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General Insurance Newsletter - Friday 2nd March 2018

02 Mar 2018

Market News

The most comprehensive survey ever carried out of talent and diversity in the insurance and long-term savings sector has revealed a majority of firms already have programmes in place to promote inclusion at the very top of their businesses. The data collection, undertaken by the Association of British Insurers (ABI) and published the day before the organisation’s Annual Conference, also demonstrates the scale of the challenge faced by the industry when it comes to getting women into top posts. Headline findings of the ABI’s research, which is based on a data collection covering more than 82,000 staff, include: 78% of companies have a diversity and inclusion strategy, with 74% having an executive sponsor for diversity and inclusion; 73% of firms have an executive or management development programme that prioritises good gender balance, while 56% have a development programme targeting those that may be underrepresented; 78% of companies have already provided unconscious bias training for staff and for parents, 33% of firms have a return-ship programme to help them with their return to work. The sector’s current workforce is found to be 16% black, Asian or ethnic minority, compared with 14% in the general UK working age population. On gender, the industry is exactly split 50/50 across all levels, but despite this only 21% of executive and 21% of board positions are held by women.

The Lloyd’s Market Association (LMA), which Chief Executive David Gittings described as having “unparalleled” access to and influence in the world’s specialist insurance market, has revealed its priorities for this year. The UK’s imminent departure from the European Union sits high on the trade body’s list of priorities for 2018, with Gittings expressing optimism about the issue of contract continuity. Addressing the CEOs of Lloyd’s managing agencies, the LMA official also conveyed his support for the planned Lloyd’s subsidiary in Brussels. Other areas to be of particular focus this year include claims modernisation, electronic placing and the LMA Academy. As for the latter, Gittings said they are eyeing further development in Lloyd’s overseas hubs. In terms of modernising claims, among the triumphs cited were the launch of the single claims agreement and the creation of the claims expert hub. LMA’s board, as confirmed by Gittings during the annual CEO meeting, is also backing the proposal to mandate the use of electronic placement at Lloyd’s. 

Following Allianz' initial tender offer for Euler Hermes Group shares and additional purchases by Allianz of Euler Hermes Group shares, Allianz announced on 23 February 2018 its intention to file in the coming weeks a further simplified cash tender offer at a price of 122 euros per share (in cash). This simplified cash tender offer will be followed by a squeeze-out, for the remaining 1,998,131 Euler Hermes Group shares held by minority shareholders which represent 4.69% of the share capital and voting rights of Euler Hermes Group.

In a highly competitive P&I market, an international marine Insurer has posted significant growth in mutual P&I business, as well as in all its commercial P&I business lines. Skuld concluded a successful February 2018 renewal, reporting a 9.4% net increase in mutual P&I gross tonnage from 2017 to 2018, including committed tonnage for delivery throughout 2018. This brings the firm’s mutual P&I tonnage to 92m gross tonnes. Stale Hansen, Skuld president and CEO, said the increase to the firm’s gross tonnage was due to the combined efforts of their three business platforms – Skuld P&I, Skuld 1897, and Skuld SMA – and the coordinated teamwork of all their offices and departments.

Insurance Broker Lockton, which has worked with the National Rifle Association on gun show and gun carrying policies, on Monday said it would no longer sell NRA-endorsed products.The move comes hot on the heels of the latest shooting tragedy in the US in which 17 people were killed at a Florida high school. The horrific events saw Chubb make an announcement that it would no longer underwrite for the program that offers protection to gun owners that shoot in self-defence.

Hiscox has reported reduced profits for what it described as "an historic year for catastrophes". Gross written premiums rose to £2.55bn in 2017, up from £2.4bn the year before, while net premiums earned hit £1.88bn, compared with £1.68bn in 2016. Pre-tax profit was £30.8m, down from £354.5m, while pre-tax profit excluding the effects of foreign exchange rates was £93.6m, down from £202.1m. Earnings per share dropped to 9.3p from 119.8p. The group's combined ratio deteriorated to 99.9 per cent from 84.2 per cent. Shares were down 5.9 per cent in early trading. The company said profits were dented because it had reserved $225m (£160m) for claims in "an historic year for natural catastrophes", which included the impact of hurricanes Harvey and Irma.

QBE’s European CEO has revealed plans for the business to engage more with regional Brokers and says its new post-Brexit base, in Belgium will be operational by the end of the year, following the announcement of its 2017 results  The Insurer’s European arm posted an insurance profit of £249m for 2017, up 6.9% from 2016, despite what it called “challenging market conditions.” The business said it had a year of “solid underwriting performance” with a combined operating ratio of 95.2% and Gross Written Premium of £3,144m. QBE Europe CEO Richard Pryce stated at a press briefing that “Our insurance and reinsurance businesses in Europe have been growing steadily, they’re almost standout growth areas of our business over the least three or four years, we think this will link us a lot more closely to our customers, because we’ll be right in the centre of Europe and we will carry on being a European business serving European insurance and reinsurance customers. I would expect to carry on growing in those areas as a consequence of that.” In the UK, QBE will be building ties with more regional Brokers going forwad, and will have a “more visible marketing campaign going into 2018,” Pryce said.

The insurance industry remains under pressure to stop supporting coal, an industry which environmental groups say undermines international efforts to combat climate change and air pollution and even causes “thousands” of premature deaths each year. Earlier this month, the Unfriend Coal campaign published a report revealing that European insurers have invested more than €1.3bn (around £1.14bn) in Polish coal companies and have signed at least 21 contracts underwriting existing operations and new developments since 2013. The report called out five Insurers that it said are the biggest Underwriters of Polish coal: Munich Re’s Ergo Hestia, Allianz, Generali, Talanx’s subsidiary Tuir Warta, and PZU.

Allianz Partners has partnered with Visa to create a new mobile payment and loyalty app for its customers. Allianz says that the app, Allianz Prime, is the first of its kind within the insurance industry. Customers will also be able to claim loyalty bonuses for using the payment app. Allianz Prime will feature built-in security technology pioneered by Visa that replaces sensitive payment card account information with a unique digital identifier (a ‘token’) that can be used to process payments without exposing actual account details, according to Allianz. Other benefits of using the app with be a loyalty programme, smart spend money tracker and Allianz Partners’ Digital Payments Protection.

Allianz Insurance has launched Returners@Allianz, a programme specifically designed to recruit talented people who have taken a career break but are looking to return to work. The programme is a six month paid placement with the aim of finding long term talent and has been created for people who have been out of the work environment for at least two years. Throughout the programme the candidates are offered training and mentoring support to help them achieve their ambitions.

Less than a week after the Central Bank of Ireland ordered the New Zealand based Insurer CBL to stop writing new business in the country, it has now gained approval to appoint Kieran Wallace as Provisional Administrator for the European arm of the business, CBL Insurance Europe dac. According to a report in The Independent, the regulator informed the court that it was concerned over the way in which the Insurer’s business had been carried out and the fact that it had apparently not made the necessary provisions for debts. As such, it took action to “protect policyholders” – the firm has around 12,500 Household policies in Ireland, as well as providing cover against insolvency on one of the country’s largest airline carriers’, Ryanair’s, Travel insurance policies. The company also had the authority to write business in the UK, Belgium, France, Italy, Romania, Sweden, Spain and Denmark. Existing policies will reportedly remain in force – but policyholders have been asked to arrange alternative cover as quickly as they can. The move comes shortly after the parent company CBL had administrators appointed over the weekend.

AXA has revealed that it will be the first panel member to provide a new Car insurance product via start-up Brolly. Scheduled to launch in March it includes a 24hr claims helpline, cover for replacement keys and locks, as well as windscreen repair. The product is set to be made available via the Brolly app and is seen as part of AXA’s wider strategy to work with innovative companies in an effort to make insurance easier and more accessible for customers. 

Average pricing rose by 0.8% in the fourth quarter, compared to a 1.9% decrease in Q3 2017, according to Marsh’s Global Insurance Market Index. Globally, Property insurance pricing rose 3.2% in Q4. The previous quarter, it decreased 2.4%. Financial and Professional lines pricing was also up, rising 0.1% in Q4, while Casualty pricing fell 1.5%. Both Financial and Professional lines pricing fell in the third quarter of 2017, according to Marsh, by 1.4% and 1.7% respectively. On a regional level, average pricing increased in the UK, Latin America and Australia – which saw its fourth straight quarter of pricing increases. Average pricing fell in the US, continental Europe, and Asia. US Cyber insurance pricing increased for the first time since the fourth quarter of 2016.

“The insurance industry provides a good illustration of why remaining in the single market makes most sense,” said First Minister of Scotland Nicola Sturgeon MSP at yesterday’s annual conference of the Association of British Insurers (ABI). “Remaining in the European Economic Area would, for example, enable financial passporting to continue. That is by far the easiest way of ensuring that UK companies can continue to sell insurance across the EU without having to consider setting up operations new in other parts of Europe.” However, Sturgeon gave insurers a reality check. “I know that many of you might perhaps agree with the notion that we should remain in the single market but consider that it is unrealistic,” she noted. “After all, the UK government keeps on saying that we will leave both the single market and the customs union.”

Admiral Group with its “record profits” for 2017. However, it was also revealed the British motor Insurer would pay a special dividend and that each member of staff will earn £3,600 worth of free shares. Meanwhile, the firmannounced that it is considering setting up an EU subsidiary in Spain as a result of Brexit. The company already has businesses in the country and now wishes to set up an insurance company and Broker there, having already sought the permission of the Spanish regulator.

The on-demand market worldwide has “exploded in the last few years,” thanks to the rise of the gig and sharing economies, says Cheryl Agius, CEO of Legal & General’s (L&G) GI business. Earlier this month, L&G revealed a partnership with insurtech Slice Labs – a US firm known for its pay-per-use insurance offering – to provide on-demand cover for UK home-sharers. “In the US and Asia, insurance is something that people do switch on and off. They are much more aligned to that,” said David Robertson, L&G’s Director of Digital Transformation. The UK’s “very established insurance market” has seen less of that change filter through, but demand from consumers and global trends mean it’s on the way. “We are being approached by people asking us to provide on-demand insurance, around particularly home-sharing,” Robertson said. “So, although we are starting with home-sharing, I think a lot of the market will move in the direction of dynamic insurance in the next five years. Millennials are pushing that demand, but I think also the overseas influence is beginning to tip into the UK market.”

Thingco, an insurance technology (insurtech) venture based in London, will expand into China, appointing Richard Trebble as Partnership Director to head its entry into the new market. Trebble will focus on fostering business opportunities with Insurers in China, which is the largest automotive market in the world and where demand for connected vehicle services is growing. According to the UK’s Minor Metals Trade Association, the Chinese automotive market accounts for around 30% of passenger car sales globally and has grown 18.1% per year over the last decade.

The Fintech Delivery Panel is pleased to announce a new subgroup focused specifically on insurance technology and innovation. One of the goals of the Fintech Delivery Panel, which was launched by Tech City UK at the request of HM Treasury, is to promote the UK InsurTech agenda and help InsurTech companies to scale up and compete on a global stage, in line with the Government’s Industrial Strategy’s focus on future sectors. The new InsurTech subgroup includes representatives from leading InsurTech startups, incumbent Insurers and key market bodies including the ABI, Lloyd’s of London, the London Market Group (LMG) and BIBA. Outlining the initial priorities for the group, Will Thorne, Innovation Leader at The Channel Syndicate, a Lloyd’s syndicate, said: “The InsurTech Board will establish a common vision for InsurTech in the UK in order to position the UK as the best environment to start or locate an InsurTech business. Industry support and collaboration with a thriving InsurTech scene will build on the UK’s traditional strengths as one of the major global insurance markets.”

DAS UK Group has been awarded the CIPS Kite Mark for Ethical Procurement and Supply for 2018. This is the foremost ethical practice accreditation given by the Chartered institute of Procurement and Supply (CIPS), the global body serving the procurement and supply industry. CIPS promotes high standards of professional skill, ability and integrity among all those involved in purchasing and supply chain management.

Seventeen Group has announced that, effective 22nd February 2018, it has acquired Complete Insurance Solutions Ltd and Total Insurance Services Ltd for undisclosed sums. Complete and Total will be integrated into James Hallam Limited. James Hallam have a long standing Scottish presence including the acquisitions of Annandale Insurance Brokers and Westscott Insurance Brokers. These acquisitions further strengthen their position as an independent Broker in a very important region. All staff are remaining with the business and will continue to operate out of the existing premises. 

Eliza Manningham-Buller, former Head of MI5, gave an audience of Liberty Speciality Market’s Brokers a series of insights into how she set about modernising the security organisation in the wake of the 9/11 attacks. In addition to dispelling many of the popular myths about intelligence operatives and their lives, Baroness Manningham-Buller told the story of her plans to grow the organisation and persuade ministers to significantly increase its funding in order to combat new threats. She also laid out her thoughts on how leaders can make a positive impact on their organisations while working under intense pressure and public scrutiny. Questions from the audience included the impact of Brexit on the security services, Russia’s behaviour and the pressures facing individuals making quite literally life-or-death decisions.

Zurich Insurance Group (Zurich) has entered into an agreement to acquire the operations of Australian Insurer QBE Insurance Group Limited (QBE) in Latin America for a total aggregate price of USD 409m subject to closing adjustments. The transaction, which is subject to regulatory approvals, will position Zurich as the leading Insurer in Argentina, while also adding incremental scale and capabilities in Brazil, Colombia and Mexico and making the Group the number three insurer in Ecuador.

It has been revealed that Ataraxia has taken a minority stake in Hampshire-based commercial insurance Broker Glowsure.The deal, which is for an undisclosed sum, is set to help the Petersfield located business make local acquisitions. According to a statement from Ataraxia the business will seek opportunities in the south coast region.

Mark Drummond Brady, Deputy Group CEO of Jardine Lloyd Thompson (JLT), has stated that the Broker is looking to make acquisitions in 2018. In a recent interview he said “In JLT the chequebook is always open for acquisitions for any part of our business where they come up with opportunities to reinforce areas which are of a strategic importance for us through bolt-ons. We’re pretty allergic to making any kind of large or transformational acquisitions that have the effect of impacting our culture.” He explained that over the last 12 years JLT had grown from £400m in turnover to £1.4bn through “two thirds of organic growth and one third acquisitions”. “We always have a regular pipeline of deals that we are looking to and working on and we’re keen to continue to make acquisitions as part of our growth strategy,” he added.

MGA Azur, which describes itself as a managing digital agent (MDA), has developed Car Collector, a HNW product designed for owners and collectors of both classic and modern cars. The product is for owners who collect vehicles as a hobby or an investment. 

Hastings Group has achieved a 21% growth in gross written premium (GWP) to £930.8m for the year ended 31 December 2017 (2016: £769.0m). According to the firm its operating profit rose by 39% to £184.1m in 2017 (2016: £132.1m). Hastings revealed a £20m hit from the discount rate change in its 2016 accounts, but its operating profit had not been further impacted by Ogden in 2017. The business also posted an improved combined operating ratio of 87.0% (2016: 91.3%). In addition, Hastings’ net revenue was also up by 21% to £715.6m in 2017, compared to the £590.3m it achieved in 2016 and its net income for 2017 was £144.6m (2016: £96.9m).

According to reports, Howard Lickens, Chief Executive Officer at Clear Insurance Management, has confirmed the news that the Broker has appointed Fenchurch Advisory. Lickens detailed that the firm’s previously announced target of doubling to £40m of revenue by 2022 underpinned the decision. Lickens was questioned directly as to whether the latest development meant the company was for sale he admitted he was regularly asked about selling up. “You can well imagine that we get approached all the time,” he confirmed.... “We rebuff them.” As to what form the discussions with Fenchurch were taking Lickens said that nothing was “off the table but no decision has been made”. He accepted that any firm could be bought at the right price but repeated that options such as debt funding, private equity and “somebody out of left field” were possibilities to support future growth. He highlighted that he struggled to envisage any future change coming from that final left field category adding: “If somebody wants to come with wheelbarrow loads of spending money and a really nice story you never know.” “At this stage we are taking advice and are not in any great hurry.”

Market Movers and Shakers

Founder and former CEO of Tasker Insurance Group, Paul Tasker has been appointed Managing Director Reg UK Ltd.

Gallagher has appointed James Fletcher to lead its Manchester operation as Branch Director to drive growth, continue to strengthen its regional presence and further build out client capabilities in the North-West.

In further news, Gallagher has appointed Marsh veteran, Jayne Pinnell as Client Director for North East in their specialist UK Public Sector and Education practice. 

Independent Broker Smith Greenfield has appointed Andrew Cross as its Chairman.

Chubb has announced the appointment of Benjamin Rowley as Senior Underwriter of Financial Lines for Chubb Global Markets.

Leading Legal Expenses and assistance provider ARAG plc has appointed David Haynes as a Director on the company’s board.

QuestGates has announced that it has further strengthened its Major Loss team with the appointment of Dean Ciaburro as a Major Loss Adjuster.

Specialist Engineering and Construction Insurer HSB Engineering Insurance (HSB), part of Munich Re, has appointed two new Non-Executive Directors, Jeff Herdman and Craig Scarr

Sabre has annouced the appointment of Andy Pomfret to the Board of the Company as an Independent Non-Executive Director and the Senior Independent Director. 

Legal Protection Group has announced the appointment of Alistair Stewart as Non-Executive Director. 

Independent Lloyd’s Broker AFL Insurance Brokers Ltd has announced the appointment of Mike Almond, who has joined the company’s Corporate Retail team as Director. Group PLC ("Company") has announced the appointment of Sarah Warby as a NonExecutive Director with effect from 1 June 2018, subject to regulatory approval. She will be a member of the Audit, Risk, Remuneration and Nomination Committees of the Board.

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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