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Malaysia’s Insurance Industry Supporting economic development
Captive Insurance Why it’s on the rise
Cyprus
How the insurance industry is aiding recovery
Insurance in Ireland We look at the effect of recent regulatory changes
Blue Cross Insurance Inc. Blue Cross Insurance Inc. is a Liberian Lebanese Composite insurance company established in the year 2001. We are located at the Midtown Plaza Building on Carey Street, Monrovia, Liberia. Our commitment is to maintain leadership position in the area of insurance by providing professional underwriting and excellent customer services through our experience and potential work force. We believe in the value of contract. We believe in what we write. Your premium is our commitment.
Blue Cross Insurance provides you with protection.
Telephone: +231 (0) 886510522 / 886544985
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Contents 4 Insurance in Ireland
We speak to John F. Healy, Managing Diector of James P Healy & Co Insurances Ltd, in Killarney, southwestern Ireland
6 Ghana’s Insurance
Industry
Stephen Kyerematen and Solomon Lartey from Activa International Insurance tell us about Ghana’s insurance industry
10 Supporting Eco-
nomic Development in Malaysia We hear from AFR Asia Pacific Limited on how the insurance industry is helping fuel Malaysia’s continuing economic growth
12 Captive Insurance:
Stepping Out of the Shadows
Joseph L. Petrelli, President of Demotech, Inc., tells us why captive insurance providers are today on the rise
14 Aviation Insur-
ance: Managing Risks through Innovation By Bile-Aka, Brizoua-Bi & Associés is an international law firm based in Abidjan, Cote d’Ivoire
16 Insurance in
Cyprus: Aiding the Recovery
We speak to Anthie Zachariadou, Executive Director at Royal Crown Insurance Company Ltd
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Insurance in Ireland
James P Healy & Co Insurances Ltd, in Killarney, southwestern Ireland, first opened its doors to insurance broking 34 years ago. In that time the company, which arranges all forms of general insurance cover, has earned a reputation for professionalism and integrity in all its business dealings. John F Healy, Managing Director, tells us more
The insurance industry in Ireland welcomed 2015 with open arms, says John F Healy, Managing Director of James P Healy & Co Insurances Ltd. “The previous 18 months was a rollercoaster ride – and not always in a positive way. The national stories of RSA having to inject over £200m into their Irish operation to plug a black hole, and the collapse of Setanta Insurance in April 2014, were pivotal moments in the evolution of the industry in Ireland. Coupled with the Quinn Insurance administration in 2010, the past few years have been turbulent to say the least. The Quinn Insurance levy of 2% on all non-life insurance policies will continue for many, many years to pay for this disaster.
our existing and new customers. The next year will be an interesting challenge. I am confident we will succeed in growing our business, minding our customers and ultimately saving them money.”
“Insurance Ireland, whose non-life members account for over 95% of the market, revealed its members made an underwriting loss of ¤211m in 2013, reflecting a combined operating ratio of 110%. Investment income of ¤131m reduced the operating loss to ¤81m. However, motor insurance had a significant net loss of ¤192m.
“However, the tentative recovery signs are evident. In the past few months we have seen considerably more commercial vehicles on the road and being insured again. The ‘man in the van’ is a clear indicator of an upward curve that will hopefully continue. As a customer-facing insurance broker with a main street presence we continually improve our efficiency and service which now results in customers documents printed in less time than it takes to boil the kettle. That said we provide face to face honest advice, especially so in the event of a claim. Of course this can take longer than the kettle to boil.”
“What does this mean for 2015? Early indicators are premium increases of up to 20% on motor insurance. These increases are already being felt across the market and no doubt will continue for the foreseeable future. As an Insurance broker we are poised to achieve the best possible rates for
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Overcoming the challenges The major challenges facing insurance firms over the past few years have been the same for most of the SME sector, says Healy. “Overall the recession contracted the insurance industry considerably, with many businesses going into liquidation, reducing staff numbers, parking up vehicles, reducing cover or for many cancelling their cover.
Healy explains that in the current business environment you need to have a positive optimistic outlook, and be focused on the most important thing: your customers. “Our business model for the past 34 years has resulted in our clients benefiting by saving money on their premiums without reducing their cover. We will continue to invest in the most up-to-date systems and processes which enable us to obtain the best possible quotes in the marketplace. Together with our philosophy of professionalism, efficiency and the personal touch, our existing and new clients will continue to benefit from our progress. “We regularly survey the market to ensure we have negotiated the best terms from our insurance companies,” he continues, “and we have found that in most cases we can source better quotes with better cover than online or direct insurers. Thus, our clients are provided with the best quotes in the market backed up by an efficient, friendly and local customer service. We are confident that we can continue to offer value and protection to our customers well into the future”
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The tentative recovery signs are evident. In the past few months we have seen considerably more commercial vehicles on the road and being insured again
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Ghana’s Insurance Industry Stephen Kyerematen is Managing Director & CEO at Activa International Insurance, and Solomon Lartey is Deputy Managing Director of the firm
Activa International Insurance is licensed by the national insurance commission of Ghana to write general insurance (non-life) business. Originally called Global Alliance Insurance; established in 2005 and taken over by Activa in 2009. Currently the preferred insurer of most blue chip and multinational business in Ghana. Solomon Lartey, managing director of the firm, tells us a little more. “At Activa, through the Globus Network, we provide tailor-made insurance solutions to companies and individuals in close to 40 African countries bridging Legal, Linguistic, Monetary and Cultural boundaries. We also have centres of excellence through which we pool technical expertise across 38 African countries for
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the benefit of our clients.” “In spite of the falling cedi, problems with electricity and power, and inflation among other challenges the Ghanaian business environment is still vibrant,” explains CEO of Activa, Stephen Kyerematen regarding the economic climate of Ghana. “The fast depreciation of the cedi and inflation has however, thrown business plans into disarray and business confidence in the economy is waning. “This year, we have not seen much positive change. With the introduction of the cash before cover regime in the insurance industry, some customers have either refused to renew existing
businesses or reduced sums insured or converted motor comprehensive policies into Third Party only, causing the insurance industry to lose money. This is expected to normalise over time.” Despite this drawback, there are major pull factors for potential investors in Ghana, including stability and safety. Solomon embellishes. “In spite of the many difficulties with the economy Ghanaians have remained calm and there is still peace on our streets both for foreigners and local people. Government is also making a lot of effort to reduce bureaucracy in most state organisations to ensure speedy turnaround times for services from SOEs.”
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Aviation insurance policies are distinctly different from those for other areas of transportation
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The Insurance Industry: Supporting Economic Development in Malaysia
AFR Asia Pacific Limited established in 1999 , was incorporated in the Federal Territory of Labuan, Malaysia under the Labuan Financial Services and Securities Act 2010. The company is registered under the Labuan Financial Services Authority (Labuan FSA) and is licensed to operate as a reinsurance and retakaful broker. The company’s primary business activities are reinsurance broking in facultative and treaty risks. Its specialties are in the areas of property & engineering , aviation, liability, marine, oil and gas. The island of Labuan, located off the north west coast of Borneo is strategically located in proximity to most of the Asian cities. It was declared an international business and financial centre in 1990 which boast of a robust and business friendly legal framework and efficient fiscal structure. The centre offers a wide range of products such
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as Protected Cell Companies, Captives, Foundations, Labuan Special Trust, Private Trust Companies and an International Shipping Registry, Islamic Trusts, Islamic Foundations, Limited Partnership and Limited Liability Partnerships. It is home to more than 60 banks and 200 insurance entities. Malaysia’s current economic environment continues to be robust with a projected growth of 5.4% in 2014 expanding from a growth of 4.7% in 2013. This will be fueled by a demand in exports in the country’s commodities, electronics and petrochemical products. The major sector is the petroleum industry. This industry includes petroleum products, petrochemicals, and natural gas. The rapid expansion of the industry is chiefly credited to the accessibility of oil and gas as feedstock, a strong foundation of supporting services, well-developed infrastruc-
ture, and the country’s strategic location within ASEAN and its closeness to the key markets in Asia Pacific. Malaysia has the 14th largest natural gas reserves and 23rd largest crude oil reserves in the world producing 5,891 million standard cubic feet of natural gas and 691,600 barrels of oil equivalent of crude oil per day. The country also has the largest production unit at a single location of liquefied natural gas with production capacity of 23 million metric tonne per year. Malaysia maintains a well developed financial and banking environment and has been in the forefront of Islamic financial developments which includes Islamic Banking, Islamic Capital Market,
We hear from AFR Asia Pacific Limited on how the insurance industry is helping fuel Malaysia’s continuing economic growth
Takaful and Retakaful, and Islamic Interbank Money Market. The Malaysian Insurance Industry provides a crucial supporting role to the growth of the economy. The insurance industry is well regulated by the Central Bank (Bank Negara) and regulators continue to implement prudential guidelines eg the recently introduced (in 2010) Risk Based Capital (RBC) framework which aims to enhance transparency while emphasizing the optimal risk management of insurers ensuring the resilience of the insurance industry in times of stress. The general insurance industry registered a growth of 8.2% in gross premiums to reach RM15.18 billion, as compared to an increase of 7.85% (RM14.03 billion) previously, while net premiums grew 8.3% to reach RM10.52 billion last year.
Over recent years , regulators have also encouraged M&As among smaller capitalized insurance companies and now allowing foreign controlling ownership of local insurance companies. The Malaysian Government aims at progressively liberalising the financial markets following the introduction of the Financial Sector Blueprint (2011-2020). The aim of the blueprint, among others, is to facilitate greater injection of foreign expertise in the financial sector including the insurance and takaful industry. It also aims to further improve the regulatory and supervisory regime for the Malaysian financial institutions through the introduction of Basel III . To encourage the continuous economic growth of the country, the government has implemented various stimulus initiatives such as the New
Economic Model (NEM), Economic Transformation Program (ETP) and the Tenth Malaysian Plan will, according to industry analysts, lead to a growth in demand for insurance products and services. The insurance industry is expected to increase at respectable rates in line with economic growth. The life insurance segment will benefit from the rising per capita income of the population as well as new and innovative products introduced by insurance companies. The Malaysian economy is seeing exciting growth in the areas of offshore oil and gas which has also spilled over to the supporting marine services. The country is also progressively establishing itself as a regional aviation hub and it is in these areas AFR Asia Limited has developed a niche in providing expert reinsurance services.
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Captive Insurance: Stepping Out of the Shadows
Demotech, Inc., a financial analysis firm located in Columbus, Ohio, was the first company to review and rate regional insurance companies and then initiated coverage of captive insurance companies. Joseph L. Petrelli, President, Demotech, Inc., tells us why captive insurance providers are today on the rise
“Captive insurance is popular in all lines of insurance, casualty or property. It is particularly effective for high frequency, low severity losses as well as the funding of large deductibles or self-insured retentions.” The payment of premiums to, and subsequently the payment of losses from, a captive insurance company supplements an effective risk management program by focusing the risk management function and the captive insurer on the mitigation as well as the minimisation of losses to effectively
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An effective risk management program will reduce or mitigate losses and loss adjustment expenses to a level that is below the premium paid to the captive. As such, tax planning is enhanced through a tax-deductible premium paid to an affiliated entity
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Captive insurance companies, explains Joseph L. Petrelli, President, Demotech, Inc., are insurance companies established with the objective of insuring risks emanating from the parent group or groups. However, captives sometimes insure risks of the parent group’s customers. Captives are a form of risk management that is becoming a means through which individuals and businesses can protect themselves while maintaining control over the cost and coverage of their insurance.
reduce premium payments. “Concurrently, an effective risk management program will reduce or mitigate losses and loss adjustment expenses to a level that is below the premium paid to the captive,” says Petrelli. “As such, tax planning is enhanced through a tax-deductible premium paid to an affiliated entity. Residual profit is retained in the parent company and not by a traditional, unrelated insurer.” Incorporated in 1985, Demotech, Inc. is a financial analysis and actuarial services firm serving the Property and Casualty and Title insurance industries. Demotech was the first company to review and rate regional insurance companies. Today, the firm’s clientele includes hundreds of regional and specialty insurers as well as industry leaders such as Nationwide, Allstate and publicly-traded companies. Demotech is distinguished from the competition in several ways, says Petrelli. “Our personnel are
experienced insurance professionals. They knew the business before they joined us to review and rate insurers. We employ actuaries, MBAs, CPAs and CPCUs with decades of experience. Secondly, we developed a Company Classification System to distinguish carriers by their business model and not their size. Thirdly, although we review and rate carriers of any size, we are focused on regional and specialty carriers, such as captive insurers.” Both in Ohio and across the US, captives are currently under siege by regulators, reinsurers, and to some extent their actuaries and auditors, says Petrelli. “This is due to the dearth of readily available statistical information dedicated to captive insurers and the specialty lines of insurance that they write,” he says. “Although industry averages are not applicable to captives, captives are currently forced to rely upon same.” Insofar as the sectors that have seen the most activity this year, Petrelli says the activity, as well as scrutiny of captives, tends to be in the 831 (b), micro captive space that is defined in the Internal Revenue Code. “We have developed a new service, Alternative Risk Transfer Statistical Solutions, Inc. (ARTSSI), to assist all captives to justify and support their premium, loss experience and more fully vet their coverage documents,” he says. Key challenges for the region’s economy are from renewed regulatory scrutiny, particularly the scrutiny of single parent captives, says Petrelli – adding that this is likely to continue as 831 (b) captives continue to be formed. The recent rise in use of captive insurance providers has come about through changes in the traditional insurance industry, says Petrelli. “Captive use increases as coverage in the private sector becomes restrictive and captives must step up to provide the coverage that was previously available from the traditional insurance industry. Similarly, many captives are being formed in anticipation of increases in premium levels by traditional carriers.” Demotech will stay at the forefront of the captive insurance industry by developing and offering a statistical reporting opportunity to captive insurers through ARTSSI, Petrelli says. “By consolidating the premium and loss information of a large number of smaller captives into appropriate business segments, captive’s owners and managers as well as their regulators and service providers will be better positioned to evaluate the success of captive management strategies. The results will not be tainted by the use of industry averages.” When asked about opportunities for the industry in the next 12 months and beyond, Petrelli says, “We believe that by participating in ARTSSI, consolidating the premium and loss information of a large number of smaller captives into appropriate business segments, captive’s owners and managers, as well as their regulators and service providers, will be better positioned to evaluate the success of captive management strategies. ARTSSI will be a unique opportunity for captives and their managers.”
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Aviation Insurance: Managing Risks through Innovation Bile-Aka, Brizoua-Bi & Associés is an international law firm based in Abidjan, Cote d’Ivoire with a team of more than ten lawyers
The current business environment in the West Africa region today is becoming more and more friendly to investors. This is because the business start-up process is being reformed, offering tax and duties cuts to new investors, renovating existing infrastructures and building new ones. The outflow of currency to countries outside the West African Economic and Monetary Union zone is subject to verification based on the submission of supporting documentation. In the specific case of the Ivory Coast, the government has adopted a new mining code which is more attractive for investors and take in account the environmental protection. The Ivory Coast has also adopted a law on the protection of personal data as to their processing and transfer. The key challenges for our region’s economy are corruption and a lack of adequate infrastructure. These challenges can be re resolved through foreign and local investment and reduction of poverty. Aviation insurance is insurance coverage tailored specifically to the operation of aircraft and the risks involved in aviation. Aviation insurance policies are distinctly different from those for other areas of transportation. Policies tend to incorporate aviation terminology, as well as terminology, limits and clauses specific to aviation insurance. Aviation insurance is divided into several types of insurance coverage available. Firstly there is public liability insurance. This coverage—often referred to as third party liability—covers aircraft owners for damage that their aircraft does to third party property, such as houses, cars, crops,
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airport facilities and other aircraft struck in a collision. It does not provide coverage for damage to the insured aircraft itself or coverage for passengers injured on the insured aircraft. After an accident, an insurance company will compensate victims for their losses, but if a settlement cannot be reached then the case is usually taken to court to decide liability and the amount of damages. Public liability insurance is mandatory in most countries and is usually purchased in specified total amounts per incident.
Ground risk hull insurance in motion is similar to ground risk hull insurance not in motion, but provides coverage while the aircraft is taxiing, but not while taking off or landing. Normally coverage ceases at the start of the take-off roll and is in force only once the aircraft has completed its subsequent landing. Due to disputes between aircraft owners and insurance companies about whether the accident aircraft was in fact taxiing or attempting to take-off this coverage has been discontinued by many insurance companies.
Passenger liability, on the other hand, protects passengers riding in the accident aircraft who are injured or killed. In many countries this coverage is mandatory only for commercial or large aircraft.
Finally, in-flight coverage protects an insured aircraft against damage during all phases of flight and ground operation, including while parked or stored. Naturally, it is more expensive than not-inmotion coverage since most aircraft are damaged while in motion.
Combined Single Limit, or CSL, combines public liability and passenger liability coverage into a single coverage with a single overall limit per accident. This type of coverage provides more flexibility in paying claims for liability, especially if passengers are injured, but little damage is done to third party property on the ground. Ground risk hull insurance not in motion is another type of aviation insurance. It provides coverage for the insured aircraft against damage when it is on the ground and not in motion. This would provide protection for the aircraft for such events as fire, theft, vandalism, flood, mudslides, animal damage, wind or hailstorms, hangar collapse or for uninsured vehicles or aircraft striking the aircraft. The amount of coverage may be a blue book value or an agreed value that was set when the policy was purchased.
To overcome the costly problem of fraud, businesses can put in place measures that will permit to authenticate the claims of the client in order to prevent fraud. They should make sure that the claim exists and is within the policies of the insurance. Within the insurance industry fraud can be a big issue. For example, senior managers at Air Zimbabwe were revealed earlier this year to have defrauded the airline out of USD 11 million by inflating premium. This may lead to bankruptcy for the airline. Therefore, when we meet clients of the aviation insurance, we advise them of the risks fraud can cause to their businesses and their reputation and of the possible steps they can take to prevent them.
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Aviation insurance policies are distinctly different from those for other areas of transportation
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Insurance in Cyprus: Aiding the Recovery Anthie Zachariadou is Executive Director at Royal Crown Insurance Company Ltd
Royal Crown Insurance was acting as sole agent for Royal&SunAlliance until 1999 when it was established as a Cypriot company, naturally suceeding Royal’s successful operation that had been active in Cyprus since 1922. “We are one of the largest private non-life insurance companies on the island, and specialise in property and liability insurances,” explains Anthie, telling us a little more about the form’s background. “We provide quality services by educated, welltrained and experienced employees, consultants and associates, and through our wide network of accredited insurance agents. We are among the most reputable companies, mainly due to our claims settlement practices. We are committed to justice and integrity in compensating clients and third parties. “We firmly believe in loyalty and good faith in all our transactions. We are proud to enjoy a long-term partnership with Swiss Re, one of the most robust and credible reinsurance companies worldwide.” Anthie continues to explain how the business environment is faring. “At this time, the business environment is quite gloomy, as the effects of the economic turmoil the country has found itself in are becoming apparent,” he states. “Unemployment rates are rising. Small-to-medium businesses, which have traditionally been the core of our economy, have suffered the most damage, mainly due to lack of cash flow in the market and the banks’ tenacity towards lending. They are forced
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to close down or significantly reduce costs, thereby affecting the rest of the market. There are, however, sectors that are still very active and these are within the services industry, as Anthie tells: “Company formation, tax planning, trusts, foreign exchange trading, fund administration etc. are all strong segments of our business industry and the country has continued to attract and retain business regardless of the downturn. The tourism industry is also doing well, despite the crisis. We have noticed certain innovative initiatives popping up, specifically in the arts and entertainment sectors. The construction industry has become idle due to limited funds, and, for obvious reasons, the luxury retail sectors, including vehicle sales and branded clothing, are certainly less active than they were before March 2013. Our own area, insurance remains active, as it is a commodity, albeit amongst changes in consumer behavior and needs. “We are seeing interest by foreign investors and plans are already in the way for the development of large projects, such as luxury resorts, golf courses, malls and theme parks. It is also important to note that our two largest banks are now mostly controlled by foreign investors. One of the greater opportunities lies in our energy sector, as gas reserves identified in our offshore blocks are enough to allow Cyprus to hope to become a gas exporter in the future.” There are still many challenges ahead, however, the main challenge being compliance with the obligations under the memorandum of understanding with troika, so that the country’s funding
may continue, with a view towards restarting growth on the island. “Another key challenge is the stabilisation of our banking system,” says Anthie. “The Bank of Cyprus is still frailing, creating uncertainty within the banking and financial sectors. Inability to lend leads to stagnancy in the market and hinders all areas of growth, whilst non-performing loans are increasing constantly. Recently the bank was recapitalised and foreign investors are now the majority shareholders. At the moment, rating agencies are seeing negative outlook in our banking sector, and we are hoping that this will change in the near future. “Short-term, the main challenge facing the economy is stabilising the banking system, tackling the NPLs, increasing liquidity and fully lifting remaining capital control. Fiscal reforms and the restructuring of the public sector are to be tackled. Two huge challenges that are included in the memorandum, and are already creating political mayhem, are the implementation of an overdue National Health System and the privatisation of semi-governmental organisations. In the meantime, opportunities for foreign investment on the island are ample, and, despite its difficulties, Cyprus retains its position as a strong business services centre.” And what of Royal Crown’s plans for the future? Anthie tells us more. “At present, we do not seek to grow, but retain profitability. We aim towards customer retention, always within strict underwriting guidelines and are on the lookout for changing insurance needs which we do our best to accommodate.”
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Insurance remains active, as it is a commodity, albeit amongst changes in consumer behavior and needs
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