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Facing up to the challenges of deteriorating underwriting environment and reduced investment earnings

Online Published Date : 15 October 2009 | Appeared in issue: 872 - 12 October 2009

The historically profitable New Zealand market has been hit by what one observer describes as a “perfect storm”. Over the last two years there has been an upsurge in severe weather events and an increase in the number of total loss fire claims affecting the household and food processing sectors. These factors have helped push the market’s combined ratio up from 93.3% in 2006 to 102.8% in 2008. New Zealand used to have the highest interest rates in the developed world but as a result of the economic recession, the official cash rate has been reduced six times in the last 12 months. Insurers’ investment earnings have therefore been dramatically reduced. However, the domestic household market, which has the most chronic loss problems, has been hardening for the last three years even though rates are widely perceived to be increasing so slowly that only the most agile and best prepared insurers are able to benefit from this trend

Willis buys 100% of Argentina brokers

Online Published Date : 15 October 2009 | Appeared in issue: 872 - 12 October 2009

Willis Group Holdings has completed the purchase of 100% of the share capital of Argentinean businesses Herzfeld Willis S A and Willis S A, a reinsurance operation. The business will be renamed as a single unit: Willis Argentina S.A. Terms of the..

Hartford recruits new CEO

Online Published Date : 15 October 2009 | Appeared in issue: 872 - 12 October 2009

International insurers and reinsurers based in Ireland saw their premium income grow to record levels in 2008, according to DIMA, the association which represents them. Based on a survey of its members, DIMA reports gross premium income of $26.2bn..

Arch Capital Group Ltd

Online Published Date : 15 October 2009 | Appeared in issue: 872 - 12 October 2009

The fact that Arch Capital, unlike many of its peer group, managed to emerge from 2008 with not only a positive net result (albeit greatly diminished compared with the previous year) but also with a positive underwriting result, is largely down to the way in which the group has diversified its business over the last five years in terms of the extent of its involvement in the primary insurance and reinsurance markets of the US and Europe. However, its increased loss experience in 2008 has prompted group to reconfigure its US exposures, on both the primary insurance and reinsurance sides, and to increase its involvement, particularly on the reinsurance side, in Europe and other regions such as the Middle East

Managing energy risks in a volatile environment

Online Published Date : 15 October 2009 | Appeared in issue: 872 - 12 October 2009

The financial crisis has served to elevate enterprise-wide risk management (ERM) to the level of the imperative. According to Dan Glaser, chairman and chief executive of insurance group, Marsh Inc, the financial crisis has pushed companies into an era of strategic capital management which has to be embedded in the culture and practices of the entire organisation, at all levels. Here, in an edited extract from his keynote address to the 44th Annual Marine Insurance Seminar in Houston, Mr. Glaser issued a call to the insurance industry for ingenuity, discipline and vigour to meet the emerging needs of clients in the energy sector. Energy companies, he argued, have to navigate increasingly complex challenges, including fallout from the global economic crisis, energy price volatility, and natural catastrophe risks. The insurance industry has all sorts of tools and data to mitigate operational risks and natural hazards. While this is valuable, there may be insufficient focus on what is becoming more daunting for energy companies: dealing with uncertainty surrounding political, regulatory, and economic trends — and planning for the unexpected

Flood insurance costs rise

Online Published Date : 15 October 2009 | Appeared in issue: 872 - 12 October 2009

The cost of federal flood policies in the US will rise by an average of 8% nationally as part of changes to the National Flood Insurance Programme. Deductibles will also change: homeowners in high flood risk areas with $500 and $1,000 deductibles..

Directors’ and officers’ liability insurance: problems and pitfalls

Online Published Date : 15 October 2009 | Appeared in issue: 872 - 12 October 2009

One of the purposes of incorporation is to absorb and contain liability within the corporate shell: the so-called corporate veil, behind which directors used to feel reasonably safe. However, a director can in certain circumstances be personally liable to the company, its liquidator, its shareholders, third parties and any of its regulators, such as the Financial Services Authority (FSA), Health and Safety Executive, Information Commissioner, Pensions Regulator or Office of Fair Trading. Directors may also incur considerable expense in defending claims, investigations or even extradition and, in addition to the recent potential extension of litigation by derivative action, may face claims arising out of the tougher regulation brought into force as a result of the recession. Even when the director is convinced that the allegations made are completely unfounded, the costs of defending their position can be extremely high, a fact gruesomely appreciated by the departed directors of Equitable Life prior to the abandonment of all claims against them by the incoming board, apparently after £20m in defence costs are rumoured to have been incurred. Here, Jeremy Hill, partner, and Christopher Henley, international counsel, at law firm Debevoise & Plimpton LLP, highlight some of the main areas in which careful judgment should be exercised by a director, or, more usually, the company secretary overseeing cover for the board. It should be remembered that D&O policy wordings are complex and the smallest error could result in a large gap in coverage.

Generali merges Spanish businesses

Online Published Date : 15 October 2009 | Appeared in issue: 872 - 12 October 2009

The Generali Group is to merge its Spanish subsidiaries Estrella Seguros and Vitalicio Seguros to form Generali Espana SA de Seguros y Reaseguros. Operations under the new name are expected to start by the middle of next year. The merged company..

Earthquake strikes Samoa

Online Published Date : 15 October 2009 | Appeared in issue: 872 - 12 October 2009

An earthquake recording a magnitude of 8.0 struck in the Samoa Islands region, just south of Samoa’s capital, Apia. The impact was felt in Samoa itself and American Samoa, a nearby US territory. The earthquake triggered a series of tsunamis..

Ahlmann joins Deutsche Bank

Online Published Date : 28 October 2009 | Appeared in issue: 873 - 26 October 2009

Kaj Ahlmann, former chairman of Employers Re, has joined Deutsche Bank as managing director and global head of strategic business development at Deutsche Insurance Asset Management. Mr Ahlmann will be based in San Francisco and will report to Randy..

Opportunities for foreign insurance capital and expertise

Online Published Date : 28 October 2009 | Appeared in issue: 873 - 26 October 2009

Foreign insurers are heavily involved and influential in the Mexican market, having brought new capital and expertise. Among the 72 private insurers in the market no fewer than 61 had majority foreign capital. In March 2009, it was announced that AXA, which had acquired the Mexican insurance operations of Dutch financial services group ING, a year earlier, planned over the next three years to invest US$100mn in the Mexican market in view of its growth potential. But there are a number of challenges. The market is very competitive, among both insurers and brokers. Indeed, the market regulator, the National Commission of Insurance and Bonding (Comision Nacional de Seguros y Fianzas or CNSF) has stated that it does not intend to limit the number of companies authorised to operate in the market. However, at the same time security has become increasingly important for clients. In addition, property insurers, as a result of changes in the way in which the market’s natural catastrophe exposures are calculated, are under pressure to buy much more reinsurance protection. Indeed, three local companies have withdrawn from the property insurance business, including writing catastrophe perils in the Mexican Caribbean, including Cancun, following Hurricane Wilma

JLT names new head of Asia operations

Online Published Date : 28 October 2009 | Appeared in issue: 873 - 26 October 2009

Broker Jardine Lloyd Thompson (JLT) has appointed Anthony Langridge as regional chairman of JLT Asia. Mr Langridge will take up the post from January 4, 2010. JLT said it has identified Asia as having the potential to add significantly to the group...

What insurers can do to reduce flood risks

Online Published Date : 28 October 2009 | Appeared in issue: 873 - 26 October 2009

The assistance provided by insurers in the UK to those at risk of flooding is a vital one, demonstrated very clearly in 2007 when they had to deal with over 180,000 claims, equivalent to four years of normal claims totals. 17,000 households were housed in alternative accommodation by insurers. Indeed, Sir Michael Pitt, in his review of the floods, very clearly recognised that industry played a major role in helping the country to recover from the floods. However, Lord Chris Smith, chairman of the Environment Agency, believes that the industry can do more in terms of providing financial incentives (which the government cannot provide) that can help to change the way people respond to the dangers they face. In a recent speech to a London Insurance Institute seminar, Lord Smith noted that in the 18th century, the London insurance industry was able to take the lead in providing incentives for people to reduce their fire risk, by introducing the first building fire codes in the form of fire marks. In this edited extract from that speech, Lord Smith urged the industry to consider taking the same approach, for flood risk in particular, but also for some of the wider challenges we face as a result of climate change. He also called on insurers to rebuild flood-hit properties to more resistant and resilient standards

Aviva lists in US

Online Published Date : 28 October 2009 | Appeared in issue: 873 - 26 October 2009

UK insurance group Aviva has started trading on the New York Stock Exchange (NYSE). Andrew Moss, group chief executive of Aviva, rang the Opening Bell at the NYSE to mark Aviva’s first day of trading on October 21, 2009. The company has..

The path of least resistance

Online Published Date : 28 October 2009 | Appeared in issue: 873 - 26 October 2009

Most data security breaches occur because the procedures that so many companies introduce become so cumbersome and restrictive that users find a way around them, according to Mark Fullbrook, UK & Ireland director of information security company, Cyber-Ark. Mr Fullbrook identifies this trend as the common issue in many of the recent highly publicised security breaches. Mr Fullbrook believes that the answer to the problem is to put in place controls that not only provide companies with the highest level of security, but also empower users to get on with their everyday jobs. Here he considers how this balancing act, security versus productivity, which he describes as the cornerstone of any security process, can be achieved

USAA settles Katrina case

Online Published Date : 28 October 2009 | Appeared in issue: 873 - 26 October 2009

The Mississippi Supreme Court has issued a unanimous decision in Corban v USAA, settling the legal issues surrounding hurricane Katrina claims in Mississippi and confirming that Texas-based USAA handled claims arising from the 2005 hurricane..

Key trends in the UK life insurance market

Online Published Date : 28 October 2009 | Appeared in issue: 873 - 26 October 2009

The last year has been a difficult one for life insurers in the United Kingdom and Europe, for although they had limited exposure to US subprime mortgagees, the secondary effects have been severe. The economic crisis brings declining demand for life insurance products along with an increasing lapse rate as personal disposable income comes under pressure. Underwriting profits are put under further pressure with poor performing stock markets. New products such as variable annuities remain under pressure because of the decline in assets under management and the increased costs in hedging. Declining asset value along with decreased interest rates have also increased the costs of providing guarantees for “with-profit” business. Here, Catherine Stagg-Macey, a senior analyst in insurance practice of IT research and advisory firm, Celent (a division of the Oliver Wyman Group) considers the drivers in the UK life insurance market that will impact the nature of the market in the future. These include the changing demographics (including the growing ageing population bulge which is likely to force insurers to look at new products and services for this underserved group), the changes that will be brought about by the Financial Services Authority’s Retail Distribution Review including the introduction of professional standards for advisors, commission and fees, and a guided advice process. There is no doubt that the traditional role of the insurer is being challenged and indeed, many insurers are moving into the role of distributor. In this regard, Ms Stagg-Macey comments on the growing importance of the direct channel as a result of the increased willingness of consumes, supported by changes to regulation, to buy online.

PartnerRe Ltd

Online Published Date : 28 October 2009 | Appeared in issue: 873 - 26 October 2009

The company’s net result was heavily impacted by the financial crisis in 2008. The impact, however, was greatly accentuated by Partner Re’s decision to adopt more transparent accounting rules which meant that unrealised net investment losses or gains on equities and fixed maturities are now recorded directly in the net income statement rather than in shareholders’ funds. Indeed, of the $531.0mn in investment losses suffered by the company in 2008, well over half (around $296.0mn) were unrealised losses which previously would have been discreetly posted to shareholders’ funds. The 93.5% reduction in the company’s bottom line result was also due to natural catastrophe losses. The latter was almost entirely the result of the damage caused by Hurricane Ike as it swept through the Caribbean, the Gulf of Mexico and the US