announcing this week a step forward in its Part VII transfer to Lloyd’s Insurance Company S.A. in Belgium to allow the (re)insurance marketplace to service existing European policies and pay claims even with the loss of passporting rights as a result of the UK’s departure from the European Union. Lloyd’s has received approval from the High Court of England and Wales for its Part VII strategy for notifying policyholders about the proposed transfer. The strategy spans comprehensive plans to ensure customers understand the transfer process, as well as providing assurance of the validity of their policies being transferred to Lloyd’s Brussels.

There is a new member of GRiD, the group risk protection sector body. Incoming is Nugent Santé, the health and protection insurance intermediary – which marks the latest step in the firm’s rapid growth. Having launched just four years ago it wants to be part of a combined effort to boost growth in the sector.

As shipowners face new compliance challenges in the face of the Inventory of Hazardous Materials (IHM) legislation, Marine Insurer UK P&I Club has put together a helpful guide. The Protection and Indemnity insurance Provider is offering a Risk Focus report on the sector that delves into the processes and requirements of the IHM legislation, as well as its technical aspects. The idea is that it will assist members with compliance and reduce the likelihood of reputational risks. The Marine Insurer outlined that the IHM is an important tool when the vessel reaches the end of its useful life and recycling is planned. It can help ensure minimal environmental impact and safe working conditions on the scrapping yard.

The UK Government recently released its Cyber Security Breaches Survey for 2020, the findings of which highlighted that the majority of UK businesses are still not insured against cyber risks. Among the key insights gained from this report is that the rate of uptake of Cyber insurance policies for SME-level companies is not only critically low at 14% but also that this has improved relatively little since last year’s report.

Willis Towers Watson is selling its Swedish financial advisor, Max Matthiessen, to Nordic Capital for an undisclosed sum. “We are very proud of what Max Matthiessen has accomplished and are confident that Max Matthiessen will continue to grow and expand their capabilities in order to deliver first-class client solutions with Nordic Capital as the new owner,” said Willis Towers Watson’s Nordics Head Johan Forsgård.

“Sabre has a strong balance sheet and a resolute focus on underwriting profitability.” Those were the words of Sabre Insurance Group Plc Chief Executive Geoff Carter when the British Private Motor insurance Underwriter issued a trading update for the three months ended March 31 ahead of its annual general meeting. According to Sabre, its solvency coverage ratio of 186% exceeded the Insurer’s preferred range of 140-160%. The company cited continued strong organic capital generation in the period. Meanwhile Sabre’s gross written premium for the quarter slid by approximately 5% to £43.7 million.


Coronavirus-related News

The hardening market, which has been accelerated by the coronavirus pandemic, has led to a number of calls to consolidators from Brokers wishing to sell. That is according to Towergate CEO Joe Thelwell who spoke about the Towergate deals revealed in the Ardonagh results for Q1 2020. “More Brokers are keen to talk to us because of Covid. The market is hardening and Brokers are struggling to get placement. Brokers then want to sell to someone like Towergate because they want their clients looking after and because they know we can get placement,” he commented.

There are not many green shoots of hope for the insurance industry amid the coronavirus pandemic. Though many Insurers have been able to save on reduced Car insurance claims, others have faced a barrage of complaints over issues like business interruption cover – even though they may never have offered coverage for pandemics in the first place. So then, perhaps it’s some small consolation for the industry that at least one product appears to have received a boost from the pandemic – Warranty & Indemnity (W&I) insurance in M&A. According to Brokerage giant Lockton, take up of W&I in M&A deals has surged – rising 6% to more than 40% in the past five years with companies “scrambling” to win transactions in what has become an increasingly competitive landscape.

The ABI has responded to an open letter from small business owners and representatives (The Covid Claims Group) regarding Business Interruption insurance and COVID-19. In the response, ABI Director General, Huw Evans, recognised the extremely challenging circumstances for many small businesses as a result of measures to combat COVID-19, and seeks to address concerns raised by the sector with regards to the response of the insurance industry and BI cover in particular. Mr Evans remarked, “Far from failing our customers, Insurers in the UK expect to pay at least £1.7 billion in claims as a result of Covid-19. This includes over £900m to businesses and £275m to people claiming on Travel insurance. The international insurance market, Lloyd’s of London has said it expects this event globally to have more impact on the financial position of insurers than the 9/11 terrorist attacks or the 2005 hurricanes, with the global and systemic nature of this crisis challenging our industry in a way we have never seen before.”

After witnessing several years of decreases, commercial insurance buyers are facing rate increases not seen in almost two decades, adding to the hardships many are already experiencing amid the COVID-19 pandemic. Industry experts expect price hikes to double for some premiums as Insurers try to mitigate the impact the coronavirus on their revenue. The outbreak has created a double whammy for Insurers, with combined customer claims predicted to exceed US$100 billion and the volatile financial markets hitting reserves hard.

Trust in the insurance profession was improving before the coronavirus outbreak, according to the latest Chartered Insurance Institute (CII) Public Trust Index. A total of 1,000 consumers and 1,000 SMEs were surveyed over two waves, the first one in October 2019 and the second in January/February 2020. The results revealed that overall consumer and SME satisfaction with insurance increased slightly between October 2019 and February 2020.

Axa has agreed to pay coronavirus claims to some policyholders in France with restaurants. Reuters reported that following a court ruling in Paris that Axa should pay one policyholder for two months of cover amid the Covid-19 pandemic the Insurer has agreed to pay out on further claims where the policy wordings are similar to those involved in the original court case. CEO Thomas Buberl said the Provider would pay a “substantial part of these contracts” and “do it quickly”. Thomas Buberl’s has announced a further 500 million euros to assist SMEs in France.

Fresh group action against RSA and Hiscox is being prepared by insurance lawyers at Edwin Coe. The claims relate to Business Interruption losses as a result of the coronavirus crisis. According to Edwin Coe, the group action against Hiscox is in conjunction with claims specialist Roger Topping of Claims Equilibrium Club.

Aviva has suggested its claims exposure for Business Interruption caused by Covid-19 could be £200m in a trading update for Q1 2020. Aviva is the latest Insurer to be caught up in the dispute over BI cover. The Hospitality Insurance Group Action (HIGA), represented by Mishcon de Reya, has revealed that its group litigation will be focused on Aviva alongside QBE. In the statement the provider reiterated that the vast majority of its policies do not cover BI claims arising from Covid-19. It pledged to work with the Financial Conduct Authority (FCA) to offer certainty to customers quickly. The FCA is building a legal test case to find clarity on a number of disputed BI wordings.

Chartered Insurance Institute exam candidates can be confident that whatever government guidance is issued to slow the spread of coronavirus in the coming months they will still be able to be assessed. Next week the professional body will contact more than 2,500 candidates who were set to sit their written examinations on 6th and 7th July for units R06, AF7, AF1 and AF5 to inform them they will now complete their exam on-screen by online remote invigilation as the exam centres will be closed.

The Global Risks Report 2020, published by the World Economic Forum (2020) at the beginning of this year highlighted that, for the first time in the 15 year history of the annual risk report, environmental concerns accounted for all of the top five long-terms risks likely to have a major impact over the next decade. Since the COVID-19 pandemic hit, however, long-term risks and concerns have increasingly found themselves overshadowed by the more immediate and pressing problems afflicting businesses and individuals throughout the world.

The global Reinsurance sector will fail to earn its cost of capital in 2020 due to the COVID-19 pandemic, according to a forecast by Fitch Ratings. Fitch projected that financial performance would be impacted by mortality claims and losses from Event Cancellation, Business Interruption, Credit and Surety Insurance, and financial-market disruption due to the economic impact of COVID-19-related lockdown measures. The pandemic follows three years of heightened natural catastrophe losses and rising US Casualty claims, which impacted returns in 2017-2019, Fitch said.

Sydney-headquartered QBE Insurance Group, which provides Business Interruption (BI) insurance as part of a broader Property Damage policy, has lifted the lid on its BI exposure in the UK. “While the group’s BI policies do not typically cover claims arising from COVID-19, in response to queries regarding potential Business Interruption claims relating to QBE’s UK-based policyholders, QBE notes that reinsurance would limit the group’s net UK BI claims cost to US$75 million,” stated the Insurer in an Australian Securities Exchange filing.

Top broker Marsh, advocating for clients whose coronavirus-related claims have been rejected under their Business Interruption (BI) insurance, has submitted information to the Financial Conduct Authority (FCA) as part of the regulator’s High Court test case consultation. The submission, which Marsh said included a range of issues that are relevant to most clients’ claims as well as a number of specific wordings, used data from the company’s Marsh Commercial unit.

It’s been a good couple of months now – so how are you enjoying working from home? Are you missing your colleagues in the office space and sick of juggling the kids with working life? Or are you glad to escape those morning commutes and enjoying some new-found flexibility? According to Northern Ireland Insurtech firm MCL InsureTech, it seems it’s very much a case of the latter rather than the former. Its survey has revealed that 87% of staff wish to work from home in a post lockdown world.

Insurers are facing something of a “perfect storm” at the moment. Amid the coronavirus pandemic, they have been hit with an increased frequency of ransomware events, longer periods of Business Interruption and larger extortion payments – prompting one Reinsurance Broker to attempt to come up with a solution. Capsicum Re has now unveiled a modelling solution that can quickly quantify ransomware exposure threats. Known as Gh0st, it helps clients and markets quantify realistic scenarios so they can model probable maximum losses (PMLs) and attritional losses.

Italy’s largest Insurer expects its operating profit to take a hit this year due to the COVID-19 pandemic. Generali said that it expects operating profit to be “resilient” this year, but to come in below 2019 due to the outbreak, Reuters reported. Frederic de Courtois, Generali General Manager, said that the company would give a full update on its outlook for 2021 in November, since it would be some time before the Insurer could fully assess the impact of the pandemic. De Courtois said that Generali was less exposed than some other Insurers to some of the business lines hardest hit by the virus

At a time when many companies have halted their hiring in the face of the coronavirus lockdown, brokerage giant Gallagher has swooped for two new faces at its Liverpool office. The Sefton Street location now houses close to 60 risk management and insurance specialists after two new additions. Arriving to bolster the line-up is Garry Roberts, who joins as a Corporate Broker with more than 30 years’ experience, as well as Corinne Daniels, who will drive growth in the Financial Lines arena with 13 years behind her.

Global Reinsurer PartnerRe Ltd. has revealed an executive leadership shuffle, with two new CEOs in its Non-life business. Effective June 01, Philippe Meyenhofer will be appointed CEO of Specialty Lines, while Greg Haft will assume the newly created role of CEO Global Cat.

Starr Insurance Companies has announced the appointment of Jose Ribeiro as an Independent Non-Executive Director for Starr Europe Insurance and Starr Managing Agency. Ribeiro is based in London and has more than 30 years of experience in the financial services industry, including several leadership roles with insurance organisations. An actuary, Ribeiro began his insurance career in 1986 at AIG. After eight years with the company, he joined Munich Re. In 2002, Ribeiro headed to Willis as CEO for Latin America and the Caribbean. In 2007, he became Director for International Markets at Lloyd’s. From 2015 to 2019, he was Managing Director and Board Member for Asia-Pacific at AM Best.

Clear Insurance Management Ltd has added Tim Money and Nick Gallimore to its Board of Directors to serve as Chief Financial Officer and Group Operations Director, respectively.

Legacy specialist Randall & Quilter Investment Holdings Ltd, has swooped on a big name as its group Chief Financial Officer (CFO). Incoming is Thomas Solomon, who will also join the firm’s Board of Directors later in the year. Solomon makes the switch from his role as Managing Director and Head of Americas Insurance Investment Banking at Bank of America. His extensive experience also includes time spent at PricewaterhouseCoopers and Citigroup.

The senior management line-up at EC3 Brokers has picked up a boost with the arrival of Colin Bird. The former Chairman and CEO of Besso Insurance, who held those roles for two decades, officially joined at the turn of the month and is now set to oversee the newly created Specialty Casualty and Cyber team.

If you’re going to expand your business in a new market, then picking up a leader with experience at the likes of Prudential, Chubb and AXA seems like a good place to start. That is what Insurtech INSTANDA has done with its swoop for Steven Haasz. The firm has set its sights on expansion across Europe, focusing on partnerships and accounts across the continent and now Haasz will take a hybrid role with the business – externally driving that move forward, and internally working as Chief of Staff.

It’s a trio of new appointments for specialist Reinsurance Broker BMS Group. The firm has swooped on three new names for its Energy division – Alison Schwab, Russell Williams and Robert Thomas. Schwab offers more than 20 years of experience from across the US and London markets, focusing on the energy and utilities business. She makes the switch from Marsh JLT Specialty, but her background also includes time spent at AIG, Alesco Risk Management Services and Wortham Insurance. Meanwhile, Thomas specialises in thermal power and renewable energy fields having begun his career at Price Forbes & Partners, while Williams, who joins in July, specialises in General Casualty and Energy Liability and was previously a Managing Director at JLT Specialty Bermuda.

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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