DEC/JAN 2015/16 - Insurance News (the magazine) by Insurance News (the magazine)

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WHY BROKERS ARE BECOMING ARs

THE AXE FALLS AT ZURICH

MEET THE MOVERS AND SHAKERS

GODZILLA ARRIVES: John Lush can only watch as buildings blaze on his son Paulâ&#x20AC;&#x2122;s farm during the deadly Pinery bushfire in South Australia on November 25, marking the early arrival of a devastating El Nino summer

December 2015/January 2016

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LAUNCH O TO ZURICH COMMERCIAL

Zurich Australian Insurance Limited ABN 13 000 296 640, AFS Licence No. 232507. 5 Blue Street North Sydney NSW 2060 www.zurich.com.au ZU23024 - V1 11/15 - AWHN-010845-2015

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H OF ENHANCEMENTS TO ZURICH FLEET AND L MOTOR INSURANCE

ZURICH INSURANCE. FOR THOSE WHO TRULY LOVE THEIR BUSINESS.

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Disillusioned with your licensee or AR network?

MAYBE YOU SHOULD CHECK OUT WHY SO MANY BROKERS ARE MOVING ACROSS TO UIG We’ve been working with ARs since 2003 – in fact, UIG was established by ARs for ARs. It is a group designed specifically to support independent broking experts. Call Trevor on 03 8676 0344 or 0431 705 660 or you can email trevor@uig.net.au to discuss why we’re growing so quickly.

With United Insurance Group, you’ll never work alone

At UIG you’ll find: s

A competitive fee structure with no extra charges for PI or additional fees collected directly from clients

An easy transition with data transfer, on-site training and constant management support

Real-time response from experienced staff who really can assist you, and access to discuss business with a wider network of your broking peers

Support for the decisions you make and our commitment to maintain your independence

Access to the wider range of underwriting and support services through the Steadfast Group

ww www.uig.net.au w.u i g .n et.au | Co Contact n ta c t Ge General n er a l Ma Manager n ager TTrevor revor How Howard a rd | 03 8676 867 6 0344 0 34 4 | trevor@uig.net.au trevor@ u i g .ne t . a u

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Contents 6 Newsmakers » 10 Zurich’s focus change »

66 Big deals and burning issues » We look back on a year dominated by consolidation, consultation and the ominous approach of the ‘superEl Nino’.

The insurer is downsizing its workforce and picking where it wants to compete in Australia.

16 Godzilla is here » One of the strongest El Ninos on record could bring unprecedented impact to Australia and beyond.

22 The top 20 most influential people in general insurance » Our annual round-up of the people who change people’s minds, affect the industry and make things happen.

74 Data with destiny » A restructure has helped The Warranty Group tap into one of its greatest assets – information.

companyNEWS

76 Droning on » Vero’s new policy is the wind beneath operator’s wings.

76 Motoring ahead »

32 Stronger as one » With XL’s acquisition of Catlin near completion, regional chief Craig Langham says it’s a marriage built for longevity.

40 The personal brand still matters » The authorised representative networks provide significant power and support, but it’s individual reputations and the value of their advice that keep clients onside.

47 Smartphones rule » They’re everywhere and seemingly irresistible, but in the insurance industry they’ve become an essential business tool.

52 An explosive mix » The Tianjin blast was caused by a relaxed attitude to safety. Now insurers are paying for it.

58 That sinking feeling » Coastal cities around the world are slumping under their own weight, posing an unseen threat to property and infrastructure.

Zurich introduces a range of fleet enhancements.

peopleNEWS 78 80 82 84 86 87 88 90 94 95 96

CGU brings Monet’s garden to the races » Vero puts risk management in the spotlight » Westcourt makes a splash at Hamilton Island » Christmas comes early as CQIB and friends celebrate » AILA brings out the heroes and villains » NTI’s Yellow says hello » Allianz shows why partnerships matter » IA conjures up Vegas in Hobart » Christmas lunch has marinos in stitches » Happy 30th birthday, Austbrokers! » Oaks Day’s a winner with Vero »

98 maglog »

64 BYOD » An idea whose time has come, and with it some headaches.

December 2015/January 2016

Cover Image: News Ltd

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newsmakers at

70 78 63 51 68 83 9 6

Local Corporate Regulatory & Government Financial Services The Professional International Analysis Breaking News

Some 19,450 news articles – including 197 breaking news bulletins – have been published since we started in 2001. All articles can be accessed through our archives. Access to articles and other services provided by insuranceNEWS.com.au is free.

All change as Harmer steps up

”

insuranceNEWS.com.au is a free weekly online news service for the general insurance industry. The website has more than 22,000 subscribers. In October and November we published 428 articles online. These were made up as follows:

Changes at the top as Milliner moves to IAG, 2 November

Everyone accepts that the way we do disclosure now simply doesn’t work. We need to make a change.

– Consumer Action Law Centre Senior Policy Officer David Leermakers on an Insurance Council move to overhaul disclosure documents

Insurers make a profit General insurers and reinsurers have made a combined full-year net profit of $2.31 billion, according to a compilation of company-level statistics from the Australian Prudential Regulation Authority (APRA). A calculation by insuranceNEWS.com.au shows the industry’s leading players logged overall gross earned premium of $34.15 billion and gross incurred claims of $26.63 billion. The statistics cover company financial

”

Dramatic changes at the top of Australia’s largest insurers will see IAG and Suncorp move into next year under new leaders and refined strategies. Last Monday Suncorp Personal Insurance Chief Executive Mark Milliner resigned from the company and was named the following morning as the new Chief Operating Officer at IAG. Mr Milliner will work closely with Peter Harmer (left), who will replace IAG Chief Executive and Managing Director Mike Wilkins on November 16. Mr Milliner was immediately replaced as Personal Insurance Chief Executive by Gary Dransfield, who recently returned to Suncorp’s Sydney office after four years as Auckland-based chief executive of Vero New Zealand. IAG also reported a high-level/high-profile departure, with Chief Strategy Officer Leona Murphy deciding to leave the company at the end of the year. She intends to relocate to Queensland and pursue opportunities as a non-executive director.

years ending on December 31, March 31, June 30 and September 30, and are based on audited regulatory returns submitted to APRA under the Financial Sector (Collection of Data) Act 2001. AAI, which includes all Suncorp general insurance brands, posted the largest profit at $597.55 million, and Munich Re chalked up the biggest loss – $163.03 million. Insurers and reinsurers make $2.31 billion profit, APRA data shows, 16 November

Calibre sees opportunities

One hailstorm = $1.3 billion

Calibre Commercial Insurance was officially launched last week following Munich Re’s purchase of Calliden’s general insurance operations. Chief Executive Mike Hooton (left) says the business remains “firmly focused” on providing business package, industrial special risk, general liability and specialty liability products to SMEs through brokers. But he says the backing of Munich Re opens up new opportunities. “Munich Re bought the business in December, but we haven’t been able to change the name until now,” he told insuranceNEWS.com.au. “We have the support of the existing Calliden brokers, plus some new ones who have been attracted by the strength and stability Munich Re provides. “Now we are part of the global group we may be able to introduce new products to Australia that Munich Re offers elsewhere. That is one of the exciting opportunities.”

Claims have passed $1.34 billion one year after Brisbane’s biggest hailstorm in three decades, according to the Insurance Council of Australia. Commercial claims were $497 million and domestic claims $847 million. The total number of claims was 121,394. Suncorp has finalised 90% of its 33,500 claims, worth more than $343 million. Some 11,400 of those were for home and 22,100 for motor. More than 10,000 motor vehicle claims were lodged within 24 hours of the storm on November 27 last year. Within three weeks the insurer had assessed more than 17,400 hail-damaged vehicles, and Suncorp’s repairers made 3000 homes safe immediately after the storm and 94% of total loss claims were paid within two months.

Calibre debuts in commercial market, 9 November

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Brisbane hailstorm claims pass $1.3 billion, 30 November

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Flood accounted for 47% of all disasters in the past 20 years: a couple carry their belongings along a flooded street in the northern England town of Carlisle on December 6

Disasters: blame the weather Nearly all the world’s major disasters over the past 20 years can be blamed on weather, with an estimated cost of $US250$350 billion each year, according to a United Nations report. And the number of weather-related disasters is increasing, up 14% over the past decade to average 335 a year. The frequency has almost doubled since 1985-95. While scientists cannot calculate how much is due to climate change, predictions of future extreme weather suggest the increasing rate of catastrophes will continue. The findings feature in a report from the UN Office for Disaster Risk Reduction and the Belgium-based Centre for Research on the Epidemiology of Disasters. The report, spanning 20 years, says 606,000 lives have been lost, 87 million homes damaged or destroyed and 4.1 billion people adversely affected due to

Reuters

New name reflects change

weather in the period. It says 90% of major disasters have been caused by 6457 recorded floods, storms, heatwaves, droughts and other weather events. The US had the most disasters with 472, while China recorded 441, India 288, the Philippines 274 and Indonesia 163. Asia bore the brunt of the impacts, with 332,000 deaths and 3.7 billion people affected. Floods have accounted for 47% of all disasters in the past 20 years, killing 157,000 people and affecting 2.3 billion more, 95% of them in Asia. Storms were the deadliest weatherrelated disasters, killing 242,000 people – 40% of global weather-related deaths. About 89% of these deaths were in lowerincome countries. Blame it on the rain: weather-based disasters soar, 30 November

Claims pour inI The number of insurance claims from recent bushfires in SA has reached 1344 and the value of insured losses stands at $119.7 million, according to the Insurance Council of Australia (ICA). Last month ICA formally declared the bushfires north of Adelaide a catastrophe, putting its disaster taskforce and hotline into action. SA bushfire claims pass $119 million, 7 December

Rebranded IAG has removed “Insurance Australia Group” from its new logo, to better reflect its growing international presence. New Chief Executive Peter Harmer says the purple logo, which is part of a new brand identity, recognises the group’s “significant presence” in New Zealand and key Asian markets. “Brand recognition plays an integral role in telling the IAG story, so our visual identity must be distinctive, modern and engaging, reflecting our future aspirations and supporting our plans to engage with a broader set of stakeholders,” Mr Harmer said. IAG rebrands with purple patch, 16 November

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Austbrokers Holdings has rebranded as AUB Group to reflect the company’s increasing diversification. The name change was approved at last Thursday’s annual general meeting, where Chief Executive and Managing Director Mark Searles outlined the thinking behind it. While most of the group’s income is generated through broking, the underwriting agency and risk services areas have gained significance. The group has also expanded internationally to become the third-largest broking entity in New Zealand. “In light of these developments, we have undertaken a review of our naming conventions and branding approach, to ensure the names we utilise are relevant to all the segments and geographies we serve,” Mr Searles said. Despite the change to group branding, sector names – Austbrokers and NZbrokers – will remain, and Sura continues to develop as the generic underwriting agencies brand. Austbrokers’ name change ‘reflects diversity’, 30 November

Gallagher says bye to Lynam Pen Underwriting Chief Executive Paul Lynam has left the company three years after selling his Lloyd’s agency SRS to Arthur J Gallagher. US-based global broker Arthur J Gallagher merged its UK and Australian underwriting agency brands under the Pen Underwriting brand in November last year. Mr Lynam says in a LinkedIn post that he has left the company “following redundancy” and has begun 12 months’ gardening leave. Pen chief Paul Lynam leaves, 7 December

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newsmakers at

French tops merged firm Ace and Chubb have unveiled their Australian leadership team as merger preparations continue. John French (left), currently Ace’s Country President of Australia and New Zealand, will retain this role in the merged company, which will operate under the Chubb brand. Reporting to Mr French will be Senior Vice-President and Chief Operating Officer Matthew Doquile, who is currently Australia Country

Manager for Chubb. Ace’s Paul McNamee, who retains his Deputy Regional President AsiaPacific title, will continue to oversee Australia and New Zealand. Chubb and Ace continue to operate as competing companies in the local market until their merger is completed. The companies say planning for integration of the Australian businesses is “progressing well”. Ace, Chubb reveal Australian leaders, 30 November

NIBA College drops out The National Insurance Brokers Association (NIBA) has handed over its broker training role to the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) under a deal signed in Sydney this afternoon. The change will see the two major broker training bodies in Australia move immediately into a new relationship under which ANZIIF becomes NIBA’s preferred education supplier. From today NIBA College will cease to take new enrolments for its broker qualifications, traineeships or continuing professional development courses. People will be referred instead to ANZIIF. The college will provide education for current students until September 1 next year, when the remaining students will transition to ANZIIF’s education programs. NIBA Chief Executive Dallas Booth says NIBA will now focus on lobbying, member services, professional standards and representation of its corporate and individual members, and in providing networking opportunities and events for the intermediated insurance community.

From the In the past couple of months the country’s two biggest insurers have replaced their chief executives, while one highly regarded senior executive has jumped from one to the other, necessitating a reshuffle of managers swiftly to fill the gap. IAG, which Mike Wilkins transformed in seven years from a confused and lost organisation to a powerful leader in the insurance industry, was smoothly handed on to Peter Harmer, who has since restructured the entire operation. The changes he has made reflect an organisation adapting to the emerging realities of the technological age. Change has been the mantra shouted across society for 20 years now, and the pace of change is accelerating. There is no “new normal” any more because there is no “normal”. Instead, we’re in a permanent state of transition. It’s not just insurance, of course – it’s every aspect of our lives and our work. Technology is changing the way we approach what we do and how we exist. Our privacy is now not much more than a concept. Big Data is making the calculation of risk more accurate and also more personal. That will inevitably lead, over a disconcertingly short time, to new ways to buy insurance. The traditional distribution channels are not set in stone – they will exist only as long as they’re effective and useful. Challengers already emerging are the data-rich companies with bottomless pockets and – as XL Catlin’s Mike McGavick put it so eloquently earlier this year – “the kids in garages working to destroy whole categories of economic activity and reducing them to apps”. Technology is changing everything. It’s making our world more efficient and safer but also more complex and less predictable. The demand for insurance will change, and if the traditional channels aren’t up to supplying the need, someone else will. Mr Harmer noted a couple of years ago that brokers, for example, must “adapt or die”. But this is December and a long, hot summer stretches ahead. It’s time to step off the treadmill for a while, catch our collective breath and rest. The 19th Century banker and scientist John Lubbock once noted that “to lie sometimes on the grass on a summer day listening to the murmur of water, or watching the clouds float across the sky, is hardly a waste of time”. As we hurtle forward into a new year, the team at Insurance News wish you all the joys of the festive season, with the hope that you and those you hold dear will indeed have an opportunity to lie on the grass and simply do nothing. Terry McMullan

NIBA hands broker education role to ANZIIF, 18 November

Publisher/eDitor: TERRY McMULLAN McMullan Conway Communications Pty Ltd Tel: + 61 3 9499 5538 Fax: +61 3 9499 5535 Email: publisher@insurancenews.com.au ADvertising: NAOMI CONWAY McMullan Conway Communications Pty Ltd Tel: +61 3 9499 5538 Fax: +61 3 9499 5535 Email: naomi@mccmedia.com.au Artwork Delivery to: McMullan Conway Communications Pty Ltd PO Box 116, Ivanhoe VIC 3079 Australia or Level 1, 120 Upper Heidelberg Road, Ivanhoe VIC 3079 (COURIERS ONLY) Email: naomi@mccmedia.com.au

subscriPtion enquiries: www.insurancenews.com.au/subscribe Email: admin@insurancenews.com.au contributions: We welcome all material that is relevant to the Australasian and regional risk insurance industry, including all aspects of risk management. Please contact the Editor, +61 3 9499 5538. Printing: Printgraphics, 14 Hardner Road, Mt Waverley VIC 3149, Australia www.insurancenews.com.au/magazine

A McMullan Conway production

ISSN 1837-4972

insuranceNEWS

December 2015/January 2016

Material in insuranceNEWS (the magazine) is protected under the Commonwealth Copyright Act 1968. No material may be reproduced in part or in whole without the consent of the copyright holders. The content of articles appearing in this magazine do not necessarily reflect the views of the Publisher. All statements made are based on information that is believed to be reliable and accurate, but no liability is accepted for any fault or omission. We also accept no responsibility or liability for any matter published in this magazine that reflects personal opinion. Printed on PEFC paper stock using vegetable based inks by a printer with ISO14001 Environmental Management System Certification.

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The insurer is downsizing its workforce and picking where it wants to compete in Australia By Terry McMullan

WHAT’S GOING ON WITH ZURICH? It’s a question being asked across the industry as brokers and competitors try to interpret the extent of the global company’s reorganisation of its Australian and New Zealand businesses. Yes, Zurich is engaging in a round of significant redundancies that will see the company’s local workforce reduced by 65 or more. And yes, budgets are being cut. Whole departments have been laid off, others are being told to operate with fewer staff, and many employees have been forced to apply for their own jobs, some of which have been altered. The reorganisation kicked into gear shortly after the departure of chief executive Daniel Fogarty in late September. Mr Fogarty had been in the role since mid-2012, and the suddenness of the move initiated by Asia-Pacific Chief Executive Stuart Spencer caught the local market by surprise. Mr Spencer appointed chief financial officer Rajbir Nanra – who joined the Australian operation last year – as Interim Chief Executive while a global recruitment search is carried out. It then fell to Mr Nanra, who joined Zurich in Hong Kong in January 2013 as Asia-Pacific regional audit director, to undertake the restructure. This is about a complete change in the group’s approach to the Australian busi10

ness, which contributes about one-third of the Asia-Pacific division’s revenue. Within the Australian market, Zurich has long been recognised as the smallest of the majors, but because of the breadth of its offering and the effectiveness of its key teams, it has been admired for its ability to punch well above its weight. Zurich Australia is, in fact, the fifthlargest insurer in Australia. But the margin between fourth-placed Allianz and Zurich is discouragingly wide. The latest company-level statistics from the Australian Prudential Regulation Authority show Zurich Australia’s general insurance business turned in gross written premium of $1.26 billion in the year to June 30. Gross incurred claims were $905.85 million and net profit was $7.79 million – a figure well down on the $99.18 million achieved in the 2013/14 year. Allianz Australia, by contrast, recorded gross written premium of $3.92 billion, gross incurred claims of $3.09 billion and net profit of $388.08 million. So Zurich is in the middle of the market, the biggest of the also-rans. It’s common knowledge – although it has never been officially confirmed – that Zurich was given first dibs at buying Wesfarmers’ insurance companies in late 2013, but was reluctant to pay the $1.8 billion asking price and lost out to IAG. That was the group’s last opportunity to insuranceNEWS

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grow in the Australian market, and it’s now clear Zurich Group’s management see the Australian business as an asset that will profit more in the niches where it’s a significant player. That was confirmed by Mr Spencer in October, when he told Insurance News in an exclusive interview that Zurich will henceforth focus on classes of business in which it is most competitive. No one should be surprised, however. Zurich Insurance Group’s current strategy was first published on its website last year. It states it will “invest in high-potential market positions in the corporate market, commercial mid-market and select retail markets”. “This includes maximising returns in our smaller general insurance markets, while turning around or exiting underperforming businesses,” it says. In the case of Australia, it’s a turnaround. The strategy is a major part of Zurich’s global transformation program to cut annual costs by $US300 million by the end of next year and more than $US1 billion by the end of 2018. The strategy has seen Zurich take a series of actions that underline its willingness to invest where there are opportunities, and pull back where there are not. For example, it has withdrawn from writing general insurance policies in the United Arab Emirates in recent weeks,

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Overhauling Zurichâ&#x20AC;&#x2122;s general business in Australia: interim Chief Executive Rajbir Nanra (left) and Asia-Pacific Chief Executive Stuart Spencer

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Happier days: now displaced Australia/New Zealand Chief Executive Daniel Fogarty (left) with group Chief Executive Martin Senn in 2014

Trials and tribulations at the global level Martin Senn’s departure is a mere blip in the group’s 143-year history ZURICH INSURANCE GROUP CHIEF executive Martin Senn’s decision on December 2 to leave the company at the end of the year was the climax of a year many in the group would prefer to forget. His departure was not unexpected, with rumours floating around insurance markets in October that the group’s exposure to big losses and falling profits in the previous few months had sealed his fate. Continued occupation of the top job in any major insurance company is predicated on profitability and growth – often a chancy prospect in the boom-bust world of insurance – and Zurich’s performance in the last half of the year has been a shocker. It would have been tough for any chief executive to explain and counter, and it is much harder when you are running the world’s 75th-largest public company with 60,000 employees in 170 countries and equity of about $US35 billion. Mr Senn’s profitability problems were exacerbated by the embarrassment of having to abandon takeover talks he initiated in July with major British insurer RSA. With analysts saying Zurich would have to stump up as much as $US8.7 billion to acquire RSA, the Swiss terminated the takeover talks in late September, on the day before they were required to make the acquisition offer formal. It was a sudden downdraught of confidence for a company whose Chief Executive had boasted as recently as June that he had a multi-billion-dollar acquisitions fund. Zurich blamed its decision to drop out of the RSA talks on expected losses of at least $US275 million – and probably much more – from the Tianjin industrial explosion in China in August, combined with a $US300 million hit from its US auto insurance business. Then the company announced its thirdquarter operating loss would exceed $US200 million, and that set the markets chattering about Mr Senn’s chances of survival. September saw the departure of general insurance chief executive Mike Kerner, who was replaced by the head of global life (and former group head of operations) Kristof Terryn, who was charged with “conducting an in-depth review… given the deterioration in profitability in certain parts of the general insurance business”.

By November there was widespread speculation that a British recruiting firm had been retained by the Zurich board to find a replacement for Mr Senn. The departure of Mr Senn, who was interviewed by Insurance News in October last year, is unlikely to do much to change the crisis of confidence Zurich is experiencing at present. But the 143-year-old group has found its way through crises before, and there’s no reason to believe this is much more than a small blip in the Swiss company’s long history. Zurich is huge, and the remedies to its latest bout of indigestion are already being worked on, including in Australia.

Some recent examples of crises Zurich has faced and moved on from: US executive Jim Schiro is widely credited with restoring the group to profitability after Zurich came under enormous financial pressure following the terrorist attacks of September 11 2001. He instilled financial discipline in the group, centralised processes and made it profitable again. In 2006 Zurich again found itself in highprofile trouble when it fell foul of US regulators. The company paid out $US299 million for bid-rigging and price-fixing. Its US arm was accused of being involved in “an intentional smokescreen by several insurance players to artificially inflate premiums and pay improper commissions to those who brokered the deals”. It also had to pay $US153 million in restitution and penalties and agree to a series of reforms over “finite reinsurance” transactions. In 2007 the finite reinsurance scandal bit Zurich’s Australian business, with former chief executive Malcolm Jones being banned from acting as a director or senior manager of a general insurer, or being an agent of a foreign general insurer. Mr Jones, who was chief executive from 1998 to 2002, was the seventh Zurich executive to be disqualified by or to accept enforcement from the Australian Prudential Regulation Authority. The issue related to an investigation of two financial reinsurance transactions made in 2000 with General & Cologne Re Australia that caused Zurich’s profits to be overstated by about $60 million.

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and exited life insurance in the pivotal Singapore market. It has also sold its share of an insurance joint venture in Malaysia, but acquired a small construction and engineering specialist insurer in Hong Kong. It has opened up business opportunities in China with a new office in Shanghai, and Mr Spencer told Chinese business media last year he is looking for appropriate merger and acquisition opportunities. Back in Australia, Mr Nanra says he has been charged with “improving operational efficiency to support Zurich’s strategy and growth plans in Australia”. To achieve that he has embarked on what appears to be a thorough cleanout of many support areas, while also changing operational strategies and programs. For example, Insurance News found out in early December from sources close to the company that a significant number of people in service and front-line teams had been laid off. Individuals were being invited to apply for some of the vacated positions on a three-day deadline. The sources say state managers have had their underwriting authority removed, and property claims roles are being moved out of Sydney to Brisbane and Melbourne. Budgets have been cut and a “no-hire” policy has been in place for more than a year. Mr Nanra said in a statement in late November that Zurich had “commenced consultation with its employees around changes to its organisational structure that could lead to a number of redundancies”. The upside of such a large restructure is Zurich has pledged to invest in improvements that will lead to better services for brokers and customers. In his interview with Insurance News in October, Mr Spencer described the Australian market as “soft and challenging over the past 18 months to two years”. But referring to the local market’s global notoriety for competitiveness, he added: “We won’t be drawn into a downward spiral.”

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A new brand of commercial insurance for brokers has arrived

calibreinsurance.com.au 1300 306 226 Calibre Commercial Insurance Pty Ltd (ABN 86 603 039 023, AFSL 474540)

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“Let me dispel any speculation – Australia is a long-term vital strategic market. We are resilient and undeterred.” – Zurich Asia-Pacific’s Stuart Spencer

STUART SPENCER UNDERSTANDS Asia-Pacific very well, having worked in the region since 2004. But his education seemed at first to have marked him more for diplomatic service. Pursuing what he describes as a “passion for international affairs”, he studied at Tufts University’s Fletcher School of Law and Diplomacy, the oldest school in the United States dedicated solely to graduate studies in international affairs. “My geographic concentrations at Fletcher were Asia and the Middle East, but the message at Fletcher was to go out into the world to be a leader that makes a difference,” he tells Insurance News. “So when I embarked on my career in insurance I was committed to making a difference to the industry in Asia. Insurance is a vehicle for nation-building and improving living standards.” His business career began at American Express in New York, where he held several senior marketing positions. He moved to insurance in 1996, heading up AIG’s accident and health operations in Latin America and the Caribbean. He moved to Hong Kong in 2004, and two years later was promoted to president of the $US12 billion accident and health division for AIG worldwide. In 2009 he became global chief operating officer of Chubb Insurance’s life, accident and health division, and switched to Zurich as Asia-Pacific Chief Executive in 2013.

The meeting with Mr Spencer came about after Insurance News raised market concerns over the company’s direction following the departure of Mr Fogarty. Senior market sources had suggested Zurich – deciding growth from the No.5 spot in the market was not possible, or at least too difficult – might be setting out to quit Australia by selling all but the global corporate book to any of the market leaders. Mr Spencer quickly put paid to that supposition, asserting Zurich is in the market to stay but will no longer chase business in classes where it has no competitive advantage. “We have no intention of being all things to all people.” He says Zurich will “concentrate on where we have the capability to win”. “Underwriting profit is everything in Asia-Pacific,” he says. “We don’t rely on investment returns. “We concentrate resources where we do well, and we are actively doing this across the region.” He says Zurich will concentrate on understanding general insurance market demand in Australia and “develop the propositions where we have the capabilities. We target areas where we shine.” Mr Spencer tells Insurance News he is “realistic about the Australian market”, but still believes the company has a significant role to play in it. “We could not be more committed to insuranceNEWS

December 2015/January 2016

this market. We have thousands of small and medium-sized customers, operators as well as corporates, who rely on us as their insurer. “Let me dispel any speculation – Australia is a long-term vital strategic market. We are resilient and undeterred.” He’s also undeterred by the portrayal of Zurich Australia as the also-ran of the big league. “We are in the middle, [but] we never wanted to be the biggest,” he says. “We are the leaders in the middle.” And by playing in the market sectors where Zurich is strong, he sees the disadvantage of scale as irrelevant – or at least less relevant. “We will compete more aggressively in a chosen space,” he says. “In Asia our ambitions have been consistent and our footprint is in sync with the market opportunities.” Mr Spencer is also keen to point out that insurance isn’t just about profit. Noting the group has a strong focus on corporate social responsibility, he says the aim is to improve quality of life for people in countries where Zurich does business. “Across the region, we want to be able to increase insurance per capita to address underinsurance and non-insurance,” he says. “We have a role to play in society and are here to improve lives through insurance solutions tailored to the needs of the * people in our markets.”.

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GODZILLA is here One of the strongest El Ninos on record could bring unprecedented impact to Australia and beyond By John Deex 16

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PACIFIC Warm water from the western Pacific and Indian Ocean spreads to the eastern Pacific, stopping rain and causing extensive drought in the western Pacific and rainfall in the normally dry eastern central Pacific Less chance of cyclones in southeast Pacific, more chance of severe tropical cyclones further north

AUSTRALIA Drier conditions in parts of northern Australia, increased bushfires, worsening haze and decreasing air quality Drier conditions in Queensland, Victoria, New South Wales and eastern Tasmania

ASIA Shorter, more intense monsoon season Drier conditions leading to drought in some countries in a band from Papua New Guinea to India The Mediterranean to central China will be dry, followed by storms Significant rainfall events from Israel and Syria to northern India, northeastern Pakistan, Kyrgyzstan and southern Kazakhstan

ATLANTIC Lower incidence of hurricanes Simultaneous events in North and South Atlantic oceans have been linked to severe famines due to the failure of monsoon rains

NORTH AMERICA Cooler and wetter winter in the southern and western US, drier in the northwest Storms and flooding in south-central Canada, colder in northern Canada More icebergs in the northern sea areas, ice on the Great Lakes Warmer in northeastern US and southeast Canada, raising danger of icestorms

El Nino This occurs when sea surface temperatures in the central and eastern tropical Pacific Ocean become substantially warmer than average. This causes a shift in atmospheric circulation, with trade winds â&#x20AC;&#x201C; which usually blow from east to west â&#x20AC;&#x201C; weakening or reversing. The warming temperatures in the central and eastern Pacific make this area more favourable for tropical rainfall.

CENTRAL/SOUTH AMERICA Fishing industries affected along western coast as fish move south for colder waters Heavier winter rain in southern Brazil/northern Argentina/central Chile Drier in Amazon Basin, Columbia and Central America

EUROPE

Indian Ocean Dipole The dipole is the difference in water temperature between an area off east Africa and an area off Indonesia. A positive Indian Ocean Dipole is characterised by cooler water in the east and warmer water in the west. When the heat moves to one side of the ocean basin, so does the rainfall.

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Colder and drier winter in the north Milder, wetter winter in the south

AFRICA Wetter rainy seasons (March-May) in eastern central Africa Drier in southern Africa

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Warm spring, hot summer: the Bushfire Natural Hazards Co-operative Research Centre’s outlook published in November. Red is “abnormal”, green is “normal”

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Keeping a wary eye on the weather Insurers are on alert for a quick response to weather-related catastrophes Insurers are watching the situation closely and co-ordinating their response. “We have a major events team which does a lot of preplanning and the framework is already in place – that’s what makes it possible for us to respond really quickly,” an IAG spokesman tells Insurance News. “We have weather specialists watching things closely and we get a heads-up if something is developing and we need to be on standby. “The team helps us figure out what resources we need before the weather hits.” IAG’s Major Event Rapid Response Vehicles – fully equipped mobile offices – can be deployed at any time to fire-damaged regions. Most preparations are focused on dealing with a sudden influx of claims, helping those affected as quickly as possible and minimising impact to the rest of the business. “We’re using new channels like social media and internet lodging to minimise queues,” the spokesman says. “And we have our ‘all hands on deck’ strategy, where people not usually involved in claims get involved. We can move people between IAG brands, too.” The other way insurers prepare for a major bushfire season is by preparing consumers. Suncorp says it has a range of initiatives aimed at assisting customers in bushfire-prone regions. “This year we introduced AAMI Access mobile app alerts for AAMI customers, which provides severe weather and bushfire alert notifications for their postcode,” a spokesman tells Insurance News. “Suncorp has already invested in other changes, including a new automatic sum-insured calculator designed to tackle underinsurance which has helped customers gain 15% more coverage.” The insurer is also directly contacting thousands of at-risk policyholders to help educate them about building code changes, so they can make informed decisions about cover.

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AFTER MONTHS OF WARNINGS ABOUT the size and impact of the El Nino weather phenomenon now settling over parts of the western hemisphere, forecaters and commentators have begun using a sobriquet – a descriptive nickname to indicate what it’s all about and what to expect. They’re calling it Godzilla. The image of a huge monster ploughing through city buildings causing scale destruction and mayhem while humans stand helplessly by is accurate enough: the current El Nino event could be truly monstrous, and there’s no way of stopping it. Damage has already been done in many areas, from the hazeproducing Indonesian forest fires to a very active tropical cyclone season in the western and eastern North Pacific basins. India is suffering from a serious rainfall deficit, and a global coral bleaching event is under way. Aon Benfield’s Impact Forecasting says El Nino’s “fingerprints” have been all over the latest set of natural catastrophes. And while the world is better prepared than ever before, nobody knows quite what’s coming – thanks to climate change. This event is playing out in “uncharted territory”, according to World Meteorological Organisation Secretary-General Michel Jarraud. The planet has “altered dramatically”, with warmer oceans, plus the loss of Arctic sea ice and more than a million square kilometres of northern hemisphere summer snow cover. “So this naturally occurring El Nino event and humaninduced climate change may interact and modify each other in ways which we have never before experienced,” he says. “Even before the onset of El Nino, global average surface temperatures had reached new records. “El Nino is turning up the heat even further.” Here in Australia, the effects of El Nino have been supercharged by the co-existence of a positive Indian Ocean Dipole (IOD). When the two conditions team up, it is a recipe for hot, dry conditions, and extreme bushfire risk. Spring was extraordinarily warm in many parts of the country – October was the warmest on record, with maximum temperatures 3.44 degrees above the long-term mean and rainfall 53% down.

December 2015/January 2016

O Be In In he

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AT CGU WE’VE HELPED OUR CUSTOMERS SEE IT THROUGH ...AND THROUGH ...AND THROUGH.

Over the past year we’ve been able to help countless Australians see it through in times of need. Because of this, we’ve been awarded the Australian Insurance Industry Awards’ 2015 Large General Insurance Company of the Year, NIBA General Insurer of the Year and Insurance Business Magazine’s Insurer of the Year. But this doesn’t mean our work is done. We will strive to continue working hard to help our customers see it through for years to come.

CGU Insurance Limited ABN 27 004 478 371 AFSL 238291

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Above-normal potential for bushfires: South Australian firefighters try to save a house at Wasleys on November 25

“A recent Morgan Stanley report says Australian catastrophe losses in El Nino years are usually 40% down compared with the floodinducing La Nina.”

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The Bushfire and Natural Hazards Co-operative Research Centre (CRC) took the highly unusual step of reissuing its outlook for southern Australia, due to the rapidly worsening conditions. More areas of South Australia and Tasmania are now at greater risk than previously thought. “The combination of an El Nino-linked drought, long-term rainfall deficiencies, drying in southern Australian over nearly 20 years, as well as warming global and Australian temperatures, sets the scene for above-normal fire potential in large parts of southern Australia.” Lives have already been lost in Western Australia and South Australia, and there were damaging early fires in Tasmania and Victoria. Despite the bushfire threat, El Nino is not all bad news for insurers, as it usually results in a reduction in the number of tropical cyclones hitting Australia. In fact, a recent Morgan Stanley report says Australian catastrophe losses in El Nino years are usually 40% down compared with the flood-inducing La Nina. Also, the strength of an El Nino is not a reliable indicator of the strength of impact, and rainfall may yet pick up. The positive Indian Ocean Dipole has already broken down, while wider Indian Ocean temperatures remain well above average – which could lead to increased rainfall over Australia, mitigating the effects of the El Nino. Even a good wet might not save us from severe fires though, thanks to the decades-long rainfall deficit. “A lot of the forested regions will dry out very quickly,” Bushfire and Natural Hazards CRC Chief Executive Richard Thornton tells Insurance News. “If we get some water dumped on these areas it might delay the onset of the season, but it won’t stop the potential for severe fires.” And there could be worse news still for insurers next year. Research shows that a Godzilla El Nino will likely be followed by an equally strong La Nina. * She’s a very different beast, but just as destructive. December 2015/January 2016

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You can tell a lot about someone by the companies they keep.

When it comes to insurance, IAG is the little name behind some of Asia-Pacific’s biggest brands. In fact, last year we paid almost $9 billion in claims to millions of customers across the region, so you can be confident we’ll be there when you need us. It’s all part of helping make your world a safer place.

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IN THE SEVEN YEARS IT HAS BEEN PUBLISHED, the annual Insurance News Top 20 list of the most influential people in the industry has attracted a great deal of attention. While it was intended originally as a one-off look at the industry’s power players, continuing demand from within the industry encouraged us to repeat it each December. We don’t pretend that the list is the most comprehensive possible. It’s a subjective look at the people Insurance News considers are the individuals most likely to move the Australian insurance industry in new directions. They’re the people we know influence others, initiate new ideas and change the way we work with customers, governments and the wider community.

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Insurance touches everything, but for reasons no one can ever really explain, it’s also one of the most modest industries around. Not for insurance the sort of chest-beating belligerence of the mineral industry’s “stop the mining tax” advertising campaign of a few years ago, or the “we know better” smugness of the banking industry. The influencers of insurance are, for the most part, people who work in the business background. They don’t appear in the pages of the financial press every day, but they are nevertheless effective thought-leaders who make things happen. The list this year sees some significant changes at the top. Chief executives of listed local companies tend to stay in the job for seven to 10 years, although some whose roles are selfmade – like Steadfast’s Robert Kelly or LMI Group’s Allan Manning, for example – tend to stay longer as their companies grow around them. Others stay at the top of their companies because they’re very good at what they do and young enough to keep pace with change. This year Mike Wilkins of IAG, who has been consistently at the top of our list or close to it for years – and for very good reason – has retired

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Our annual round-up round-up of the people who change people’ people’s s minds, affect affect the industry and make things happen

after seven years running the company. Prior to that he built, managed and sold Promina. Wilkins has been replaced by the equally capable Peter Harmer, a technically savvy leader who already has runs on the board for rebuilding CGU and merging the Wesfarmers insurance companies into IAG without too much drama. He has a different angle on insurance delivery, and promises to give his competitors a run for their money. A few blocks away in Jamison Street, Suncorp has also been through a change of leader, with the enigmatic Patrick Snowball leaving after six years. We were never able to establish exactly where Snowball stood in the ranks of the influencers. His arrival from the UK in 2009 was accompanied by London media articles quoting his desire to get back there as soon as possible, and during his time at Suncorp he seemed to prefer to leave the issues of the local market to deputies like his personal lines chief Mark Milliner. Snowball was replaced by Michael Cameron, who is yet to make his mark as an industry influencer. We’ll know more about him and his strategies next year.

Milliner, a consistent inclusion on the Top 20 influencers list, has left to join Harmer at IAG. He has been replaced by Gary Dransfield, who will no doubt appear on next year’s list once he’s had the chance to pull the reins of the juggernaut he inherited. So there have been plenty of changes in the ranks of the Australian insurance industry’s influencers. Roles have changed, and with them the possibilities have changed also. The industry’s big issues and influences tend to change more slowly than the influencers themselves, so the next few years will be interesting as leaders continue to change and next generation thinking is brought to bear on old problems. – Terry McMullan

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Peter Harmer, Managing Director and Chief Executive, IAG: He’s not likely to go slow in taking a new broom to the region’s largest insurer, because Harmer carries into the top role at IAG an attitude that’s savvy, sharp and challenging. Inheriting a solid and successful company from his predecessor Mike Wilkins, Harmer is well placed to exploit IAG’s large customer base. His enthusiasm for Big Data and customer-centric development will see the market scrambling to keep up with what will almost certainly be new distribution strategies. There’s also room for greater efficiencies within IAG – from a rearrangement of IAG’s “silo” approach to much of its management, for example. Harmer is the right person to cut through internal resistance using precision and persuasion. His experience at the top of Aon’s UK operations and his transformation of CGU from a ponderous traditionalist into a commercial insurance market leader – all the time while juggling with the integration of Wesfarmers Insurance’s business into the mix – is a fair example of the sort of dynamism he can bring to the whole IAG group. Expect the unexpected.

Mark Milliner, Chief Operating Officerdesignate, IAG: This was a tough one to call, but every insider Insurance News consulted had the same thing to say: The decision in November by Milliner, the chief executive personal lines at Suncorp, to quit the group and join Peter Harmer at IAG is a gamechanging event in a market where Suncorp and IAG are tough competitors. Milliner built his reputation as the mastermind behind the Brisbane-based insurer’s back-office overhauls, its auto repair revolution and his willingness to go head-to-head with powerful politicians over mitigation issues. Passed over this year to replace Patrick Snowball as group chief executive at Suncorp, Milliner is tipped to be a masterful deputy for Harmer, bringing 22 years of change management experience with him when he starts at IAG in mid-2016. His industry nous and his straight-shooter attitude have earned Milliner high status in our Top 20 over the past few years, and we reckon nothing much will have changed, except his place of work. Suncorp’s loss is a very significant gain for IAG. Game on.

1 Robert Kelly, Managing Director and Chief Executive, Steadfast:

The founding father of Steadfast is realising his vision for the company at a bewilderingly swift rate. Since listing in 2013, Steadfast has become a company capable of dealing in practically any branch of insurance, including personal lines and life. It has around 304 brokerages and about 750 offices around Australia, with its consolidated revenue growing 72% in the 12 months to June 30 to reach $298.7 million. Kelly is building a juggernaut that has an increasing capacity to provide straight-through services for clients via its force of directly owned and affiliated brokerages, underwriting agencies and specialist services. Maintaining a pace that would exhaust much younger men, the industry’s ultimate wheelerdealer shows no sign of slowing down as he adds new bits and pieces to the Steadfast operation just about every month. Kelly has been one of the go-to people in the Australian insurance industry for many years, and that hasn’t changed. Despite the constraints imposed on him by virtue of his company’s listed status, he remains the insurance industry’s most candid advocate. Like a modern trade union leader, he’s as much at home talking shop with ordinary insurance people as he is hammering out agreements in the industry’s boardrooms.

Ajit Jahn, President, Berkshire Hathaway Insurance:

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Another out-of-the-box choice, perhaps, but Ajit Jahn has the ability to change the Australian insurance industry, if he’s inclined to. Jahn shook up the local market twice this year – once with the arrival in Australia of Berkshire Hathaway Specialty Insurance, an insurer with the financial and technical wherewithal to disrupt the market in pretty much any way it sees fit – and then with the acquisition of 3.7% of IAG for $500 million. That deal carries some unprecedented side-deals. The media-shy Jahn is often tipped as a successor to Warren Buffett. He wields considerable influence in the industry through his management of Berkshire’s massive reinsurance operations. This year he has had to drastically tweak or cancel some deals in his empire to counter falling revenues, and there has been some change in strategies as well. That’s what makes the IAG deal so globally interesting. It was a one-off, and is seen as the spearhead of Jahn’s typically innovative – but untypically late – charge into Asian insurance, where IAG is very nicely placed.

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New entrants and emerging threats:

The buoyancy of the Australian insurance market has encouraged smaller foreign specialist insurers to set up shop here over the past few years. While there are signs that some niche players have found the going a bit too hard, some relatively new players like Berkshire Hathaway Specialty Insurance are doing very well providing brokers with well-devised alternative policies. The Australian commercial insurance market has always been one of the most competitive in the world, and it has only become more so recently. On the personal lines front, smaller insurers are gradually making inroads into the established insurers’ markets. But they’re accused of being cherry-picking opportunists, and are unlikely to ever overtake the giants like AAMI and NRMA Insurance. Somewhere over the horizon, however, the real game-changers are massing – data-rich companies like Google that have the potential to do to insurance underwriting and distribution what Uber has done to the taxi industry.

Mark Searles, Chief Executive, AUB Group: Even though the reputation of AUB – until last month Austbrokers – for consistently increasing returns to shareholders may have lost a little lustre recently, Mark Searles shrugs it off as he adds greater ability and flexibility into his partner brokers’ armouries. Searles is focused on diversification, building new support services that will increase the range of services brokers can provide their clients. That has seen Austbrokers taking up stakes in companies specialising in workers’ compensation, injury management and ancillary risk management activities over the past year. His diversification drive is assisted by the growth of the New Zealand broking arm and the continuing success of Austagencies, whose underwriting agencies continue to pump out increasing amounts of revenue. Austbrokers now derives 23% of its profit from non-broking sources. Searles is confident he and his team will be in the right place if/when premium rates recover through 2016. His bold strategy is being closely watched by partners – some of whom are wary – and the wider market. With broking under assault from emerging alternative distribution systems, he might just have hit on a solution others can emulate.

Kelly O’Dwyer, Assistant Treasurer and Minister for Small Business:

5 Heinrich Eder, Managing Director, Munich Re Australasia:

Ms O’Dwyer took over the role of Assistant Treasurer from Josh Frydenberg in September, and with the small business portfolio tacked on her importance to the insurance industry becomes even more significant. Ministers with responsibility for the financial services sector are at their most important to insurance when the industry comes under pressure from legislation that could affect it. While legislation flowing from the Financial System Inquiry findings isn’t expected to do any particular harm to the general insurance side of the ledger, parliamentary draughtsmen have been known to deliver some shockers, aided and abetted by regulators who like to put similar-but-different specialties like financial services and insurance broking into the same category. And small business is the area where brokers and the direct market are inevitably going to clash over insurance distribution and the importance of advice. It helps to have the relevant minister well briefed and onside. An adviser to former Liberal treasurer Peter Costello, O’Dwyer could be a significant ally in any future Canberra-initiated stoushes.

When reinsurance takes a bath, it often does it in spectacular style. But in a year of disappointing reinsurance returns, Eder can count on the increasing influence of his general insurance operation, Great Lakes Australia, to counteract some of the other side’s negative results. Great Lakes has been around for long enough for insurer clients of Munich Re to get used to a subsidiary that competes with them. It’s underwriting an increasing amount of new business, most recently Sports Underwriting, Solution Underwriting and Calliden spin-off Calibre. Eder has been around the local market for 12 years – 10 of them as MD responsible for all Munich Holdings’ life and general operations in Australia, New Zealand and the Pacific Islands. He’s totally immersed in the market’s issues and associations, is well-liked and, as you’d expect, totally trusted.

The regulators:

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December 2015/January 2016

The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have such massive influence over the insurance industry – impacting on everything from innovation to profitability – that we should be grateful for the bad eggs in banking and financial services who keep them focused. The fact is, general insurance flies quite comfortably under the regulators’ radar when it comes to behaviour. Apart from the occasional errant intermediary, there’s not much to talk about. However, APRA does have the ability to keep insurance chiefs awake at night with a list of potential controls and measures being imposed globally by their counterparts in the International Association of Insurance Supervisors. It’s all about being part of a stable global system, so we’ll just have to keep grappling with initiatives ranging from new solvency standards to insurance companies having the right sort of risk culture.

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Chris Colahan, Chief Executive, Berkshire Hathaway Specialty Insurance:

Outgoing and self-assured, Colahan is one of the rising generation of young Australian business leaders who have gained their experience in foreign places before returning home. A former global high-flyer in UK-based insurer RSA with experience gained from senior roles in the Middle East and Asia, Colahan now has at his command a business that’s not only cashed-up but also expansive. His choice of a Sydney office building where his entire staff takes up less than half of the available space should serve as a salutary warning to competitors. Colahan is aware of the market’s wariness that he could ignite market mayhem, and is always quick to reject suggestions that BHSI is going to grow in anything but an orderly and profitable way. Nevertheless, the Berkshire Hathaway brand has lured across some of the industry’s brightest and best specialists. Colahan is intent on growing the business and expanding its reach, which is good news for brokers seeking product diversity – but not for anyone else.

Mark Senkevics, Managing Director and Head of Australia and New Zealand, Swiss Re:

Chris Mackinnon, Lloyd’s General Representative in Australia:

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The giant Swiss reinsurer’s man on the spot has gained a reputation for gently urging the wider industry to seek out existing opportunities in the local market. After five years in the job he’s well across the big issues and more than willing to use Swiss Re’s considerable clout to push for such things as privatisation of statutory insurance classes – the industry’s very own holy grail. Senkevics has also witnessed the impact that billions of dollars of additional capital has had on his sector’s profitability. Like Munich Re, Swiss Re has branched out into insurance. The Corporate Solutions arm, a wholesale and retail underwriting operation with capabilities and options in a large number of key areas, adds to Senkevics' already wide product mix. While the smaller players are biting at Swiss Re’s heels with new schemes, Senkevics is well ahead. He understands reinsurance is a long-term game, and relationships really do matter.

Lloyd’s is now fully engaged on its strategy to emerge from its London headquarters to embrace the world, rather than waiting for the world to go to it. Mackinnon, who took up the local Lloyd’s role in January, has already broken several conventions as he works to enhance the market’s already impressive local business. Not only is he an Australian rather than a London-based Lloyd’s operative sent out to represent the market, Mackinnon is also a highly regarded and widely experienced insurance broker. He knows the local industry and the industry knows him. Australia is now the third-largest Lloyd’s market after the US and UK, and the fifth-largest insurer in the Australian market, so his role isn’t one merely of representation. Lloyd’s sees major opportunities in the Asia-Pacific region, and Mackinnon is key in enhancing the market’s strong presence in this market. He works closely with underwriting agencies, Lloyd’s major source of business in Australia, and also maintains a relationship with the insurers, whose priorities and issues are often of crucial interest to Lloyd’s.

John Neal, Group Chief Executive, QBE:

The newspaper headlines for the past year say it all for QBE’s boss, who has had a torrid time of it since taking up the job in August 2012. From “struggling to plug holes in floundering QBE” and “skeletons in the closet” last year, Neal’s success in selling non-core assets and resetting the group into a coherent and profitable whole has earned him many admirers in business. Well-liked by the investment community, Neal has generally left it to his deputies to deal with local insurance issues. Nonetheless, QBE’s position as the Australian insurance industry’s largest global company gives him a lot of profile and potential influence in the market. As the group settles into a new phase where it’s in control of its own destiny, the super-smart Neal would make a very positive addition to the meagre ranks of forthright industry leaders who can explain industry realities to politicians and the public.

When will the soft market end? The industry has been at this point in the “classical” soft market, when premiums take a nosedive, for a couple of years. It’s normally caused when insurers who are enjoying good profits compete more fiercely for market share, a process that sees premiums plummet. This time around the downside of the cycle has had some different features – not least the tens of billions of extra dollars parked in the industry by investors who can’t get any traction out of normal investments, thanks to low interest rates globally. But local insurers are muttering that some loss-making classes can’t be sustained, so in 2016 they’ll raise premiums and slash some policy features. It’s too early to say if that’s going to definitely happen, however. The market is highly competitive with many players in some classes, so there’s always a few that will keep their premiums lower for longer to gain more market share. If overall market rates do rise, it’ll be a slow process. 26

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Climate change and natural catastrophes:

The debate over climate change continues to rage, and the global insurance industry is being dragged into it. Insurers are among the world’s largest investors, and they are being encouraged to put more of their money into carbon-neutral stocks. Allianz has been an early mover in dropping carbon-related investments, and locally IAG has been an advocate for greater action on climate-related issues. Insurers hold massive amounts of information about catastrophe risks, so it should not come as a surprise that they are also being encouraged to get involved in the whole climate change debate. But with the evidence on a rapid rise in the incidence of bushfires and floods over the past 20 years becoming clearer, insurers may eventually find that merely pricing policies to match the known risk isn’t enough.

Warren Entsch, Federal MP for Leichhardt:

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Another offbeat choice for our Top 20, but Entsch has earned the spot. For the past couple of years he’s been the biggest thorn in the insurance industry’s side, pushing unwieldy solutions to counter high property premiums in his north Queensland electorate. There have been more reports and inquiries into this issue in recent times than there have been for far more pressing national issues – testament to the veteran MP’s powers of persuasion. His invective has muddied the industry’s attempts to propose workable solutions or even explain why the issue exists. Thankfully, his ear-bending abilities seem to be less effective on Prime Minister Malcolm Turnbull than they were on his more excitable predecessor.

Allan Manning, Managing Director, LMI Group:

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Colin Fagen, Chief Strategy Officer, QBE Group: Group Chief Executive John Neal has surrounded himself with astute executives since taking over in 2012. Fagen joined that select band in August, and accordingly increased the influence he will have over QBE’s future direction. His success as chief executive Australia and New Zealand over more than four years flowed in no small part from his enthusiastic advocacy of greater efficiency – and hence lower costs – from those within his own operation as well as from key partners, including brokers. While his focus is now a global one, he will almost certainly have left a legacy of thought for new local chief Tim Plant to pursue – that the intermediated market is an expensive means of distribution, which means offshoring support services and constantly finding ways to cut back on costs. A widely admired team player and supportive manager, Fagen’s interest in the vital Australian market is unlikely to fade while he applies his skills in the wider group.

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Passionate about insurance and its value to society, Manning is also one of the bestknown industry people in the region. He maintains an exhausting schedule of local and international speaking engagements, analysing policies, spruiking the good and condemning the bad. As much as he promotes the industry’s essential contribution to the well-being of national economies and individuals, he’s also not afraid to lament obvious and unnecessary shortcomings. His technical expertise has earned him an international reputation and turned LMI into a consulting powerhouse. This peripatetic academic’s blogs and books should be required reading within the industry – not just here but everywhere.

Niran Peiris, Managing Director, Allianz Australia:

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A quiet but steady operator, Peiris has won fans in Allianz for his “steady as we go” approach to the business. A few months ago Peiris' team made a submission to the Northern Australia Insurance Premiums Taskforce calling for a reinsurance pool – flying in the face of its industry counterparts – a demonstration of Allianz's willingness to stand alone when it needs to. He’s not afraid to make the hard calls and he’s surrounded by a cadre of excellent executives and some impressive operations. Peiris won’t rock the industry boat unless he has to, but he will continue to keep Allianz moving along smoothly. And as he demonstrated with the TIO acquisition, he’s ready to pounce when the opportunity is there.

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Anthony Day, Chief Executive, Commercial Insurance, Suncorp: Bold, urbane and a team player, Day is recognised in the market as a smooth operator who tells it like it is and encourages others to see things how they could be. He’s a leader in what will undoubtedly be a long battle to see statutory insurance schemes privatised, and his Vero operation has done more than most insurers to present clear evidence to brokers that the dominant SME market is changing rapidly, disruptors are emerging and change is inevitable. It’s not always a message brokers want to hear or pay heed to, but Day is a believer in getting the issue out in front and encouraging debate about what people should do about it.

J Patrick Gallagher, President, Chief Executive and Chairman, Arthur J Gallagher:

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Leon d’Apice, Managing Director, Ebix Australia:

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Having reinforced his company’s presence in Australia in 2014 with the acquisition of Wesfarmers’ OAMPS broking operation to top off its swoop on the SRS underwriting agency in 2012, the founder’s grandson hasn’t done much more in the region – so far. While they tend to work below the industry radar, local managers are getting on with the job of improving their businesses, which isn’t an easy task in the present environment. Gallagher is cashed up and could prove to be a worthy competitor for AUB Group and Steadfast when it comes to picking up some of the remaining quality insurance businesses in Australasia. Or is he content with the scale of his operations now? Nobody really knows, but everyone wishes they did.

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Financial services technology company Ebix is kicking goals globally, and its audacious entry into the bidding battle for UK-based Xchanging – which has some significant business in Australia – does make you wonder what Leon d’Apice is thinking. The boss of Ebix Australia is circumspect about the possibilities, but says that despite the global powerplays there are “some very interesting prospects” locally. Take from that comment what you will. d’Apice’s showpieced platform Sunrise Exchange continues to dominate local insurance transactions, and despite the growth of alternatives he says there has been no drop in the amount of business flowing his way. The notorious stand-off with Steadfast over Ebix-owned broking systems continues, but d’Apice remains relaxed. His company is still on top after eight years in operation, and all he can see right now is upsides.

Michael Cameron, Managing Director and Group Chief Executive, Suncorp: It’s a very big and very challenging job, but Cameron, who replaced Patrick Snowball in the top role at Suncorp on October 1, has the pedigree. He is a bit of an unknown quantity in insurance at this point, with most of his business experience solidly based in banking. And it’s a bit too early to analyse his strategies and ambitions for the group, although a frisson of curiosity ran through the industry commentariat when he noted his enthusiasm for allfinanz – a concept that never really took off in insurance in general and Suncorp in particular. Still, maybe its time has come.

Mitigation is the answer:

The long-running saga over high property premiums in cyclone-prone north Queensland should reach some kind of resolution soon. It started several years ago when insurers began to accurately price the risk posed by residential buildings that weren’t capable of withstanding the force of a cyclone. North Queensland is a conservative stronghold, so many inquiries and official reports have resulted. We’ve also seen some suggested alternatives that were, at best, useless. The latest alternatives under investigation are the establishment of either a reinsurance pool or a mutual insurer, with the Federal Government bearing the costs. Insurers are insisting the only suitable solution is mitigation – making buildings stronger through a retrofitting program. New Prime Minister Malcolm Turnbull is less likely than his more impulsive predecessor to make any rash decisions. But then again, this is north Queensland politics we’re talking about.

insuranceNEWS

December 2015/January 2016

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SURA HOSPITALITY

SURA LABOUR HIRE

SURA TRAVEL

SURA PROFESSIONAL RISKS

SURA ENGINEERING

SURA TAXIS

SURA FILM & ENTERTAINMENT

SURA COMMERCIAL

SURA CONSTRUCTION

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People to watch:

Departures:

Gary Dransfield, Chief Executive, Personal Insurance, Suncorp:

Mike Wilkins, Managing Director and Chief Executive, IAG, 2008-2015:

Appointed in November to replace Mark Milliner immediately after his defection to IAG, Dransfield hasn’t yet had a chance to shine. Suncorp’s personal lines business is a big slice of the group’s empire, and it faces increasing competition from the so-called challenger brands and the possible entry of technology groups. Dransfield demonstrated in his previous post as chief executive of Vero New Zealand that he has the ability to deal with the big issues – claims from the Christchurch earthquakes are the biggest the region has experienced, and he was in the thick of it. Expect to see him popping up in these pages in the future.

Prue Willsford, Chief Executive, Australian and New Zealand Institute of Insurance and Finance: She’s been there and done that in her career, but it’s her role as unofficial custodian of what is essentially the insurance industry’s culture that brings Willsford consideration as a mover and shaker. The institute, regarded by elders as the centrepiece of the industry, has been a fractious and even controversial body in recent times, but two years into the job Willsford has rebuilt frayed ties with key industry groups. Her November deal to revamp and manage insurance brokers’ professional education would have been an impossible prospect not so long ago.

Tim Plant, Chief Executive, Australian and New Zealand Operations, QBE:

Steve Ball, Chairman, JLT Australia, 2013-2015: The sudden death in May of the highly regarded broker shocked the industry. Steve Ball worked for JLTA from 1982 and was made chairman in 2013. He was a director of the National Insurance Brokers Association for 12 years, and served as its president in 2004-06. A passionate advocate of broker education and a mentor to many young professionals, his profile and influence across the industry was considerable and his loss is still felt.

Plant replaced Colin Fagen in August, and will doubtless adopt a higher industry profile over the next year. QBE is the largest Australian insurer by virtue of its global reach, and its local chief has always had considerable influence. Plant can be expected to play the power game the QBE way: quietly and strategically. 30

insuranceNEWS

A legend in the industry for all the right reasons, Wilkins handed over the top job at IAG and is heading into retirement in a few months with the understated ease that has become his hallmark. He became IAG’s chief operating officer in 2007 and chief executive the following year. Through a shrewd series of acquisitions and side-deals, he built the group into a market leader in Australia and New Zealand, with some promising prospects in Asia. As Insurance News noted last year, he was the architect of a negotiation that saw British insurer Royal & SunAlliance agree to combine its assets into what became Promina, which was floated in 2003. In 2006 Wilkins sold Promina to Suncorp-Metway for $7.9 billion, and in 2007 he joined IAG “to bring order to a business that had seriously lost its way”. In his seven years leading IAG premium income grew from $7.3 billion to $10.3 billion and the group’s share price doubled. A string of deals included the acquisition of the Wesfarmers insurance assets, the addition of some significant business in Asia and an agreement giving insurance heavyweight Warren Buffett access to 20% of IAG’s Australian underwriting book in exchange for an annual fee and a small equity stake. Wilkins also acted as a de facto opinion leader for insurance, forming business alliances that have given the industry a much higher profile in such issues as climate change and disaster mitigation.

December 2015/January 2016

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December 2015/January 2016

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Stronger as one With XL’s acquisition of Catlin near completion, regional chief Craig Langham says it’s a marriage built for longevity By Michelle Hannen

WHEN IT COMES TO MERGERS AND acquisitions, horror stories are thick on the ground. Synergies that fail to eventuate, cultures that don’t align, blow-outs in integration costs, an exodus of staff and the evaporation of market goodwill are just some of the things that can commonly go wrong. Not so at the newly formed XL Catlin, its Asia Pacific Insurance Chief Executive Craig Langham says. The transaction closed on May 1 this year, and Mr Langham says so far, so smooth. “What we’ve created is a large general insurance operation that is very focused on maintaining and developing the cultures that both entities previously had,” he tells Insurance News. He says 75% of XL Catlin staff globally are now working from shared offices, but rather than slashing and burning, the key strategy has been to bring the two underwriting capabilities together and “make that one plus one equals two rather than trying to dilute our offerings or our capacity”. “This has been about being able to offer more products to more clients in more places and more often.” insuranceNEWS

December 2015/January 2016

With XL’s roots in the large corporate sector and Catlin’s DNA as a specialty underwriter, it is an approach which makes much sense. Not that cost savings have not materialised, with the company recently revising its original target of $US200 million in synergy savings up to $US250 million, which Mr Langham confirms is on track to be delivered by the end of 2017. Along with those figures, there are several more that highlight the impressive scale achieved with this deal. In its insurance operations, XL Catlin boasted $US10 billion in net premium as at December 31, 2013. And it is the largest player at Lloyd’s with more than $US3.8 billion in gross written premium. It is a top 5 player globally in both crisis management and political risk, while it holds a top 3 position in aerospace and fine art and specie. XL Catlin is the lead underwriter on 70% of the 2700 global insurance programs in which it participates, and underwrites more than 30 lines of business globally, for clients in more than 160 countries. 33

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Working the niches, avoiding the carnage ALONG WITH A NEW NAME, THE Australian XL Catlin business also has a new leader in Country Head Robin Johnson (above). Originally hailing from England, Mr Johnson took up the role on July 1. He was previously Country Head, Singapore for XL, having joined the organisation in February from his former post as Head of Broker and Client Management for Asia at AIG. Mr Johnson started his career as a financial lines underwriter in London, and he has worked across underwriting, distribution and management in London, Paris and Kuala Lumpur. He says he is enjoying learning the ins and outs of the Australian business. “We’re the perfect size in Australia. It’s quite a tricky market if you’re a very big player, as you become a bit of an index for the market. “If you’re the size we are you’re very well placed to manage the market. We’re small enough to work in the niches and avoid the carnage.” He says the business uses the mantra “the smallest of the multinationals and the biggest of the boutiques” to describe itself. Its market positioning is “very appealing to clients”, he says. Echoing Mr Langham’s sentiment that the local integration of the two businesses has gone “ridiculously smoothly”, his focus is now on growing the Australian business. That and training for the Marathon des Sables, a six-day, 250-kilometre endurance race in the Sahara Desert that Mr Johnson – a keen cyclist, runner and ironman – will compete in next April.

“We were both nimble. And what we’re really trying to do is maintain that even though we’ve developed scale.”

So what does a successful integration strategy look like? Mr Langham says the approach was to first focus on external integration, by presenting a clear, consistent, cohesive message to brokers and clients. He says apart from positive anecdotal responses, business retention metrics since the deal closed have been “very, very positive”. “[It] has been better than we expected, to be honest.” He says that ease of integration was aided by the two companies being culturally similar, “both highly focused on innovation being driven by customer solution strategies, very, very strong DNA in the claims piece… and thinking globally, acting locally”. “I think the other thing was that we were both mid-size global carriers, so we were both nimble. And what we’re really trying to do is maintain that even though we’ve developed scale. “We’re very keen on being able to maintain that ability to respond quickly, providing strong service to clients and brokers not only in the claims space but in the broader solution space and service space. insuranceNEWS

December 2015/January 2016

“I think what we’re trying to sell is exactly that same capability but with a lot more horsepower in terms of product and capacity.” A decision to create a “shared population” of senior appointments in the combined business also sends a strong signal, both externally and internally. While Mr Langham hails from XL – he was formerly regional manager of Australia and Asia Pacific – as does Country Head Australia Robin Johnson (see sidebar), former Catlin Asia Pacific chief executive Mark Newman is Mr Langham’s Singaporebased deputy and heads up Asia. Former Catlin Australia boss Andrew Case is now Regional Distribution Director for the combined operation, while former Catlin employees Steve Gibbs and Peter Fryer have been appointed Head of Claims for Asia Pacific and Operations Manager for Australia respectively. “I think it’s made [it] a lot easier for people to understand where we’re trying to go rather than one side of the transaction being highly dominant,” Mr Langham says.

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“The overlap was minimal and that’s evidenced by the fact that the synergy [initiatives] we’ve undertaken globally haven’t affected the Australian operation.”

Keeping an entrepreneurial base AS FAR AS XL GOES, YOU WON’T FIND too many executives who have seen the business grow more than Craig Langham (above). He fell into insurance by taking a job in broking during a gap year after completing high school in Victoria, joining Sedgwick in 1986. Ten years later – after a stint at Aon in Hong Kong – he was back at Sedgwick when the opportunity arose to join XL through market contacts. “There were 120 people in the company globally,” he says of the then 10-year-old firm. “That’s the real ground floor.” Today, XL Catlin employs more than 7000 staff. “What attracted me to XL at the time, which is still very much what I see today without being evangelistic about it, is that the company’s got a strong entrepreneurial base. “It’s a company that was basically born out of a need to create a solution and was owned by clients and I think a lot of that DNA still sits in the company,” he reflects. “I think it’s a great organisation for people that have the ability to be creative and the trick for us is maintaining that as we get bigger.”

As XL grew, so did Mr Langham’s roles within the business, with a stint in Ireland followed by another move to run the company’s London business. In 2001, XL acquired the global operations of Winterthur, which came with an Australian business of 12 staff, providing a way home for Mr Langham and his young family. Or, as he points out, a job in Sydney – not quite country Victoria where he grew up, but a place that has become home as the years passed. Fast forward to today and one of his four children has followed him into insurance, with a role at Aon, while the youngest has just finished school. While for many that might signal a time for winding down, not so for Mr Langham, though he does have some passions outside of work. When not flying the globe to visit either London or New York to check in with the XL Catlin executive team, or to Asia to oversee his patch, Mr Langham can be found on the golf course or at the MCG in Melbourne cheering his beloved Hawthorn on to yet another win.

insuranceNEWS

December 2015/January 2016

The focus has now turned to internal integration, and Sydney-based Mr Langham says as far as the Australian business was concerned there was “very little overlap” between XL and Catlin’s local businesses. “The overlap was minimal and that’s evidenced by the fact that the synergy [initiatives] we’ve undertaken globally haven’t affected the Australian operation.” XL was very much along a path of providing large corporate global solutions to large Australian corporates. Catlin in Australia maintains a very strong capability in providing the Lloyd’s platform for coverholder business. “Our go-forward strategy is to maintain both of those capabilities.” In fact, the only area of material overlap in the local business, which comprises offices in Melbourne and Sydney, was in professional lines, something Mr Langham views as a competitive advantage. “I see that as being a very accretive part of the transaction locally. We’re definitely a go-to market in that space.” Mr Langham’s remit also includes over-

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“One of the advantages of the combined entity is that we can look at how we enter some of those new markets and which is the most efficient platform to access that business.”

Splitting insurance from reinsurance ASIDE FROM ITS SUBSTANTIAL insurance business, the acquisition of Catlin by XL has created the world’s eighth-largest property and casualty reinsurer, with $US3 billion in combined net premium. Catlin had previously run its insurance and reinsurance businesses under a single management structure, while XL ran its businesses separately. The new company has separated insurance and reinsurance, with XL Catlin Re’s Australian business (which comprises the former Catlin reinsurance operation as XL Re did not have a reinsurance business in Australia) now managed out of Singapore. Former Catlin chief executive of European Reinsurance, Peter Schmidt, is the company’s Reinsurance Chief Executive for Asia Pacific and Latin America.

sight of the Asian business, with operations in Malaysia, Hong Kong, Shanghai and Beijing, as well as representative offices in Japan and India. Its largest operation in the region is in Singapore, where Catlin and XL both had their regional headquarters. There was more crossover between the two businesses there, due to the wholesale nature of the Singapore market, but the scale gained has been a positive. “Because we’re facing the market with a combined capacity and broader product offering, that’s actually been very much to our benefit in the Singapore market. So we’ve not had to undertake any significant triage on people or product because of overlap.” Expansion in the region is also on the agenda, with Mr Langham confirming XL Catlin is “actively looking” at expansion into other Australian states, with a Brisbane office due to open early in 2016. The company currently trades in New Zealand via its Australian Lloyd’s platform rather than a locally licensed entity, but a

greater presence across the Tasman is “one of the things we’re looking at”, Mr Langham says. “One of the advantages of the combined entity is that we can look at how we enter some of those new markets and which is the most efficient platform to access that business.” Mr Langham adds that a greater focus on specialty, and in particular on marine, crisis management – including product recall and kidnap and ransom – and accident and health, is also “one of the strategic initiatives that we’re looking at both in the region and in country”. It is perhaps such future plans that serve as the best indicator of the ease with which the XL and Catlin businesses have combined; a realisation that is not lost on Mr Langham. “I think one of the key things we’re getting to now – and this is probably a good indicator as to how successful I think the integration has been – is we’re starting to think about moving past integration and * looking at where we’re going to be.”

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The personal brand still matters The authorised representative networks provide significant power and support, but it’s individual reputations and the value of their advice that keep clients onside By Terry McMullan

AUTHORISED REPRESENTATIVES WERE once categorised by one broking industry leader as “parasites who will take us all down to their level”. That was 12 years ago, and much has changed since then. Levels of professionalism have not dropped, and the “value of advice” remains the premier preoccupation of all professionals in the distribution end of commercial insurance. Authorised representatives (a term usually reduced in conversation to the simple diminutive ARs) are now a common – and constantly growing – part of insurance industry life. While the concept of intermediaries working under a single licence has been around for many years – it’s how agents employed by insurers operated, for example – the drive for greater levels of regulation and reporting stemming from the Financial Services Reform Act of 2001 brought the AR model squarely into the limelight through the early years of the century. Smaller independent intermediaries in particular found themselves distracted and intimidated by a massive increase in paperwork and compliance requirements to retain their individual licences. Suddenly the option of becoming an AR – and still being able to define themselves as a broker – had great appeal. The AR model allows individuals to work semi-independently under one financial services licence held by a central management group that provides compliance and a range of support services. The group shoulders the regulatory workload, which means it’s responsible for any failings in its own network of ARs – a symbiotic relationship that forces the licence-holder to concentrate on compliance and professionalism as much as financial performance. It gives the AR the time and the technical support he or she needs to build their own “personal brand” – an essential factor in broking that has not diminished in impor40

tance with the growth of the AR networks. The evolution of the AR has also opened up opportunities for more entrepreneurial youngsters to get into the business. While traditional brokerages have tended to grow over the past 20 years through mergers and acquisitions to a point where employees can’t easily afford to get skin in the game, the entry costs for an AR are far less prohibitive. It’s where many – if not most – of the new generation of brokers are coming from. Even the National Insurance Brokers Association, once deeply suspicious of the AR model, named an AR as its broker of the year for 2015. Insurance Advisernet (IA) Managing Director Shaun Standfield joined the group in October after holding down several senior distribution and relationship management roles at QBE. He says brokers who haven’t looked seriously at the AR option may not understand what they’re missing. “I am in awe of the capability that has been developed here,” he told Insurance News. “The development of systems, people and culture over that time ensures our advisers can work on providing risk management advice to their clients safe in the knowledge they are working in a supportive environment backed by professional teams running compliance, professional indemnity programs, finance systems, a broking system and support in product placement and development.” His predecessor at IA, Adrian Kitchin, who is now the Managing Director of Suncorp-owned Resilium Insurance Brokers, says his recent experience is that “traditional” brokers are increasingly giving up their individual licences and moving across. He says the branded range of policies produced exclusively for Resilium combines the supportive strength of Suncorp “while giving our ARs choice in terms of the products they recommend to their clients”. insuranceNEWS

December 2015/January 2016

“This provides many independent licensees the comfort to ‘retire’ their licence while retaining their ability to properly serve their clients’ needs. This also allows them to have their succession plan guaranteed.” Trevor Howard, the General Manager of Melbourne-based United Insurance Group, says the AR model is ideal for brokers who are “struggling to find the time and retain the staff and systems required to maintain their licence responsibilities. The challenge for any AR group is to show that a ‘traditional’ broker can maintain revenue net of the AR margin, save time and get better market access than they otherwise would. That’s what it’s all about.” Tremayne West and Jeff Hollands, joint owners and directors of long-established AR group Westcourt, point out another littlerecognised benefit for a broker flying solo who moves across to a network: camaraderie, that comforting sense of trust and solidarity that tends to define AR groups. “Small licensees have administration and compliance burdens that don’t ever stop,” Mr West, who is also Chief Executive of Westcourt, says. “It makes sense to adopt the buying power and services that groups such as Westcourt offer. “There’s immediate access to the partners and our support services at the state level. That’s why more brokers are looking at the alternative that being an AR offers.” So what can brokers expect from the AR groups? Are they all the same? While their overall aims might be similar, it’s obvious the people who manage the AR groups are focusing on what makes them different. Mr Kitchin nominates a good AR network as “one that has a sense of ‘family’ while remaining focused on keeping the client’s best interests at its core”. Mr West tells Insurance News Westcourt is attractive to brokers because it doesn’t confine its members to a panel of insurers and other suppliers. “We’re a rarity – an openmarket broker group that doesn’t restrict underwriters or products.”

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insuranceNEWS

December 2015/January 2016

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New/old faces at the top THE AUTHORISED REPRESENTATIVE sector has experienced several management changes over the past six months as the networks concentrate on new strategies to enhance growth and profitability. Each recruit has been charged with increasing the presence of their company in the industry, with key objectives to attract more authorised representatives and improve processes and business relationships. Shaun Standfield (above left) joined Insurance Advisernet as Managing Director in October. He was formerly chief underwriting officer for QBE Asia. He was appointed to the Asia role in 2012 after serving five years as QBE’s General Manager of Australian intermediaries. Mr Standfield has more than 25 years’ experience in the insurance industry. He replaced lawyer Adrian Kitchin (centre), who became Managing Director of Suncorpowned Resilium in May. He was managing director of IA for four years, having joined the group in 2006 as general manager. Tremayne West (right) joined Westcourt General Insurance Brokers in April as Chief Executive and co-owner of the business with Jeff Hollands. He was formerly the chief executive of Perth-based mutual insurer Capricorn Risk Services and before that was group manager strategy, research and development at Allianz Australia.

But Westcourt nevertheless maintains strategic relationships with key supply companies. “You could sum it up in terms of the stakeholders,” United’s Mr Howard says. “Clients are looking for an organisation that demonstrates a level of support for their chosen AR. “Insurers are looking for competence that’s consistent at all levels of the group and transparency in terms of business relationships. “And the ARs are looking for a group that supports them in growing their business, solves their problems and satisfies their emotional need to belong to a group.” Mr Standfield measures his network’s effectiveness through what it does for individual members. “A good AR network has to be able to bring professional independent insurance specialists together in a way that allows them to develop their own businesses with the support of a professional framework that’s constantly listening and acting to their needs,” he says. “We also believe culture is crucial, not optional. So we ensure any new ARs are going to culturally fit into our network. “We provide our ARs and their clients with value, trust, advice and choice. We’re on a flight to quality – best practice and continuous improvement is at the core of what we do.” Critical to it all is the ability of the AR to comply with the group’s procedures and the licence requirements. Mr Standfield sees compliance as important but not necessarily as the most important. “Good governance isn’t optional. All of our advisers are monitored via a regime of practice reviews. They’re not so much audits as an opportunity to improve business practices.” insuranceNEWS

December 2015/January 2016

Mr Standfield says IA is “committed to investing in quality people who are experienced insurance brokers. We don’t allow ARs to ‘rent a licence’ and do their own thing.” Mr Kitchin agrees compliance is “one of the keys to running a successful AR network”, and says Resilium was recently independently audited and found to have “one of the highest standards of compliance in the industry”. Mr Hollands says compliance is “absolutely fundamental” to Westcourt’s continuing success. “We talk about it all the time. It’s the ticket to the game, because if you don’t have a licence you can’t play.” He says Westcourt is “investing heavily” in compliance systems. United Director Anthony Zambelli says compliance “is the cornerstone on which our business is built”. “These days much of the regulatory ‘compliance’ is invisible to the AR, and the greater and more visible emphasis is on professional standards as they apply to compliance. “Good broking practices that are consistent at all levels of United are just as important in terms of maintaining our overall reputation with insurers as well as clients.” With the continuing growth of AR groups, how will they evolve from here? Can we expect them to become an even greater influence on the role intermediaries play in the distribution of commercial insurance? Will the vagaries of regulation force them to become more like each other? Will there be more AR groups? The managers Insurance News interviewed are confident the AR channel will continue to grow – and competition for the best ARs available may be the focus of the battle. Where the ARs of tomorrow will come from is equally intriguing.

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“We’ve found our ARs can no longer depend solely on the strength of their own book, or even being part of a cluster group.” The challenges of 2016 Professional development poses one of the biggest challenges to authorised representatives (ARs) and all other brokers, according to AR network executives. Asked to nominate the major issues and challenges faced by ARs, they identified education as both. One executive called for “one clear avenue for professional development”, while another says ARs “need improved access to quality education, especially for those in remote locations or that operate in dual or sole trader situations. Hopefully the changes announced by [the Australian and New Zealand Institute of Insurance and Finance] and [the National Insurance Brokers Association] will open the door for a stream of educational material to come through. “That sort of material should include education in new and emerging markets, product-specific modules, business development, placement and claims.” Other issues and challenges the AR networks expect to face in 2016 include: • Talent, technology and innovation • The state of the market and the wider economy • Underinsurance – “an issue that needs addressing by all stakeholders, including governments” • The need for investment in disaster mitigation • The emergence of disruptors to the advice model • The delivery of systems and processes that support brokers. In the words of one executive: “We need to be nimble and develop solutions that blend technology with personal relationships, so clients truly appreciate first-rate risk management advice.”

IA’s Mr Standfield says his company “will grow strongly [as] we seek to attract new ARs that will add value to the whole group. They must be an excellent fit culturally. “Interestingly, we find most new ARs are those that have been recommended to us via our current network of advisers.” He says networks will continue to evolve, driven by the changing needs of the ARs. Westcourt’s Mr West says growth is “an absolute necessity. I hear some people say they don’t want their businesses to grow, but everyone needs to grow. “The Westcourt model is built around the concept of growth. Why else would we invest so much in professional development? Increased professionalism is how you grow.” United’s Mr Howard sees a growth not only in the number of ARs, but also in the number of groups entering the market. “There will be more ARs popping up,” he says. “Some will develop niche offerings and target the ARs who best suit their business models. And mergers and acquisitions will be the only way for some operators to build scale.” Mr Kitchin hints at the increasing level of competition with other groups for qualified and experienced ARs by revealing Resilium is planning an innovative approach to recruitment. “We definitely have plans to grow our network next year and have almost completed our planning around an offering that will be a market-first,” he says. “We will be looking for the best and the brightest insurance professionals with a desire to run their own business to join us in 2016.” He tells Insurance News one of the biggest issues any prospective AR faces is the ability to generate income from day one. “We’ve solved that problem with an innovative approach we are calling ‘business in a box’ that provides them with a portfolio and income from day one.” He says Resilium will have more details on the initiative “early next year”. In the meantime, ARs – like all intermediaries – are suffering through a soft commercial lines market and hoping for a better year ahead. Low rates and high levels of insurer competition inevitably result in higher numbers of clients quitting their established insurers to pick up lower premiums. But Mr Kitchin says Resilium ARs have maintained high retention rates throughout the soft market, thanks to long-established client relationships and ongoing engagement with clients. “We’re now entering a new phase where we will be directing considerable resources to generating sales and marketing opportunities,” he says. “As a result, any [further] softening in rates will be more than offset by an increase in sales.” insuranceNEWS

December 2015/January 2016

While Mr Standfield sees the IA philosophy of “advice not price” helping his ARs through the soft market, he is confident they are “spending their time productively on client-related value-added activities”. However, he concurs with a widely held view that more needs to be done in the development of a broader range of insurance products. He says product development is now a strong focus for IA following the recruitment in October of former Steadfast IRS chief operating officer Harry Georgoulas as General Manager Development. Mr Howard believes the soft market has “tested traditional broking methods”, but says United’s ARs have coped well and have “retained clients and achieved some modest growth”. “It’s put a greater emphasis on efficient systems and has led to a lot more work to achieve the same result,” he says. “We’ve found our ARs can no longer depend solely on the strength of their own book, or even being part of a cluster group [United is a member of Steadfast]. We are often up against others within our own cluster group. We’ve had to increasingly call on the strength of our own relationships with underwriters to get the right outcomes for our ARs.” Mr Howard says there is already more competition for many accounts, “particularly accounts with some wriggle room. We’re finding many brokers, including the internationals, are combining co-operative underwriting terms with sacrificed earnings to win business.” Insurance News also spoke to insurance company leaders who feel the soft market has gone on long enough. They say rates in some commercial classes will have to rise in 2016 because margins have eroded too far. As products – and clients – are exposed to greater risk appetite standards, some of the more competitive policy features will be removed, and the task for brokers of all shades is unlikely to get easier. A market featuring rising premiums and tougher policy conditions is always going to be even more competitive. ARs will find themselves relying more on their groups’ relationships with underwriters and associated product suppliers as they move ahead. But just as important as the strength of the groups’ reputations will be the “personal brands” of the ARs. As Mr Standfield sees it, that “personal brand” – the reputation and trust ARs have built with their clients – coupled with strong access to the right products is ultimately what makes the difference between business growth and standing still. “I respect the fact that each AR network has its own strategy, but our experience in assisting our ARs to grow their businesses backs up my belief that the ‘personal brand’ * is ultimately what works best.”

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aturday morning, 8.15am. What do you do when one of your longest serving customers has a rolled B-double spilling 40 tonnes of liquid tallow into a creek that runs into the Brisbane River? When you’re Rob Wass, Manager of NTI Accident Assist, you go out and buy an inflatable boat. “Having worked at NTI for over 27 years, I’d thought I’d seen everything,” Rob said, “but I was wrong. This was a real disaster. With the driver unharmed the focus was on cleaning up the site, and fast.” “The young woman at NTI Accident Assist who took the call was exceptional,” explained Julie Russell from Russell Transport. “Before we knew it, all the necessary emergency services and environmental protection people were on site, along with NTI themselves.” Rob explains further. “We had disposable oil booms in place to stop the tallow spreading into the Brisbane River, but because the tallow had solidified and was breaking up, we needed to find a way to direct it towards the vacuum sucker trucks”. Ken Russell, Julie’s brother and fellow company director, was keen to get in on the action – he too went out and bought a boat. “They were out on the water with poles pulling the solidified tallow towards the sucker trucks,” says Julie. “I guess I shouldn’t have been surprised about the hands-on role NTI took. They’ve always been great, but it was above and beyond what I expected. They managed everything – the clean up, the police, the media - they even arranged for part of the road to be resurfaced.” It’s certainly an event no one will soon forget. And that’s exactly why R.B. Russell Transport has been with NTI for longer than they can remember. Visit truestories.nti.com.au

Insurance products are provided by National Transport Insurance. NTI Limited (ABN 84 000 746 109) (AFSL 237246) is the Manager for National Transport Insurance, an equal-partner joint venture of CGU Insurance Limited (ABN 27 004 478 371) (AFSL 238291) and AAI Limited trading as Vero Insurance (ABN 48 005 297 807) (AFSL 230859). Each insurer is only responsible for its 50% share of the policy.

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s e n o h p t Smar rule

gly nd seemin a re e h w y r e stry They’re ev rance indu u s in e th but in iness tool s u b irresistible, l a ti n e ss come an e they’ve be te Hanley By Ka

OLD MOVIE SCRIPTS HAD SATED LOVERS reaching across to the bedside table for that post-coital cigarette. Now they reach for their smartphones. The insatiable need for some smartphone users to constantly check to see if anyone has messaged them, or review their Facebook page, or download their emails, can seriously intimidate the uninitiated. Collectively, Australians check their phones 440 million times a day. So pervasive has the technology become that the 2015 Deloitte Consumer Survey estimates eight out of 10 Australians have a smartphone, and 80% of those cannot wait more than an hour after waking to check them. Australians are increasingly using their phones to chronicle and organise their lives, for taking photos, checking out the weather, ordering groceries, transferring money and video-calling with overseas friends. “The smartphone has become much more than just a means to communicate – to call, to message, to link socially or in business – it has become the personal remote for life and the consumer is in control... for now,” says the Deloitte Customer Survey. With apps like Uber you can now order your car, pay for it and track it in real time using your smartphone’s GPS. Then you can ask yourself whether you feel like some calming Bach or a rev up with AC/DC because you can even choose the soundtrack for your Uber trip across town – all without uttering a word.

So what does this mean for insurers? In an industry notorious for being riskaverse, insurers have been slow compared to other businesses to jump onto the digital bandwagon. Nevertheless, they are beginning to embrace what smartphones bring to their customers, brokers and their own bottom line. If your Uber driver crashes the car he can now use his smartphone to take photos of the crash and upload an insurance claim immediately via his insurer’s app. Allianz General Manager Strategy and Transformation Nagib Kassis says smartphones, as part of the Internet of Things, are fast becoming the interface for a number of other “things” such as wearable technology, cars, the connected home, etc. He sees smartphones as an exciting opportunity for the insurance industry in the active monitoring of assets and helping to address needs more quickly and accurately. An example of such potential is a current trial in Perth of a small but powerful GPS device that sends an alert to your smartphone to tell you if your car has left a

insuranceNEWS

December 2015/January 2016

“geofence” – a virtual barrier – of 200 metres from where you parked it. You can then track in real time where the thieves are taking your car, and call the police, who can use their own system to track and recover your vehicle without the need for a dangerous police pursuit, thereby potentially saving lives and money. Smartphones are increasingly playing a useful role in car insurance. “Gone are the days when a pen and paper were essential items of a vehicle’s glovebox – Generation Y would most likely ask you what a glovebox is,” Mr Kassis says. “Your smartphone has quickly emerged as your best friend after an accident. It allows you to capture images of the incident, the parties involved, licences and the photos themselves can provide geographic location information. “Having the ability to capture all pertinent information from the one device and then using that same device to submit your notification of an incident are no longer a ‘nice to have’ – they’re an expectation.”

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ir phones e h t t a k o “People lo and the y a d a s e 100 tim on’t sit d s t n e li c r ou majority of up with p e e k o T . s at desktop ave no h s r e k o r b e the world w bile.” o m o g o t choice but

It won’t be long before many more drivers will have the increasingly affordable telematics – a black box for the car – that will interface with the driver’s smartphone and instantly send the physical details of an accident and all the circumstances surrounding it to the insurer. IAG Corporate Communications Manager Natalie Pennisi says emerging telematics and mobile technology “will change our ability to understand risk, and in turn price to an even more granular level than ever before”. And Suncorp says it receives about 30% of its website traffic via smartphones and tablets. Now the insurer is taking a “responsive design” approach to all the latest digital assets. “This means that the customer will get the right experience on whatever device they choose to interact with us on, including desktop, tablet and mobile,” Suncorp Senior External Relations Adviser Angela Wilkinson tells Insurance News. Suncorp also recently launched AAMI Access App alongside a fully responsive website allowing customers to buy and manage their insurance anywhere, anytime. Ms Wilkinson says all the insurer’s “online purchase journeys” are optimised for mobile. Suncorp also has purpose-built mobile apps that allow customers to manage their policies, lodge claims and track progress of claims directly. QBE is about to launch a new website that improves its customers’ experience on smartphones, says Head of Digital for Australia and New Zealand Marcus Marchant. “We see smartphones as being an increasingly important element of the digital landscape and have seen increasing volumes of our customers interacting with us via smart devices.” He says changes to how QBE services its customers will focus heavily on smartphone technology, but such changes must be developed “using customer-centric design principles”. IAG Commercial Chief Executive Ben 48

Bessell says smartphones present a great opportunity for intermediaries too. “It’s extremely important for us and for brokers that we look to take advantage of technology and innovation opportunities by continuing to build our digital capability and digital integration.” For example CGU’s uSurvey app allows brokers with farm or commercial clients to run through each of their risks like fences, livestock, sheds, theft cover, motor vehicles, etc, in the presence of the client. The information is recorded straight into the app and the geo-location technology lets brokers capture an exact site location with one single tap. CGU says uSurvey delivers immediate benefits to broker partners by helping their underwriters better understand a client’s individual risk and respond faster. Emma Tyler, the Marketing and Community Supervisor at Victoria-based Adroit Insurance, agrees that smartphones have a huge role to play in brokerages. She says all their brokers use smartphones in their day-to-day business. “People look at their phones 100 times a day and the majority of our clients don’t sit at desktops,” she tells Insurance News. “To keep up with the world we brokers have no choice but to go mobile.” Ms Tyler says it gives the client the ability to “steer the relationship” and provides an “omni-channel” approach. Adroit is close to launching its own accident claims app that will link to all policy documents and their blog, “Adroitness”. Not only are smartphones used to facilitate claims and client relationships through texting and social media, but consumers are starting to use them to actually purchase policies. “We have a significant number of insurance purchases coming through smartphones,” Allianz’s Mr Kassis says. “Australian consumers have moved from real-time transactions to what I call ‘nowtime’. We need to be able to do what they want now, and they must have the choice of how they want to interact.” He says smartphones could be used to sell “any line of insurance”, but companies will have to cut down on how they present the product to avoid a “clunky experience” insuranceNEWS

December 2015/January 2016

because smartphone screens are small and people’s fingers are comparatively big. “But the product itself doesn’t need to change,” he adds. Mr Kassis says insurers must keep up with the consumer’s preferred method of doing business. After all, he changed banks because he couldn’t do what he wanted to on his smartphone. “When do I have time to go into a bank branch? If I can’t get it on my mobile I’ll ask why I’m doing business with them.” But there are complicating factors in using smartphones to buy insurance. For example, there’s the question of adequate product disclosure – the smartphone gives a whole new meaning to the term “reading the fine print”. But Mr Kassis says there’s no real problem in that. Like any online transaction the terms and conditions pop up and people either agree or disagree with them. “At the end of the day we have a duty to make people aware of the conditions of the product,” he says. “We also send electronic copies of product disclosures to customers’ emails.” Smartphones are also being used to facilitate communication between insurance company staff. Allianz employees use their own smartphones for company emails, while IAG says its relationship managers use their smartphones and tablets as mobile offices. “It would be hard to imagine how they could do their jobs without them,” Ms Pennisi says. But she cautions there are downsides to the smartphone revolution. “With this connectivity also comes a new class of risks around cyber liabilities for large corporates,” she says. “While technology is reducing risks in some areas like driving accidents, it can also increase them in other areas like liability.” But getting back to smartphones and lovers… There was a case in 2011 of a woman who was injured when a motel light fitting fell on her while she was having sex with a colleague. She later became embroiled in a legal battle with her employer after she claimed workers’ compensation for the injuries she incurred. If that happened today she might just reach for her smartphone and make a con* venient post-coital claim.

INMAG DEC 15_page layouts 8/12/2015 6:30 pm Page 49

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An explosive mix The Tianjin blast was caused by a relaxed attitude to safety. Now insurers are paying for it By Terry McMullan

insuranceNEWS

December 2015/January 2016

insuranceNEWS

December 2015/January 2016

Reuters

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“Acetylene gas formed and at 11.30pm ignited, causing an initial blast measured by seismic instruments as equivalent to an earthquake of magnitude 2.3.” CHINA IS A DIFFICULT PLACE for any insurance company to do business, and the Tianjin blast in August illustrates just how official corruption and relaxed attitudes to safety can turn difficulty into disaster. The Tianjin event will probably be recorded as the largest insurance loss of this year, with global (re)insurers noting the impact of the man-made catastrophe in their third-quarter results. Tianjin is the major port for Beijing and northern China. It is the country’s fourth-largest city, with a population of about 15.2 million. The port sits on 120 square kilometres of land. It’s the 10thlargest container port in the world and the fourth-largest in terms of cargo throughput. It houses many of China’s largest petrochemical and refining plants. Some 1.4 million cars were imported into China last year, and Tianjin handled about 40% of them. Like so much of China, the port has grown spectacularly in recent years, reflecting the swift pace of the country’s industrial revolution. But planning and 54

control of the port area’s many facilities show signs of, at best, not keeping up and, at worst, official short-sightedness. In a busy section of the port area is (or more correctly was) Ruihai International Logistics, a 46,000-square-metre complex of warehouses handling hazardous chemicals, flammable and corrosive materials and oxidising agents. The company’s licence to handle hazardous chemicals was renewed in June. Media reports say Ruihai International Logistics had previously operated under a temporary licence that expired in October last year, meaning it operated unlicensed for eight months. The site is about 600 metres from apartment buildings, which media reports say is against government regulations. The area is densely populated, with some 5600 families living within 1.5 kilometres of the chemical storage facility. Apartment building developers in the area have since said they were unaware of the hazardous chemicals storage facility. No one told them when they obtained their building permits. insuranceNEWS

All in all, the situation was a volatile cocktail of hazards if anything ever went wrong. And on the evening of August 12, it did. Shortly before 11pm fire crews responded to an alarm at the Ruihai International Logistics site, where a warehouse was ablaze. It has not been established exactly what was stored in the building – most records were destroyed – but it was normally used to hold stores of calcium carbide, sodium nitrate and potassium nitrate. Reports say the firefighters were unaware the site contained dangerous chemicals, and used water to keep the fire from spreading. Calcium carbide reacts with water to create highly explosive acetylene. Experts have since suggested that acetylene gas formed and at 11.30pm ignited, causing an initial blast measured by seismic instruments as equivalent to an earthquake of magnitude 2.3. This first explosion was followed 30 seconds later by a much larger explosion – about 20 times larger. The force of the second

December 2015/January 2016

explosion was cataclysmic. It was so large that a weather satellite in geostationary orbit above Japan recorded the flash. This was followed by eight more explosions. But it was the second blast that did most of the damage. With a force estimated to be equivalent to 21 tonnes of TNT, it shot fireballs hundreds of metres into the sky. The initial two blasts caused 173 deaths and 797 injuries. Many injuries were suffered by apartment residents whose windows blew in. Some 17,000 homes were damaged, and more than 6000 residents were forced to evacuate. Of the 1000 firefighters on the site, 97 died. Eleven of the dead were police officers. Eight people remain missing. The port area around the Ruihai International Logistics site – which is now just a large hole in the ground – was devastated. Stacks containing thousands of shipping containers were blown over, with some thrown through the air by the explosion. Many caught fire. Buildings were destroyed and others damaged so badly they have been condemned. Beside the chemicals facility was a large vehicle storage area, where up to 12,000 newly imported vehicles were destroyed by fire or badly damaged. The official reaction was slow and clumsy. Censors cut unofficial discussion of the event from China’s internet by scrubbing any post containing the words “Tianjin” or “explosion”. But when rumours began to circulate that the owners of

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INMAG DEC 15_page layouts 8/12/2015 6:30 pm Page 56

Reuters

The most expensive man-made loss since the 2010 oil spill in the Gulf of Mexico: Battered containers litter the area behind a shattered port building in Tianjin

Ruihai International Logistics had close connections in high positions in Beijing, officialdom reacted. Police placed former Tianjin vice-mayor Yang Dongliang under investigation. During his 11 years as vice-mayor he had issued an order to loosen rules governing the handling of hazardous substances at the port. Ironically, Mr Yang is now China’s most senior work safety official. Twelve more people, including Ruihai International Logistics’ Chairman, Vice-Chairman and three other managers, were arrested. 56

Initial estimates of the insured losses were between $US833 million and $US1.6 billion. Later estimates have doubled to about $US3.3 billion as insurers begin to factor in the likely costs of pollution and contamination cover, plus remediation and supply chain disruption issues. Comments from London market sources suggest the Tianjin event could be the most expensive man-made loss since the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. Whatever the final costs are for insurers and reinsurers – insuranceNEWS

and the complexity and time involved in tracing, detailing, documenting and assessing the contents of thousands of damaged or destroyed containers is daunting – the Tianjin disaster is affecting already compressed bottom lines. While most of the insurance claims will be borne by Chinese insurers and their mainly global reinsurers, Zurich was the first to reveal the pain being experienced when it withdrew from a £5.6 billion bid for British insurer RSA, citing as a major reason a $US275 million exposure to the Tianjin event.

December 2015/January 2016

At least 18 reinsurers have reported heavy losses in their third-quarter results. For example, Swiss Re says its losses will be about $US250 million, Berkshire Hathaway about $US130 million, XL Group $US100 million, PartnerRe about $US70 million, and Asia Capital Re $US26 million. Reports from the London market say Chinese insurance companies have been slow to post their exposures and losses, and many more millions in losses are likely in coming months. Of the 17,000 Tianjin households affected by the explosions, more than 9000 have signed agreements to settle their damages claims. Some have sold their damaged homes to developers who offered them about 130% of the original purchase price. Others have accepted local government offers of free repairs. But the underlying problem – official corruption that allows unsafe facilities to exist dangerously close to residential communities – remains one of the country’s biggest problems. Last month Greenpeace Asia reported that two other chemical storage facilities in the Tianjin port area – one of them much larger than the Ruihai International Logistics complex – are operating close to a primary and a nursery school. Which makes you wonder: if vital laws and regulations designed to keep people safe can be changed or ignored by Chinese officials for whatever reason, how many more Tianjin disasters might be quietly simmering in cities across the * country?

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That sinking feeling Coastal cities around the world are slumping under their own weight, posing an unseen threat to property and infrastructure By Andy Swales

THE WORLD IS NOW WELL AWARE OF the threat posed by rising sea levels, even if the global response still leaves a lot to be desired. But there is another side to the equation, a double whammy that poses a threat to communities from New Orleans to Perth – sinking cities. Major urban areas around the world are subsiding at an alarming rate, giving way under the weight of ongoing development and sprawling populations. In a report presented to the European Geosciences Union General Assembly last year, scientists from the Deltares Research Institute in Utrecht, Netherlands, warned: “In many coastal and delta cities land subsidence now exceeds absolute sea level rise up to a factor of 10. insuranceNEWS

December 2015/January 2016

“Without action, parts of Jakarta, Ho Chi Minh City, Bangkok and numerous other coastal cities will sink below sea level. “Land subsidence increases flood vulnerability – frequency, inundation depth and duration of floods – with floods causing major economic damage and loss of lives.” The world’s fastest-subsiding city is Jakarta, which is sinking at up to 10cm a year. Some of its communities already sit below sea level. The city of almost 10 million people is forecast to subside almost two metres further by 2025. Ho Chi Minh City is sinking at 8cm a year and Manila up to 4.5cm a year. Global sea levels, by contrast, are rising at about 3mm a year. Deltares says subsidence affects roads and transportation networks, hydraulic infrastructure – such as river embankments,

Sinking 10cm a year: a Jakarta mother keeps her daughter and groceries high and dry as she leaves a shopping mall in February. The city’s gradual subsidence is increasing the incidence of flooding

sluice gates, flood barriers and pumping stations – sewerage systems, buildings and foundations. “The total damage worldwide is estimated at billions of dollars annually.” The scientists say the main cause of such subsidence is “excessive groundwater extraction after rapid urbanisation and population growth”. “In addition, coastal cities are often faced with larger natural subsidence because they are built on thick sequences of soft soil.” Oil and gas extraction can also play a role. “Sinking cities” feature in Swiss Re’s latest Sonar report on emerging threats, rated a medium-impact risk over the next three years. “While the sea level rise due to climate change has been well advertised and also calculated for the world’s coastal mega-cities, soil subsidence is often underestimated and

probably also not adequately factored into many natural catastrophe models and property insurance portfolios,” the reinsurer says. “Soil subsidence and sea level rise also often happen at the same time, leading to increased coastal flood risk. Human-induced coastal subsidence is particularly strong in urbanised river deltas with soft sediments.” Swiss Re warns of damage to buildings, foundations, infrastructure and subsurface structures such as sewerage and gas pipes, disruption of water management and coastal floods. It flags an impact on property and casualty insurance lines “with potential for large claims – but given that damage and erosion are a consequence of groundwater mismanagement happening over several decades, it could be challenging to assign responsibilities”. insuranceNEWS

December 2015/January 2016

Reuters

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News Ltd

Going down the mine: council workers restore water and power to a house in the NSW town of Swansea Heads in 2014, after the front garden was lost in a sinkhole. An old coalmine shaft has been blamed, prompting fears more land in the area could collapse in the same way

The pitfalls of underground mining IN NEW SOUTH WALES, A DIFFERENT kind of subsidence is having a more immediate – and often more dramatic – impact on property owners. In the Hunter Valley and other regions of the state, the problem is not water extraction, but coal. Mineworks – some of them dating back centuries – are undermining homes and infrastructure in communities including Newcastle. Philip Pells, a civil engineer and consultant on subsidence matters, says the Newcastle area was the site of much mining in the early days of European settlement, and properties have subsequently been developed above known and unknown excavations. “The areas most affected are areas of Newcastle where mining occurred 100 years ago… the new areas of mining up in the Hunter Valley… and then south of Sydney around Appin, Thirlmere, Picton, Mittagong, where there’s active new mining occurring under people’s houses,” he tells Insurance News. Damage can range from cracks in walls to large sinkholes opening up under buildings and land. Compensation comes from the Mine Subsidence Board, a government authority unique to NSW, which administers a fund drawn from mine operators’ contributions under the Mine Subsidence Compensation Act. “I don’t think any household insurance… covers mine subsidence damage, and so the only compensation people can get in NSW is to demonstrate [to the board] that the damage that’s occurred to their house is by mine subsidence – and that’s easier said than done,” Dr Pells says. He's right. LMI Group’s Head of PolicyComparison Peter Jenkins says he

can find only two policies "that might cover mining subsidence”. "These policies were aimed at high net worth clients,” he tells Insurance News. The board has designated certain areas as Mine Subsidence Districts, where construction and renovations are restricted. Dr Pells was called in to advise on a case at Gillieston Heights, a suburb of Maitland, that settled recently after a legal wrangle lasting nearly 10 years. In 2006 a couple built a house on land they believed was safe. The next year, “the guy got out of the car near his front door... and there was a five-metre-diameter hole of unknown depth. The mine entry was directly under the house they had built.” The couple’s long fight for compensation involved the board, which said it was notified of the issue too late, and subsequently the local council. Dr Pells says this legal battle and others like it expose holes in the Mine Subsidence Compensation Act, meaning the legislation “needs to be revisited and made more effective”. “They left these loose ends – whether a Mine Subsidence District covers all areas of old mining. And secondly, the Act only covers improvement to the property, so a sinkhole in your front lawn, making your property uninhabitable because it’s so dangerous – there’s no compensation for that. “Thirdly, the onus is on the owner to prove the damage is due to mine subsidence. Those three details make what is otherwise a very good idea less than terrific.” He says under the current model, there will be “continuing arguments between landowners and the Mine Subsidence Board, or landowners and homebuilders”.

insuranceNEWS

December 2015/January 2016

“Tokyo... subsided more than four metres from 1900-2013 at rates of up to 24cm a year. Now it is stabilised”

The solution for authorities in sinking cities, according to Deltares, is “a major rethink” of urban planning, including “an integrated approach to manage subsidence and to develop appropriate strategies and measures that are effective and efficient in both the short and long term. Urban groundwater management, adaptive flood risk management and related spatial planning strategies are just examples of the options available.” The blueprint is provided by Tokyo, which subsided more than four metres from 1900-2013 at rates of up to 24cm a year. Now it is stabilised, with no further subsidence expected to 2025. “After taking regulatory measures on restriction of groundwater use in the early 1960s, the groundwater levels increased

INMAG DEC 15_page layouts 8/12/2015 6:30 pm Page 61

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INMAG DEC 15_page layouts 9/12/2015 3:48 pm Page 62

“A report from Curtin University in October showed groundwater extraction in Perth has caused Fremantle to sink at 2-4mm a year.”

Average land subsidence in coastal cities Jakarta Ho Chi Minh City Bangkok New Orleans Tokyo West Netherlands

1000

2000

Subsidence in mm (1900-2013)

3000

4000

5000

Estimated subsidence until 2015 in mm

Source: Deltares 2014

insuranceNEWS

December 2015/January 2016

again and after about 10 years the subsidence was stopped,” Deltares says. Australia is not immune from that sinking feeling. A report from Curtin University in October showed groundwater extraction in Perth has caused Fremantle to sink at 2-4mm a year – leading scientists to reassess previous measurements for sea level rises in the Perth Basin. “If the land is subsiding, then the rate of sea level rise measured by a tide gauge appears to be larger than it actually is, which seems to be the case at Fremantle,” researcher Will Featherstone says. “However, this doesn’t mean that we are at a decreased risk of sea level rise. Instead, we could be at an increased risk, because the * land itself is sinking.”

INMAG DEC 15_page layouts 8/12/2015 6:30 pm Page 63

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BYOD An idea whose time has come, and with it some headaches NOT SO LONG AGO IT WAS THE NORM THAT AN EMPLOYER would provide an office worker with a desk, computer and telephone. Today, “hot desking” workplaces no longer provide employees with a permanent desk, and increasingly company telecommunications and digital equipment is optional if employees prefer to use their own. BYOD – Bring Your Own Device – enables employees to use their own devices to access emails and corporate data. It’s a development that also has advantages for employers. Even if they don't keep pace with the rapidly changing pace of technology, employees almost inevitably will. So it helps companies keep their technology costs down while boosting productivity, innovation, employee engagement and work-life balance. That’s on the plus side. Less desirable consequences of BYOD include compromised IT security and diminished productivity as employees while away company time on social media and personal pursuits. Like any aspect of the workplace – even when the “workplace” is wherever the employee happens to be – BYOD has to be well managed to realise its full potential, but also to avoid its pitfalls. Employee mobility is a “behaviour” that makes no distinction between work and non-work time, which means ignoring BYOD as a management issue, or trying to stamp it out, is simply unrealistic, says London-based analyst in enterprise mobility management Richard Absalom. “This behaviour is a fact of life for organisations everywhere, regardless of their stance toward it: it is happening whether they like it or not,” Mr Absalom says. BYO devices are largely complementary to those provided by employers: around 30% of employees who use their own devices use them as primary working tools, according to Ovum. With 40% of Australians believing that their personal smartphone contributes to their work productivity, EY technology partner David McGregor says it was always going to be an “obvious next step” that people who are devoted users of smart devices in their personal lives would “progressively integrate” those devices into their work lives. Mr McGregor says it’s something companies need to come to terms with – and their businesses will be the better for it when they do. “The connectivity, mobility and flexibility gains that become available for organisations and their people when they can access systems, databases or other professional applications via mobile devices in real time have the potential to transform business for this age,” he says. “Organisations that seize this opportunity now will reap the rewards of a digitally connected, high-performing and engaged workforce.” Allianz infrastructure manager Jonathan Buckley agrees that the BYOD trend is only going one way. Allianz has so far limited the devices that employees can bring to the workplace to smartphones and tablets to access facilities such as calendars and scheduling. “I wouldn’t say that we’ve really embraced it but we’re definitely on the journey. 64

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December 2015/January 2016

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“I’m sure there are a lot of organisations that would be shocked to know how many people had used a USB stick to copy data so they could carry on working at home. It may be done with the best intentions, but it is very dangerous.” “We’ve dipped our toe in the water at this stage, but I’m sure it’s going to expand wider and wider [at Allianz],” Mr Buckley tells Insurance News. “People, especially the younger generation, want the choice to use whatever device they want at work and the technology they’re comfortable with.” The introduction of employees’ smartphones, tablets and other devices into a company’s technology mix necessarily means the introduction of potential information security risks into the business; that’s a risk heightened with the introduction of mobile apps (BYOA). Ebix Australia Managing Director Leon d’Apice says that despite the enthusiasm for BYOD, companies are failing to recognise the information security risks they are introducing into their business. “Little is being done to create security policies that ensure protection against malware, or lost or stolen company or customer data.” According to an international survey conducted by Dimensional Research, 95% of IT and security professionals say they face challenges with the security of BYOD. The survey also indicates that employee behaviour is “a significant factor in information security”. Given all that, Mr d’Apice says Ebix is a strong supporter of BYOD. “Our staff can use whatever device they want to access facilities on our network, and we are expanding what they have access to. “Security is the biggest issue, but we have systems in place and general education covering everything from the misuse of data to privacy. “In this day and age you are more vulnerable to cyber attacks, but we lock down our networks and applications pretty well.” Mr d’Apice believes it is better to embrace BYOD and have the correct systems and policies in place, than risk unauthorised use. “It is better to acknowledge it, because the last thing you want is people going through the back door. “I’m sure there are a lot of organisations that would be shocked to know how many people had used a USB stick to copy data so they could carry on working at home. “It may be done with the best intentions, but it is very dangerous.” Mr d’Apice believes insurance brokers could gain more than most from BYOD. “Brokers should be out with clients and this makes it possible. Using your own device just increases the convenience. “Given the overall development of technology and globalisation, customers increasingly expect their broker to have access to an array of information at all times no matter where they are. Enterprise apps can provide this.” Mr d’Apice says a new report from MarketsandMarkets predicts that enterprises will spend more than three times as much on enterprise mobility technology and services in 2019 as they did in 2013. “Mobile apps can provide a number of advances to companies, including employee engagement, improved communication, easier access to information and increased efficiency,” he tells Insurance News. insuranceNEWS

“So even though employees are embracing the use of mobile apps, most organisations are yet to realise the potential that mobile apps have within a work environment. “These should be an integral element of any insurance business’ software suite. Their benefits go beyond the employee and their productivity, and extend to their customers. “Given the overall development of technology and globalisation, customers increasingly expect their broker to have access to an array of information at all times no matter where they are. Enterprise apps can provide this.” He says it’s important for companies to keep up with technology to ensure business growth and project a professional, technologysavvy image. “But it’s essential this is also reflected in their security measures. We know how important security is to our clients, and we’re confident in the security of our mobile apps, Winbeatnow and CBS Mobile. “We use industry-standard SSL encryption, an advanced level of security used by banks and other financial services”. He recommends that businesses looking to introduce mobile apps to their workplaces should ensure the apps have security built into the software. Mr d’Apice says managing security and privacy concerns is “fundamental” for successful deployment of BYOD and mobile apps. “You can’t take security for granted in today’s IT environment. It’s fundamentally important to ensure any mobile strategy includes a sound, secure security layer.” He points to the Dimensional Research survey finding that the number of personal devices connecting to corporate networks is on the rise. “With the number of benefits to be gained from mobile apps, employees will continue to use them in the workplace whether it’s controlled or not,” he says. “Without proper mobile security policies in place, companies continue to put themselves at risk.” That point is underscored by a Lloyd’s report examining the risks of BYOD, which says 47% of British workers use their own devices for work purposes, but less than three in 10 have received any guidance on how their devices should be used. The UK Information Commissioner's Office has issued recommendations on some of the risks organisations must consider when allowing personal devices to be brought into the workplace. These include being clear on the types of personal data that can be processed on personal devices; registering personal devices with remote locate-and-wipe facilities; using strong passwords to secure personal devices; and using public cloud-based sharing and public backup services with extreme caution. And new European legislation proposes fines of up to €100 million for failing to adequately protect sensitive information. Lloyd’s says the regulation will probably boost demand for cyber insurance, particularly third-party cover for the costs of notifying and compensating customers in the aftermath of a data breach. As Lloyd’s notes in its research paper: “With every phone containing a camera these days and data sticks becoming so small and transportable, industrial espionage has become easier than ever.” *

December 2015/January 2016

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Year in review

Big deals and burning issues We look back on a year dominated by consolidation, consultation and the ominous approach of the ‘super-El Nino’ By Andy Swales

IN EARLY JANUARY, INSURANCE NEWS was awoken from its post-festive slumber by the roar of big beasts coming together. In the space of two weeks, news broke of a $US2.79 billion merger between XL Group and Catlin Group, then an $US11 billion tie-up between Axis Capital and Partner Re. The deals were tipped to create the world’s eighth-largest and fifth-largest reinsurers respectively, and fired the starting pistol on a year of consolidation – particularly in reinsurance, where a flood of alternative capital and persistent soft pricing was forcing midsize players to seek safety in scale. The following month, while surveying the reinsurance landscape, Insurance News wrote: “Diversification – as well as size – is now seen as the key to survival, and the long-expected increase in mergers and acquisitions is starting to play out.” Closer to home, insurers were counting the cost in January, as the bill from November storms in Brisbane passed the $1 billion

mark, and bushfires that swept through the Adelaide Hills early in January prompted claims worth more than $33 million. February brought Australia’s second catastrophe of the year: Cyclone Marcia. The Category 5 storm lashed the coastal towns of Yeppoon and Rockhampton, causing floods and cuts to power and water supplies. “I am 61 and I have never seen anything like this here,” Peter Peirano from Piranha Insurance Brokers in Rockhampton told Insurance News at the time. “We don’t get many cyclones in Rocky… you have to go back to the 1940s for the last one.” Claims from Marcia would eventually pass the $500 million mark. In March IAG signalled its intentions in Asia, raising its stake in Indian joint venture SBI General Insurance from 26% to 49%, following passage of a long-delayed bill to let foreign companies increase their maximum stakes in insurers.

insuranceNEWS

December 2015/January 2016

News Ltd

Waiting for Marcia: Gold Coast residents watch seas rise and clouds gather as the depleted remains of Tropical Cyclone Marcia head southeast after causing massive damage in central Queensland in February

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“April was a busy, brutal month for Mother Nature: hailstorms in Sydney on Anzac Day and other severe storms across New South Wales would cause about $1 billion of economic losses.”

News Ltd

Meanwhile, then assistant treasurer Josh Frydenberg addressed what would prove to be one of the hottest topics this year: insurance affordability in cyclone-prone northern Australia. He told an Insurance Council of Australia seminar that affordability in north Queensland was “a critical issue for the Abbott Government”. He also flagged industry consultation on his much-derided plan to open the personal lines market to unauthorised foreign insurers (UFIs), but that idea was soon on the backburner. Instead, we got something a little more encouraging: the Northern Australia Insurance Premiums Taskforce, set up to consider creating a government-run reinsurance pool or mutual cyclone insurer in the region to reduce home, contents and strata premiums. It followed years of lobbying by federal MP Warren Entsch, who said securing the review was “about going down every avenue to prove that we don’t have access to affordable insurance here in Far North Queensland – which is, in effect, market failure”. By April, another of Canberra’s bids to tackle affordability in north Queensland was up and running: the government-run comparator for home and contents cover. It had been trumpeted as a driver of competition and crucial part of the solution to sky-high insurance premiums in the region. When it landed quietly on March 31, the no-frills website prompted Insurance News to observe: “It’s hard to imagine less fanfare for a government initiative.” 2014 was notable for a string of highprofile airline tragedies, and there was little let-up IN 2015, with the Germanwings crash in March among the most horrific. Co-pilot Andreas Lubitz deliberately crashed the Airbus A320 during a flight from Barcelona to Dusseldorf, killing all 150 passengers and crew. In April lead insurer Allianz Global Corporate & Specialty set aside $US300 million of reserves to settle claims. In the Australian broker industry, education was thrust to the top of the agenda at the Austbrokers & IBNA Member Services conference in Barcelona in April. The broker joint venture’s retiring general manager Martin McAvenna made an

Josh Frydenberg: insurance affordability in northern Australia "a critical issue" ––––– Martin McAvenna: his call in April for better broker training was a hot topic for months

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December 2015/January 2016

impassioned call for professional training that can prepare brokers for a future shaped by evolving customer buying trends and disruptive new entrants. He warned the existing, fragmented situation could not persist. The issue would dominate the SME broker space for months, forcing competing training providers the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and the National Insurance Brokers Association (NIBA) to thrash out a solution. Also in April came the first signs of strain in Axis Capital and Partner Re’s engagement, as a wealthy Italian began making eyes at the latter. Holding company Exor made an initial $US6.4 billion takeover bid – topping the implied value of the share deal between Axis and PartnerRe. It would eventually win out, forcing Axis to back out of the deal. From giants to little boys – April brought the first warnings that El Nino was coming. The Bureau of Meteorology rated the weather phenomenon a 70% chance for this summer, as ocean temperatures in the tropical Pacific continued to rise. In fact it was a busy, brutal month for Mother Nature: hailstorms in Sydney on Anzac Day and other severe storms across New South Wales would cause about $1 billion of economic losses, and in Nepal a 7.8-magnitude earthquake killed more than 7000 people and caused more than $US5 billion of damage, much of it uninsured. It was also the month that Berkshire Hathaway Specialty Insurance gained its Australian operating licence, opening up in Sydney with a talented team of managers handling property, casualty, financial lines and marine insurance. Chief Executive Chris Colahan promised plenty of competition, and considering his financial backing it’s no wonder the market sat up and paid careful attention. Within a few months it also opened offices in Auckland, Brisbane and Melbourne. In May the Productivity Commission tabled its long-awaited report on funding arrangements for natural disasters, and confirmed what has long seemed obvious to insurers – the Federal Government should give less money to states and territories following disasters and provide more funding for mitigation. 67

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Year in review

“July began with news of the deal to beat them all: a $US28.3 billion merger between Zurich-based global insurer Ace and US-based Chubb Corporation.”

It said federal mitigation funding should increase to $200 million a year, matched by the states, and it called for inefficient insurance taxes to be phased out: music to the industry’s ears – and white noise to the state governments that continue to ignore it. The report also said insurers “can and should” do more to inform households about the hazards they face and the indicative costs of rebuilding after a disaster. IAG entered its sixth Asian market in May, gaining an Indonesian insurance licence through the purchase of small general insurer PT Asuransi Parolamas. In announcing the move, Managing Director and Chief Executive Mike Wilkins challenged other businesses to be more bold in Asia, warning: “The Australian spirit, the entrepreneurial drive on which our country was founded has evaporated only steps from our own front door.” June brought a fresh face (as fresh as an octogenarian can be, anyway) to the Australian insurance industry, as Warren Buffett secured a shock tie-up with IAG. His Berkshire Hathaway investment group acquired a 3.7% stake in the insurer for $500 million and struck a 10-year 20% quota share agreement, under which it will receive 20% of IAG’s consolidated gross written premium and pay 20% of claims. The deal also involved the swapping of some business lines. It left some analysts scratching their heads, but Insurance News posited a simple motive: Asia. It allows IAG to continue its push into the region and opens a door there for the US group. Also in June the Underwriting Agencies Council announced its own march into Asia, unveiling a five-year expansion plan that identifies Singapore, Vietnam, Cambodia, Myanmar and Hong Kong as markets presenting business opportunities for members, and membership opportunities for the council. Meanwhile, with the financial year drawing to a close, state and territory governments were publishing their budgets, and there was action at last on stamp duties – in the Australian Capital Territory, at least. The territory flagged plans to remove stamp duty from general and life insurance from July 1 next year, with the revenue replaced through commercial and residential general rates. 68

PIGGYBACK INTO ASIA: August/September 2015

Berkshire's ride into Asia with IAG: how Insurance News saw it ––––– First in a series: the Lacrosse blaze in Melbourne led to a nationwide hunt for buildings with hazardous non-standard cladding

insuranceNEWS

December 2015/January 2016

In Victoria, authorities began investigating 170 inner-Melbourne buildings after a near-disaster the previous November at the Lacrosse apartments in the city’s Docklands, where cladding imported from China and not tested to Australian standards contributed to a huge, fast-spreading fire. It was feared similar aluminium composite products could be installed at many other sites, posing a risk to property and lives. July began with news of the deal to beat them all: a $US28.3 billion merger between Zurich-based global insurer Ace and USbased Chubb Corporation – the largest tie-up between two insurance companies. Insurance News described it as a “bombshell” and the biggest step in an enduring run of mergers and acquisitions (M&A). (Other multibillion-dollar deals announced in the year to July included UK insurer Brit and Canada’s Fairfax Capital, specialty insurer Endurance and fellow Bermudian Montpelier Re, Tokio Marine and US specialty insurer HCC, and global broker Willis and services specialist Towers Watson.) As we noted in an analysis of the AceChubb deal, “global insurers and reinsurers are experiencing low investment returns and depressed premiums, yet claims reserves are high. Faced with few opportunities to grow their capital through normal investments, they may as well invest in themselves and their competitors through M&A.” August brought actuarial consultant Finity’s annual Pendulum report on the general insurance industry – and the forecast was not good. It warned “extra time” on peak margins is now truly over, with negligible top-line growth and premium rate reductions combining to compress underlying insurance trading result margins, with the investment income outlook also down. On August 12 the Chinese port of Tianjin was rocked by two explosions at a chemical warehouse, killing 114 people and injuring more than 700. Insured losses were initially tipped to exceed about $US1.5 billion. More than 10,000 vehicles were destroyed at the port, with Allianz and Zurich among the insurers receiving claims for damage in motor, marine and property. For Zurich, the impact would prove particularly harmful.

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Year in review

“Industry sources considered the introduction of a government-backed mutual insurer or reinsurance pool in the north less likely under Mr Turnbull and Ms O’Dwyer.”

The Northern Australia Insurance Premiums Taskforce presented its interim report, and drew praise from the insurance industry for its focus on mitigation as an important tool – although as Insurance News noted, it did not “say anything we didn’t already know or couldn’t figure out for ourselves”. The report drew no hard conclusions on the feasibility of a mutual cyclone insurer or cyclone reinsurance pool. Also in August, QBE announced its determination to move forward following a lengthy turnaround operation under Group Chief Executive John Neal. It followed IAG’s lead into India, raising its stake in joint venture Raheja QBE General Insurance Company to 49%, buying an extra 23% from partner Prism Cement for $21.5 million. And in announcing a strong rise in firsthalf net income, Mr Neal said: “With remediation initiatives largely behind us, it is time to turn our attention to growth.” Asia’s reputation as the destination of choice for the Australian insurance industry was further bolstered when diversified broker group Steadfast signalled its intentions there. “We are building a network of brokers across Asia, not so much in India but in China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam,” Managing Director and Chief Executive Robert Kelly said. Meanwhile, rival Austbrokers was continuing with its diversification strategy, adding a 60% stake in work health and safety rehabilitation service provider Allied Health Australia to its growing business portfolio. With the debate over broker education rumbling on, the Brisbane-based Financial Services School set up a “rebel” industry committee in August to push for changes to course content. Founder Val Phinn said accredited certificate and diploma courses for brokers designed by Innovation & Business Skills Australia focus too much on process and too little on technical skills. In September the global reinsurance industry met for its annual rendezvous in Monte Carlo, where there was tentative talk of a turn in the pricing cycle, with the decline in rates slowing, or even bottoming out. 70

Less interventionist? Kelly O'Dwyer became Assistant Treasurer in September ––––– Giving Suncorp back its mojo: Patrick Snowball handed over the top job

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December 2015/January 2016

But Suncorp Commercial Insurance Chief Executive Anthony Day, who attended the event, was unconvinced. “There is a point where rates may hit the bottom, but it’s difficult to determine when,” he said. At home, we had (another) new prime minister, as Malcolm Turnbull ousted Tony Abbott and, in his first reshuffle, moved Melbourne MP Kelly O’Dwyer to the Assistant Treasurer role, replacing Mr Frydenberg. Industry sources told Insurance News they considered the introduction of a government-backed mutual insurer or reinsurance pool in the north less likely under Mr Turnbull and Ms O’Dwyer, who are regarded as less interventionist. Mr Abbott’s was not the only departure that month. Global reinsurance broker Cooper Gay, part of the global Cooper Gay Swett & Crawford group, announced it would close its Australian operation and service the Australian market from its London and Singapore hubs. And the first signs emerged that Axis Specialty intended to quit its operations in Australia. Its Bermudian parent later confirmed it would “wind down its retail insurance operations in Australia and continue to serve the… market through its international wholesale insurance and global reinsurance platforms”. Change was afoot at Suncorp too, with Chief Executive Patrick Snowball preparing to hand over to Michael Cameron, who told the annual general meeting in Brisbane that Suncorp’s “one company, many brands” strategy would continue to drive growth under his leadership. Mr Snowball said he was leaving a group that has its “mojo back” after tough times. Finally, the aftershocks of the Tianjin blasts reached Zurich, forcing it to drop a £5.6 billion bid for UK-based RSA Insurance Group. The Swiss insurer expected to incur at least $US275 million in losses from Tianjin. October opened with another landmark decision from the ACT Government, which legalised Uber and other ride-sharing services, paving the way for insurers to provide tailored motor cover. Later in the month, IAG and Suncorp would urge NSW and other states to follow suit.

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Year in review

“Change, they say, is good for everyone, and the insurance industry seems to be perched on the edge of enormous change as technology comes to the fore.”

There was more change at the top among the majors, this time IAG, where Peter Harmer – previously in charge of innovation hub IAG Labs – took the reins from the retiring Mr Wilkins. Warnings about the strengthening El Nino had been mounting throughout the year, and reached a head late in October when the Bushfire and Natural Hazards Cooperative Research Centre was forced to update its earlier outlook for southern Australia as conditions continued to deteriorate. It warned “large areas of southern Australia, especially along the east and west coasts extending inland, face above-normal fire potential for the 2015/16 fire season”. This year’s event is comparable to the super-El Ninos of 1982/83 and 1997/98, experts say. El Nino remained a hot topic heading into November. Impact Forecasting detected its “fingerprints” on many global catastrophes in October, with losses expected to top $US10 billion. Financial services giant Morgan Stanley noted the phenomenon could in fact be good news for Australian insurers, because any

increase in bushfire threat is more than outweighed by a predicted reduction in tropical cyclones and floods. Before the month was out, we would see deadly bushfires in Western Australia and South Australia. Australia conducted its first automated car trial in Adelaide early in November. Motor insurers are keeping a keen eye on advances in this area, and its potential implications around liability. For all our progress, the world still seems a terribly backwards place at times. We watched in horror on November 13 as terrorist attacks claimed 130 lives in Paris. Australian Reinsurance Pool Corporation Chief Executive Chris Wallace said the tragedy reinforced the need for effective terrorism reinsurance schemes. “Events [in Australia] have been thwarted, and I don’t think there is any doubt in people’s minds that we need cover for terrorism events,” he said. After months of talks NIBA and ANZIIF finally reached an agreement on broker education in November. NIBA handed over its broker training role to ANZIIF, and will instead focus on overseeing professional

standards and representing it members. Meanwhile, Ms Phinn’s rebel committee was preparing its final case on course content, to present to Innovation & Business Skills Australia. As the industry moves into the traditional year-end summer break, insurers are considering ways to put the brakes on further premium falls, indicating premium rises and tighter policy conditions might eventuate in the year ahead. For now, the market remains very competitive, and there’s plenty of choice available for brokers in many classes of business. Change, they say, is good for everyone, and the insurance industry seems to be perched on the edge of enormous change as technology comes to the fore. It’s been a year where insurance news has never been lacking. 2015 has seen global and local industry consolidation and the emergence of some very big challenges. The winners over the next couple of years will be the companies and individuals who see a way through the challenges and turn them into opportunities. Perhaps we really are on the very edge * of a new era for insurance.

insuranceNEWS

December 2015/January 2016

Reuters

Horror in Paris: soldiers on patrol after terrorists killed 130 people on November 13, leading to widespread lockdowns in France and Belgium

Reuters

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Data with destiny A restructure has helped The Warranty Group tap into one of its greatest assets – information By John Deex THE WARRANTY GROUP began underwriting and administering extended warranty schemes in Australia more than 20 years ago, and not a great deal has changed since – until now. The US-based group’s Executive Vice-President AsiaPacific Manfred Schmoelz – appointed a year ago – instigated a structural review aimed at revolutionising the business’ regional offering, taking it beyond the basic commodity of insurance and towards a more holistic business intelligence model. The rethink resulted in some efficiencies. Former Australasia Managing Director Scott Grimshaw left the company and was not replaced. But Mr Schmoelz tells Insurance News the changes are overwhelmingly positive, moving the company into exciting and innovative new areas. 74

The warranty business is still central, but premiums are reducing, competition is harsh and the business needs to go further. At the core of the new strategy is the vast amount of data collected through issuing warranties. “What we have discovered is that we have amazing data – we have data, data and data,” Mr Schmoelz says. “We have a lot of knowledge about products. “We are working with about 8000 manufacturers and 16,000 products across the region. “We came to the conclusion that we are not a pure warranty company. We are more, in fact, a business intelligence company, because of the data we have. “We can come up with profiles of the products, how good they are, how and where they are bought, which spare parts work and which don’t. There is so much knowledge we have, insuranceNEWS

which we have never used and which we want to use.” A new business intelligence system has been purchased, and is being managed in the Melbourne office. New blood is also being brought in. “We are looking at expansion,” Mr Schmoelz says. “We have taken a restructure because it’s about efficiencies, but we are also augmenting the team with new expertise and increasing our client universe.” Another key focus that dovetails with the business intelligence proposition is customer convenience. “We want to look very much at this as well,” Mr Schmoelz says. “We have call centre people [in Melbourne]. We want to build this and create a much better client experience.” As an example, Mr Schmoelz recalls one of his own experiences.

December 2015/January 2016

The Warranty Group was established in the United States in 1964. It has assets of $US5 billion and employs 1800 people in 40 countries. In the AsiaPacific region it operates in Australia, New Zealand, China, India, Japan, South Korea and Singapore. Virginia Surety is the group’s principal insurer in the US, while London General Insurance is its principal insurer in Europe. The Warranty Group was acquired from the Onex Group by TPG last year for $US1.5 billion.

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“There is a point where you have to think about resetting the business, because if you know the old way will be challenged going forward you have to inject new thinking and put it in the 21st century.” – The Warranty Group Executive Vice-President Asia-Pacific Manfred Schmoelz

“I had this coffee machine, and when it failed the warranty was a disaster, so I thought I would never buy this machine again. “The point is, the [manufacturer] would never know because I didn’t call them and say, ‘You know what, your service is a disaster,’ but I didn’t buy from them any more. “If you combine the data we generate from warranties about the products and the customer experience, we can do much more with our clients – the manufacturers, the retailers, the dealers. “We can work much closer with them on how they create good customer experience, how they can bring them back with a positive perspective and how they can create loyalty to a brand that allows them to crosssell their products. “That is why we are calling ourselves a business intelligence

group delivering convenience and brand loyalty.” From the warranty perspective, the key expansion opportunity in Australia is in the auto industry. The group is very strong in this area in the US, but has had limited success in Australia so far, where it continues to dominate in the appliances and technology sector. It is also embracing digital technology, and a regional approach. “We have closed a massive deal in China, which is totally online,” Mr Schmoelz says. “We have to recognise that these online companies will play a bigger role, and we have to be in that story as well. “The power of social media today is so great, we have to think about how brands are represented, all these things are integrated. insuranceNEWS

“This is beyond Australia, beyond Korea, beyond Japan. If I work with a big [manufacturer] in Japan that has a subsidiary here in Australia, why not capture the business here as well? “Also, big manufacturers would sometimes look at a regional set-up from a call centre or warranty or loyalty program perspective. They want to have the data on a regional basis. In that sense Australia is not just a standalone country, it is part of a network.” Mr Schmoelz believes the focus on data may set an example for other insurers to follow. “There is a point where you have to think about resetting the business, because if you know the old way will be challenged going forward you have to inject new thinking and put it in the 21st century.

December 2015/January 2016

“Every provider has to start thinking, where is my value-add in this game?” He believes the structure of the company will fundamentally change, but has no second thoughts about the road being taken. “If I just provide a warranty, I become a commodity provider. You end up as one of five warranty providers and it’s all about pricing. A commodity just gets cheaper and cheaper and cheaper. “There is no value added and the forte of the products we can provide as a product specialist will never come through. “Will we be an insurance company? Well, from a regulatory sense we are defined as insurance, but we are taking this beyond. “We have discovered in this 10-month journey that we have much more to offer than we * ever thought.” 75

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companyNEWS

More drones means crowded skies and more risk: a drone carrying a video camera swoops low

Droning on: Vero’s new policy is the wind beneath operator’s wings COMPANIES WHO USE DRONES TO HELP THEM IN THEIR BUSINESS WILL now be covered for any third-party damage under Vero’s public liability policy. In an industry first Vero revised its policy to include drones in light of the growing number of businesses now using them. The Civil Aviation Safety Authority (CASA) has granted 200 drone licences with more awaiting approval. Suncorp National Manager Liability Underwriting David Leighton says the policy protects clients whose drone causes injury or property damage to a third party. Last year triathlete Raija Ogden was injured when a drone fell on her while competing at Geraldton, and in March a drone crashed near the Melbourne Cricket Ground during the ICC Cricket World Cup final. “While it is lucky there hasn’t been a major incident in Australia yet, the growth of the commercial drone market means the risk of a serious injury or property damage is increasing,” Mr Leighton said. “The risks are only going to increase as this market continues to grow. These businesses must consider their risk exposures and ensure they have appropriate cover.” LMI Group MD Allan Manning, who uses drones as part of his claims services business, says Vero’s policy is definitely a step in the right direction. “As an industry we have got to protect these emerging risks,” he tells Insurance News. “Otherwise we will be holding back innovation.” Vero’s updated policy stipulates that businesses using drones must have a valid CASA operator’s and controller’s certificate if required, and the drone must abide by CASA regulations and not cause a breach of privacy. CASA spokesman Peter Gibson says businesses using drones are currently required to obtain an unmanned operator’s licence, which costs $4000-$5000, as well as a controller’s certificate. He says the current waiting time for processing drone licences is about six to nine months. As an alternative businesses can hire one of the 360 approved drone operators. CASA plans to introduce new regulations in the second half of next year that will allow businesses to operate drones weighing less than 2 kilograms without requiring certification. Insurers are increasingly using drones to assess dangerous-to-reach areas like the roofs of fire-damaged or asbestos-riddled buildings. Vero also requires drones to be operated within the controller’s line of sight and weigh less than 10 kilograms. They must not be jet-propelled or carry a payload other than fixed camera, surveillance, monitoring or measurement equipment. * The cover does not apply to specialist drone operators. 76

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Motoring ahead: Zurich introduces a range of fleet enhancements ZURICH HAS COMPLETED AN END-TO-END review of its fleet insurance offering and has introduced a series of significant improvements. Policy wordings have been enhanced, with new for old replacement for some vehicles written off in the first three years, and agreed value for some vehicles up to two tonnes. Electronic broking system Z.stream has been simplified and made easier to use, with pre-populated fields reducing the need for re-keying information. In the claims area, Zurich says the recently launched approved repairer network is proving a great success, with 200 repairers providing wide coverage across Australia. Executive General Manager Commercial for Australia and New Zealand, Adrian Riminton, says the network offers a priority service by skilled and trusted repairers, with the added convenience of mobile estimating where the repairer can go to the customer’s place of work or residence if required. Telephone lodgement of claims has also been added to the online lodgement launched last year. Mr Riminton tells Insurance News fleet is a high priority for Zurich. “We intend to remain a leader in that market,” he said. “We have had a comprehensive review based on broker and client feedback. This is not just about policies or wording enhancements, it’s about claims and Z.stream as well. “It really has been done on an end-to-end basis. “We are committed to building on the approved repairer network and are increasing points of contact with customers with phone and online lodgement of claims. “We want to make it as easy as possible for people to get in touch with us, and there will be more * enhancements to come early in the new year.”

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WOMEN IN INSURANCE CHOOSE DEDICATED L AWYER FOR EXCELLENCE AWARD Medical negligence lawyer Lisa Ridd, now a partner at Minter Ellison in Melbourne, has had an extremely successful career. But she’s made a point of helping others along the way – and as a result has recently been presented with the Women In Insurance Excellence Award. The nominations for her paint a picture of a dedicated professional who mentors younger staff, champions women in the legal and insurance professions, and goes to extraordinary lengths to build knowledge. As a mum of two young children, Lisa has personal experience of the issues women can face progressing their careers. “My team is all female, that’s just the way it evolved,” she says. “The joy of being in a senior position is that I can be an advocate for flexible working. “I have insight into the difficulties, and I am all too familiar with mummy guilt. “Sometimes it is as simple as allowing someone to work from home one day a week so that they can do the school run and talk to other parents. “Technology has made this possible, and we need to acknowledge that work does not have to occur strictly from 9am to 5pm.” Lisa devotes a great deal of time to mentoring staff – she even shares her office with a junior lawyer. “There are lots of senior practitioners but not many junior ones,” she says. “It is vital that we bring younger people through and work on their skills.” Lisa specialises in baby brain injuries, a highly emotive subject, which can be hard for less experienced staff to cope with.

“There have certainly been times when I have closed my office door and had a quiet cry,” she says. “We have held seminars to help staff deal with the difficult things they sometimes hear about. It is at the forefront of our minds.” Known to her colleagues as a fastidious hard worker, Lisa will seemingly stop at nothing to increase her skills. Her knowledge of medical negligence is second to none, and she even undertook midwifery studies to better understand obstetric claims. Lisa receives a year’s membership, along with a trophy and $500 cash prize. Women in Insurance President Emma Fenby says the Excellence Award was introduced three years ago to recognise a woman who has achieved professional success and displayed a strong commitment to, and leadership in, the insurance industry. She says winners will have achieved great things, but crucially they must have helped others too. “We were looking for someone who has mentored juniors and championed them in the workplace,” she says. Women in Insurance is run by a committee of dedicated volunteers. It hosts seminars and functions each year to provide members with educational and networking opportunities. “We consider it important to recognise female role models in the industry and to encourage others to aspire to making similar positive contributions,” Ms Fenby says. Nominees for the award are received from Women in Insurance members and the winner is selected by the committee. Selection of this year’s award recipient was not an easy task. Ms Fenby says “a number of impressive nominations” was received. To find out more about Women in Insurance membership and events, visit wii.org.au.

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CGU brings Monetâ&#x20AC;&#x2122;s garden to the races CGU pulled out all the stops at its annual Spring Racing Carnival event in Melbourne, recreating the French impressionist artist Claude Monetâ&#x20AC;&#x2122;s iconic garden in Giverny inside its trackside marquee. The area was fitted with a dazzling array of flowers, fashioned in a similar design to that found in the Giverny original. About 90 guests were on deck daily on Derby Day, the Melbourne Cup, Oaks Day and Stakes Day to enjoy the races while sipping Kir Royale cocktails. Naturally, guests were served Frenchinspired food such as croque-monsieur, confit pork croquette, duck parfait and beef bourguignon pie. Melbourne Cup-winning jockey Michelle Payne made a special guest appearance in the marquee on Cup Day, gamely posing for pictures with the guests. Funds were raised during the event for Down Syndrome Australia, the charity supported by Ms Payne. Her brother Stevie, the strapper for cup-winning horse Prince of Penzance, has Down Syndrome.

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Vero puts risk management in the spotlight Vero’s annual RMAdvancer Awards ceremony is a happy occasion with a deadly serious intent. It recognises client companies’ achievements in risk management, and demonstrates how the broker plays a major role in lowering the risk factors. This year’s ceremony was held at the Museum of Contemporary Art in Sydney. About 90 guests joined Suncorp Commercial Insurance Chief Executive Anthony Day to celebrate the awards’ 10th anniversary and to pay tribute to the winners. Because the RMAdvancer is a very competitive award. Timber processor AKD Softwoods, betting operator Tabcorp and facilities services manager OCS Group were the big winners on the night, out of 13 finalists. Melbourne-based Tabcorp took out the liability risk category, Victorian regional company AKD Softwoods won the property risk category and OCS Group the motor vehicle risk section. And the companies’ brokers were there to share in the limelight. Suncorp Commercial Insurance Executive General Manager Commercial Portfolio Darren O’Connell says the awards have been a positive influence, encouraging companies to take risk management more seriously. Next year’s award ceremony will be held at Melbourne’s historic GPO building.

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Westcourt makes a splash at Hamilton Island Postcard-perfect Hamilton Island was the ideal setting for Westcourt General Insurance Brokersâ&#x20AC;&#x2122; annual conference in October as the company soaked in the sun while celebrating its achievements. More than 100 authorised brokers, sponsors, speakers and staff participated in a myriad of outdoor activities including golf, a fishing charter, a reef tour and a sunset ocean cruise. Westcourt co-owners and directors Jeff Hollands and Tremayne West kicked off the conference, which had the appropriate theme Partners in Progress. Conference speakers included LMI Group Managing Director Allan Manning, National Insurance Brokers Association (NIBA) Chief Executive Dallas Booth and IAG Commercial Insurance Executive General Manager Donna Walker. Insurance News Publisher Terry McMullan chaired a panel discussion on industry and broker issues. Outstanding performances by people involved with Westcourt were also honoured during the conference. Victorian broker Bunmi Ajayi, the NIBA Broker of the Year for 2015, was named Westcourt Authorised Broker of the Year.

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Christmas comes early as CQIB and friends celebrate Old friends and new attended the Council of Queensland Insurance Brokers (CQIB) long lunch last month. About 170 members and partners attended the event, which is held twice a year, at Stamford Plaza in Brisbane. The speaker was broadcaster and writer Greg Cary and raffles raised $2500 for the Mater Foundation, which helps purchase life-saving medical equipment and improve patient care. General Manager David Duncalfe tells the November lunch takes the place of a Christmas party. “The lunches are designed as networking events for members and business partners,” he said. “It’s about working together, catching up with old friends and making new ones.”

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AILA brings out the heroes and villains Superman was downing cocktails faster than a speeding bullet while Chewbacca did his famous walrus groan for the hors d’oevres platter to come back his way – all in the name of some fun networking for Australian Insurance Law Association (AILA) Young Professionals at their Superheroes and Villains networking party in October. Some 460 lawyers and insurance professionals threw risk to the wind downstairs at the GPO in Sydney. Liberty underwriter Angus Kench, who turned up as Darth Vader, says the sold-out event was “purely fun” although he did need to eventually remove his mask – not to beg Luke’s forgiveness but to have a beer. Luckily his true face looked a lot better than Anikin Skywalker’s after he went to the Dark Side. “Everyone got into the spirit of it,” Mr Kench tells Insurance News. “More than half of the people dressed up, which is kind of unusual in insurance.” The winner of the “best dressed” competition was Jason Hunt from McInnes Wilson Lawyers, who came as Chewbacca.

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NTIâ&#x20AC;&#x2122;s Yellow says hello National Transport Insurance (NTI) held a series of events across Australia to introduce its new Yellow Cover product to hundreds of guests. Yellow Cover, rolled out in June, represents the insurerâ&#x20AC;&#x2122;s increased focus on the mobile plant and equipment market. The Sydney launch was held at the Royal Randwick Racecourse in partnership with CJD Equipment, distributors of Volvo construction equipment. At the Melbourne event, held at Journey Management Group, insurance professionals were able to try their hands at operating equipment. The Brisbane event was held at the CJD Equipment dealership in Acacia Ridge, while there were further demonstrations at the Star Tennis Centre in Perth, as well as Adelaide and Newcastle.

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Allianz shows why partnerships matter The theme of this year’s Allianz Training Days was Because Partnerships Matter – an apt choice, given the broker training events now in their seventh year have so often proved their value. This year they were held in Sydney, Melbourne, Brisbane and Perth during September and October and attracted more than 1100 brokers in total. Each training day was jam-packed with activities, providing participants with personal and professional development opportunities. They started with a welcoming address by General Manager Broker & Agency Commercial Denis Morrissey, followed by freediving champion and leadership coach Ant Williams, who spoke about what the dangerous sport has taught him about removing the barriers to success. Chief General Manager Broker & Agency David Hosking then provided insights the market issues. The “One Allianz” family – consisting of Hunter Premium Funding, Global Transport, Brooklyn, Allianz Marine and Transit Underwriting Agency, AFA Insurance, Strata Community Insurance, CEMAC, Euler Hermes and Club Marine – was well represented for some face-to-face contact with brokers. Each of the training days concluded with a networking function that acknowledged Allianz’s German roots with an Oktoberfest theme.

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IA conjures up Vegas in Hobart Las Vegas was the theme at the Insurance Advisernet (IA) gala awards night in Hobart in November, and the company put on a show for the ages during its annual conference. About 440 delegates were there for the final night of the annual conference, letting their hair down and dancing to the hits of US-born soul sensation Lisa Hunt as she performed onstage. IA took on the Vegas theme as a symbolic nod to the group’s plan to take the annual conference to Sin City next year to celebrate its 20th anniversary. Iconic Australian band The Angels and lead singer Dave Gleeson almost stole the show with their high-octane music. As for the conference, former Treasurer Peter Costello was a keynote speaker, delivering an inspiring 45-minute speech on the important economic role played by small and medium-sized firms. The conference opened with the unveiling of IA’s new corporate logo, which will come into effect in February, and a closed-door session was held to update members on the strategy that will power the company forward. The annual awards were given out during the conference. Brisbane-based Clear Insurance Principal Lisa Carter took out the authorised representative award of the year, the platinum quality practice award went to Coastal Insurance Services in New South Wales, and the Southern region was named region of the year. The Chairman’s Award went to IA’s General Manager Business and Information Systems Steve Dymond and Astute Insurance Services Principal John Lewis. Meridian General Brokers Director Bernie Kane took the Chairman’s Award for New Zealand, and the New Zealand broker of the year was Penberthy Insurance Otago Director Jackie Boyd. The employee of the year is IA’s Sydney-based Regional Operations Assistant, Sophie Beer.

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After Cyclone Marcia hit, Rockhampton came to a grinding halt. Our team developed a solution to ensure things went back to normal, as soon as possible.

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Christmas lunch has marinos in stitches Laughter’s the best medicine and members of the Melbourne Marine Insurance Forum had plenty of that at last month’s Christmas lunch at the RACV City Club. Award-winning comedian Joel Ozborn had the 190 guests in stitches with his demonstration of how to “wear a tennis racquet.” Jokes aside, there was also serious business at the annual lunch, with Zurich Insurance/Associated Marine Technical Claims Manager Lal De Silva being awarded life membership of the forum in recognition of his contributions to the industry. Leigh Quinn of Arthur J Gallagher was the happy winner of a vintage 1992 Penfolds Grange, courtesy of a raffle draw. And to cap off the day, forum members and guests proceeded to take over the club’s Carbine Bar.

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Happy 30th birthday, Austbrokers! They call it AUB Group now, but in October it was Austbrokers and it had 30 years in business trading under that name to commemorate. That’s why 350 industry guests, the company’s founders, directors and members turned up at Sydney’s Ivy Ballroom for some serious celebrating. With minimal fuss – retiring Chairman Richard Longes and Chief Executive Mark Searles welcomed guests with short speeches – the finger food circulated and so did the guests. In 30 years the population of Australia has increased by 51% and the workforce has grown by 81%. When Austbrokers was established the average full-time worker took home just under $19,000 a year and the average house price was less than $150,000. Austbrokers has grown right along with the country, becoming a sharemarket favourite and evolving into a major presence in the industry. So it was good to see such good fortune shared on such a special occasion. The charity partner for the evening was the Children’s Cancer Institute of Australia, which received more than $12,000 through a raffle and donations.

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Oaks Day’s a winner with Vero On Oaks Day at Flemington Racecourse, Vero’s marquee in the iconic Birdcage is the place to be. The special event is held on the traditional “ladies’ day” – although Oaks Day is now often jokingly referred to as “blokes’ day”. About 100 brokers attended this year. They were lavishly hosted by Suncorp Commercial Insurance Chief Executive Anthony Day, senior divisional managers and members of the Commercial Insurance Distribution team. Vero’s elevated marquee gave guests a great view of the day’s races and the colourful crowd. But as is often the case, the entertainment inside the marquee was just as good.

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When you need us most, we’re we’re at our best. Call us on 1800 618 700 or visit acchealth.com.au

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maglog »

WELCOME TO THE INSURANCE NEWS HOLIDAY QUIZ. OUR sister publication insuranceNEWS.com.au publishes more than 2000 articles about the insurance industry each year. We figure you should remember at least some of what you read. Each of the following relates to facts published in insuranceNEWS.com.au during the past year. If you get the magazine in your office, run it as a group activity during a break or – let’s face it – it might be more fun than working on a sunny day. The answers will be published on the insuranceNEWS.com.au website from December 14 on www.insurancenews.com.au/quiz-answers. ONE POINT PER ANSWER 1. While OAMPS has been rebranded by international broker Arthur J Gallagher, its New Zealand brokerage has (so far at least) retained its name. What is it? 2. Gallagher also brought its SRS and Australis underwriting agencies under one brand. What is it called? 3. Stream Group liquidated a loss adjusting company with a Latin name in February. What was that name? 4. The Australian Business Roundtable for Disaster Resilience & Safer Communities has two insurance industry members. Who are they (one point each)? 5. According to the federal Workplace Gender Equality Agency women comprise 57% of the workforce in the general insurance sector yet men in the sector on average earn how much more than women: a) 15% b) 29% or c) 57%? 6. What does NAIPT stand for? 7. Name the local chief executives of IAG, Suncorp, and QBE (and for a bonus point, their predecessors) – there’s a total of six points possible for this question. 8. What is Austbrokers Holdings now called? 9. Four international insurers, XL Group, Ace, Catlin and Chubb merged into two companies this year. What are their post-merger names? 10. Members of which broker cluster group voted during the year to join Steadfast? 11. Who owns the electronic transaction exchanges that link brokers and insurers a) Sunrise Exchange and b) SVU? 12. Gary Gribbin is the Chairman of which broker organisation? 13. El Nino is to hot dry summers as what counterpart climate system is to wet conditions and more cyclones? 14. A Bermuda-based insurer whose bid for a counterpart was abandoned during the year later quit the Australian market. Who was it? For a bonus point, who was its well-known local chief executive? 15. Munich Re bought part of the former insurer Calliden and relaunched it in November. What is the new insurer’s name, and for a bonus point, what is the name of the Munich Re company that underwrites it? 16. In March former Wallabies rugby union captain Phil Kearns became managing director of which brokerage? 17. Who is the Financial Services Minister appointed in September by Prime Minister Malcolm Turnbull. For a bonus point, name the Shadow Minister, who was appointed in October? 98

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18. In Australia they’re called bushfires, in North America they’re called what? 19. US-based giant AIG has been under pressure from some investors this year to: a) Relocate its headquarters to Ireland? b) Return its headquarters to Shanghai? c) Split up its operations? d) Retrench 15% of its senior executives? 20. Name the bisexual chief executive of a major global insurance organisation who was recently named No 1 on a list of the world’s top 100 lesbian, gay, bisexual and transgender executives. 21. Earlier this year Zurich Group abandoned its bid to acquire which British insurer? And for a bonus point, what was the insurer formerly called? 22. Name the giant Spanish insurer that has been working in Australia since 2012, but is only now seeking new opportunities. 23. It’s 10 years since a hurricane devastated New Orleans. What was the hurricane’s name? 24. Name the insurance regulators for Australia, New Zealand and the United Kingdom. 25. The Australian Prudential Regulation Authority recently announced the former chief executive of Suncorp Life as a member of its three-person leadership. What’s his name? 26. In June a US investment giant signed a surprise deal with an Australian insurer. Name both companies. 27. US-based ACORD sets the digital standards for the global industry. What does its acronym stand for? 28. The chief executive of Insurance Advisernet quit to run Suncorp’s Resilium AR network. Who is he and who replaced him? 29. Who was voted in as Chairman of the Underwriting Agencies Council in December? And who did he replace? SMARTIE QUESTIONS Here’s a few questions for those smarties who, having already crushed their quiz opponents, are looking for something with which to administer the coup de grace. Three points for each correct answer, but they have to be 100% correct. 30. Who chaired the Financial System Inquiry? 31. We know Allianz Global & Corporate insured the aircraft which crashed in the French Alps in March, but can you name the budget airline the plane belonged to – and who its parent airline is? 32. What do the following acronyms stand for: JLT, IAIS; YBR; UAC; ACCC? If you scored 10 points or less, you’re obviously new to insurance. Spend the festive season reading the www.insuranceNEWS.com.au archives. If you got 11-30, you need to focus more. 31-50, you can hold your own in a conversation on industry issues; 51-60, you’re switched on; 61-70, you probably work at Insurance News; above 70 you either can’t add up or your pants are on fire. From all of us on the Insurance News team – editorial, production, advertising and administration – we wish you all the very best for the festive season. Stay safe, be happy. December 2015/January 2016

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We’re always thinking about brokers. Specialist Underwriting Agencies Pty Ltd is an independent, Australian owned and operated underwriting solutions provider. Since 1992 our thinking has been about our broker customers, and providing you with a diverse range of quality products. SUA is one of the few truly independent underwriting agencies in Australia. We don’t engage in retail broking. We don’t deal with unlicensed intermediaries nor unauthorised Insurers. Product development and claims management are our strengths, meaning we are Always Thinking of ways to achieve the best possible solution for your clients. We are aware of the ever-changing demands of the Australian insurance market, so better able to offer a range of products that will satisfy your clients’ needs.

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