FEB/MAR 2012 - Insurance News (the magazine)

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REINSURANCE: Here comes the pain as rates rocket THE MARKET: Injured insurers upset investors REBUILDING: How insurance is boosting Queensland

New York times Meet Sydneysider Adam Hill and other Australian insurance professionals who live and work in the Big Apple February/March 2012

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Zurich Australian Insurance Limited ABN 13 000 296 640, AFS Licence No. 232507. 5 Blue Street North Sydney NSW 2060 www.zurich.com.au

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”One brand, a whole world of options.“ Insurance solutions to suit all your customer‘s needs.

Zurich provides risk management solutions for all your customers‘ needs. Backed by our global strength, security, integrity and service, our insurance solutions are available exclusively through you, the insurance broker. To learn more, contact your local Zurich Business Manager or visit zurich.com.au

AWHN-006069-2012. ZU21007 IN

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ADVERTORIAL

Allianz invests in its people The insurance industry is facing key staff shortages and a fierce war for talent. Over the coming years a higher proportion of the workforce than ever before will reach retirement age, so finding and keeping key employees has never been more important 1.

MKT 018 INEWS Jan/2012

It is a critical time for the insurance industry in terms of attracting and retaining key people.

Denis Morrissey, General Manager Commercial, Broker and Agency

“Our brokers tell us one of their major concerns is attracting and retaining insurance professionals into the industry,” said Denis Morrissey, General Manager of Commercial Broker & Agency at Allianz Australia.

His view is backed up by a 2010 PwC Global Survey warning of a war for talent in the financial sector. It predicted that it would be particularly tough in the insurance industry, which has a higher average age than other industries and is already seeing the oldest of the baby boomers retiring.

“It is a critical time for the insurance industry in terms of attracting and retaining key people. At Allianz, we have incorporated this talent shortage into our overall long-term strategy for hiring and developing employees,” said Mr Morrissey.

1

Allianz has developed a range of initiatives to attract and retain professionals to the industry to ensure that the relationship with brokers is not only maintained but strengthened. These include developing key people internally, recruiting key people from outside the company and from different industries, and securing outstanding international talent.

Over the coming years a higher proportion of the workforce than ever before will reach retirement age.

“We work hard to make sure we are hiring the right people for our brokers to deal with.

Brokers need to know they can trust Allianz to nurture and develop these key employees

Allianz identified Paul Riordan as a rising talent when he joined as a Blue Eagle Account Manager in 2008 after five years in the industry. Paul’s career has been rapidly nurtured through the role of Distribution Manager - Specialty Lines to his current position as National Key Accounts Manager for the National Partners Program.

“Allianz’s attitude to employees is carried through in the way we serve our brokers. It was both rewarding and challenging working with brokers from the Allianz Blue Eagle Program.

It’s satisfying working on programs that aim to strengthen the relationship we have with our premium partners. When you love what you do, it is really easy to come to work every day,” said Mr Riordan.

“The recently launched National Partners Program is the latest innovation in our segmented distribution model, “ explained Andrew Broughton, National Manager, Cluster Groups and National Partners. “When implementing these types of challenging and complex models, we seek to promote people with the skill sets, professionalism, hunger and desire to get involved at all levels to deliver on the commitments that we make to our valued business partners,” said Mr Broughton.

Rising stars within the company and the industry are also identified through Allianz’s Young Eagle Program, which is designed

Intergenerational Report 2010 - Australia to 2050: future challenges, Commonwealth Government of Australia

Allianz Australia Insurance Limited ABN 15 000 122 850.

to ensure ongoing reliable relationships that brokers can count on,” commented Jonathan Poole, Chief General Manager, Broker and Agency.

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“Our ability to form great teams is directly reflected in the satisfaction our customers experience in dealing with Allianz,” he said.

This is reflected in the company’s pleasing Net Promoter Score (NPS) results. The NPS scheme gathers feedback from brokers to allow Allianz to benchmark customer loyalty.

Paul Riordan, National Key Account Manager National Partners (c) with Andrew Broughton, National Manager, Cluster Groups and National Partners (r) and colleague Julie O’Donovan (l)

to foster the talent of future leaders of the insurance industry.

The program provides the opportunity for the industry’s most promising young talent to meet, interact and participate in unique training programs. It is another example of building for the future and enables our brokers to retain and develop their own key people.

Iain Hill, National Manager Specialty Lines, has just joined Allianz Australia from Allianz UK. He spent the last eight years in Scotland, his final role being Glasgow Branch Manager, and prior to that spent 12 years in London working in commercial underwriting, business development, team leadership and sales management.

“We take our NPS scores very seriously and work to improve client experiences by taking on board broker feedback and immediately addressing their concerns,” said Mr Morrissey.

“Providing customers with a great experience is very rewarding for all involved and is just another way Allianz is attracting and retaining the best people in the industry.”

At a time of enormous change within the insurance industry, Allianz understands the importance of providing brokers with a stable and consistent customer experience.

“While Allianz is building employees from within, we also recognise the benefits from bringing in talent from outside the company,” said Mr Morrissey. “It is a classic way to add value to an existing role and bring a new perspective to the way we interact with our brokers.”

National Sales and Development Manager, Jo Callister, has recently been recruited from Ernst & Young where she was responsible for managing the go-to-market strategy for the Sydney office. Jo worked for Ernst & Young for three years having worked previously for an insurer, a broker and a claims manager.

“My recent experience outside of the industry helps to bring a fresh perspective to the way we serve our brokers. In my new role I am leveraging my strategic selling, account management and events management experience to continue to provide effective product solutions and unique customer experiences for our brokers,” she said.

Rising stars within the company and the industry are also identified through Allianz’s Young Eagle Program, which is designed to foster the talent of future leaders of the insurance industry.

Allianz is also exercising its global reach to attract fresh new talent from overseas.

Jo Callister, National Sales and Development Manager (c) with team members Martin Bouroncle (l) and Sarah Johns (r)

“It has been a fantastic opportunity to bring to Allianz Australia the strong people management skills and expertise I have gained in my time working in the UK,” he said. “My knowledge base has proven easily transferable to the Australian market and has allowed me to quickly step up to promote Allianz’s Specialty Lines business.”

Allianz was named ANZIIF Insurer of the Year for 2011 and recognised as an Employer of Choice for Women. “Being recognised as an industry leader helps Allianz attract the best talent in the industry; and attracting and retaining the best people is one of the key factors in enabling us to serve brokers better,” said Mr Morrissey.

Attracting and retaining the best talent locally and globally means brokers will have relationships they can count on, enhancing their ability to grow their business.

Iain Hill, National Underwriting Manager Specialty Lines presenting to colleagues

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Contents 8 Newsmakers » 14 Withering Heights » All insurers had a torrid time last year, but investors have singled out QBE for special punishment.

18 Repenting at leisure »

IAG’s pursuit of failed insurer AMI has upsides – but some past romances have ended in disillusionment.

20 The market: Signs of life »

Premiums are rising on the back of weather claims, reinsurance costs and low returns.

22 The pain begins »

Local reinsurance rates moved sharply up in the January renewals, and there’s more to come.

24 The very model of a modern major disaster »

How insurance companies – and their money – help communities pick up and keep going after devastation.

30 Lessons from the quakes »

Canterbury businesses now know a lot more about insurance, and why having a broker is important.

32 Plotting a new course »

After eight years as a niche insurer, Calliden is undergoing a makeover.

34 Tell it like it really was »

companyNEWS

58 Back on the road again » Queensland’s floods didn’t keep these truck operators bogged down for long.

60 Bridging the gap »

Market needs meet insurer ingenuity.

60 A healthy level of protection » National OHS harmonisation has placed statutory liability in the spotlight.

peopleNEWS

61 Kokoda: tough but inspiring » 62 A touch of the Orient » 65 Zurich’s global boss receives a warm welcome » 66 Prost! Allianz cheers its star brokers » 68 Reaching out and digging deep » 70 Here come the girls! » 71 Insight’s view getting better all the time » 72 eQuipping young professionals » 74 maglog »

How intermediaries can use the facts on what really happened after last year’s catastrophes to build opportunities.

38 Life & work in NYC »

Want to take your skills and move overseas? Meet some transplanted Australians enjoying the ‘city that never sleeps’.

46 Steering straight in stormy waters »

Uncertainty reigns in reinsurance as catastrophes multiply and economies turn down.

50 The worst of years »

Earthquakes and floods ensured 2011 will be remembered as the industry’s most expensive yet.

54 Reinsurance helps us ride the storms »

An insurer explains how reinsurance helps counter the various factors that push premiums up.

February/March 2012

Cover: Adam Hill, New York Metro Environmental Hub Leader, Marsh USA Inc Image: Aaron Taylor

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newsmakers at

Smith emerges at Axis

Suncorp’s new channel

Former Zurich Australia chief executive David Smith (left) was never going to stay out of the insurance game for long.

After a break from the industry, Smith has emerged at the local arm of Bermuda-based Axis Capital Holdings as Chief Executive and Country Manager of Australia Operations.

Axis has been active in Australia since 2005, and was licensed as an insurer in 2008.

Smith left Zurich Australia in March last year after five years when the company was split into two separate divisions.

In his roles at Zurich and as chief executive of IAG New Zealand before that he earned a reputation as one of the industry’s sharpest leaders, speaking out well before the pack on the need for standard flood cover and climate change education and measurement.

Iles to guide UAC Specialist Underwriting Agencies director John Iles (right) has been elected as the new Chairman of the Underwriting Agencies Council. He replaces Damien Coates.

Heath Amber (Millennium) is the new Deputy Chairman.

Mr Iles, an expert in statutory liability, says underwriting agencies in the Australian market will enjoy a higher profile with brokers over the next year as the commercial market continues to harden.

“It’s an ideal opportunity to demonstrate our strength and value in the market by providing viable options and resolutions for brokers’ clients,” he said.

Aon quits US for London Just 25 years after Illinois insurer Patrick Ryan decided to call his growing brokerage Aon, the company he built into the world’s largest risk services group is moving it headquarters. Not just from Chicago, but across the Atlantic to London.

Chief Executive Greg Case says the move will provide greater access to emerging markets and allow Aon to “take better advantage of the strategic proximity to Lloyd’s and the London market”.

The group will be based in a new 47-storey tower in the London CBD. Case says Aon won’t significantly increase its UK employee count of about 5000. The Chicago branch’s headcount of 6000 is budgeted to rise by 750, and the company will retain its listing on the New York Stock Exchange.

“The continued investment in our international operations and emerging markets is important to the growth of our firm,” Case says.

The move to London has been hailed by recession-beleaguered British politicians as well as Lloyd’s Chairman John Nelson, because it will boost London’s somewhat dented status as a global (re)insurance hub.

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Suncorp is set to build a new stand-alone brand for its newly acquired AMP General Insurance Distribution business.

The deal to buy AMP’s general insurance division – Suncorp already provided the underwriting – was finalised on January 1, and 700 authorised representatives (ARs) and 37 administration staff have moved across.

Suncorp has a year’s grace to find a new brand to replace the familiar AMP logo.

The AR has come of age in the past few years, with brokers and insurers alike realising the financial benefits of having staff working off a single Australian financial services licence, rather than one each.

For Suncorp, it’s a whole new way of working into the commercial market, with Commercial Insurance Chief Executive Anthony Day noting that it will even enable Suncorp ARs to access competitors’ specialist products and services when it’s going to benefit the customer.

New divisional general manager Gerard McDermott says his unit will “operate at arm’s length” from the other commercial insurance operations.

Guild salutes Acerta Pharmacy Guild of Australia subsidiary Guild Insurance has renamed its intermediary division Acerta to provide a clear identity for the business.

Head of Intermediary David Roddis says the business is a growing part of the Guild group, and focuses on personalised service to brokers.

“We felt it was important that our intermediary division had a clear identity working with our broker partners and shows commitment to the market underpinned with a personalised approach.”

insuranceNEWS

Add flood, deduct customers Insurers introducing compulsory flood cover have come up against a backlash from Victorian consumers who don’t want it. Politicians say country people are angry about increased premiums imposed by RACV Insurance and CGU and the fact that they can’t opt out of being covered against flood.

Most irritated (logically) are customers who don’t live in flood-prone areas but still have no choice.

CGU Chief Executive Peter Harmer says automatic cover will remove ambiguity, while RACV Insurance General Manager Paul Northey says it will also remove confusion.

Northey says customers making a flood claim “previously had to go through a process of determining what caused the damage before they knew whether or not they were covered”, and that the impact on householders’ premiums is minimal.

The Insurance Council of Australia says there is robust competition in the home insurance sector and consumers can negotiate with their insurer or shop around.

Marsh sees rates rising It’s taken much longer than anyone imagined it would, but property rates in Australia are on the way up, according to mega-broker Marsh.

Its annual Pacific Market Insurance Report, Navigating the risk and insurance landscape, says rates increased by 8-15% across all classes of risk last year.

But while the natural disaster losses of the past year have been a major catalyst for raising property premiums, it’s a different story in the casualty market, where capacity is plentiful. Marsh says most premiums are flat and some clients are even obtaining reductions in premiums.

Customers in Australia and New Zealand with a loss history are being stung the most in property premiums.

And as is normal when the market hardens, the insurers are also seeking to tighten coverage restrictions.

There are also new restrictions – or no coverage available – for buildings built in New Zealand before 1936, and no automatic reinstatement of insurance following damage from a natural disaster.

The report says there may be a “mild withdrawal of capital” across the Pacific region as insurers experience their own capital and investment problems.

February/March 2012

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Figure this

On the rocks: safety lines assist rescue workers searching the interior of the Costa Concordia

700

Percentage rise in use of the Steadfast Virtual Underwriter platform during 2011

70

Percentage of last year’s global catastrophes that occurred in Asia

380

The Costa Concordia was once the largest ship built in Italy. Now lying in a shallow grave off the coast of Tuscany, the cruise liner is also the single largest insurance loss in recent times.

The ship ran into trouble hours after its departure on January 13 near Rome when its Captain, Francesco Schettino, deviated from the set course to give islanders a

Reuters

Concordia claim will costa lot front row view of the ship as it sailed past.

Now tilted dramatically on its side off Giglio Island, the ship looks like a set piece in a James Bond movie.

Possible insured losses are certainly of a villainous amount; Moody’s says damage to the hull and claims arising from personal injury, liability and environmental

damage could tip losses over $US1 billion. It’s the largest maritime loss event since the 1989 Exxon Valdez disaster in Alaska.

Costa Cruises, the owner of the ship, has offered passengers €11,000 each in compensation, provided they drop any other litigation.

Seventeen people are confirmed dead and another 16 are still missing.

Offshore 2000 jobs?

Not us, says Suncorp

Lardner to up stumps One of the industry’s most popular leaders in recent years, senior Aon broker Steve Lardner (above), has announced plans to retire in July.

The immediate Past President of the National Insurance Brokers Association and Chief Broking Officer at Aon, Lardner says he’s pulling the curtain on his career and is by all accounts looking forward to some much-deserved downtime.

Lardner will retire from Aon Risk Solutions after handing over the chief broking officer job to Chief Placement Officer Bob Mann.

Sydney-based Lardner, who began at Aon 21 years ago, has been “instrumental in establishing Aon as a market leader in this country”, Aon Chief Executive Steve Nevett says.

Lardner’s announcement comes just four months after he was awarded the Lex McKeown Trophy for services to broking and the association.

Suncorp Chief Executive Patrick Snowball arrived at the group’s Brisbane headquarters with a reputation for seeing value in outsourcing. But the number of jobs rumoured to be on the block at the giant insurer is audacious – even by his standards.

Under the bland designation of “simplification”, Suncorp has signed outsourcing contracts with two Indian companies.

Suncorp says 71 jobs are going to the subcontinent, alongside 50 layoffs announced in November last year.

But Indian news reports – which Suncorp has refuted – say up to 2000 Suncorp positions are to be relocated.

In an industry already spooked by large layoffs at major banks and internal reviews at CGU and Aon, the Suncorp offshoring rumours and Financial Services Union warnings are causing some consternation within the industry.

Difference of opinion Actuaries’ traditional reputation as very shy accountants is misplaced.

They’re actually outgoing, independent and quite happy to wield an opinion that goes against the common industry line.

So it is with the controversy over ways to make universal flood insurance possible. Briefly, the actuaries don’t want subsidy money set aside because it would go straight to insurers, and the insurers want the money because the alternative is more bureaucrats.

Actuaries Institute Chief Executive Melinda Howes says a

temporary pool of funds set up to subsidise high-risk properties would be better than direct government subsidies to policyholders because the money would not only go to the insurers but also remove any incentive for householders to floodproof their homes and for councils to build levees.

The Insurance Council of Australia wants short-term direct government subsidies because a flood pool “would only create another layer of government bureaucracy”.

The interesting exchange of views took place in late January.

insuranceNEWS

February/March 2012

MILLION

Amount in New Zealand dollars that IAG will pay to buy troubled New Zealand mutual insurer AMI

50

Average percentage rise property reinsurers imposed on Australian insurers last year

50

Predicted percentage for property reinsurance premiums in Australia this year

1

Number of hurricanes that crossed the US coast during last year’s JuneDecember hurricane season

1000

Percentage that some Cairns commercial property premiums allegedly rose last year

9

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newsmakers at

Big risk, big premium Rising premiums and increasingly risk-averse underwriters are making life difficult for many brokers and their clients in the far north of Australia. And the complaints of the people most affected – owners of strata title units in north Queensland – are being heard.

Hearings by a House of Representatives inquiry into residential strata title insurance in north Queensland centres in February have contained accusations of profiteering and desertion.

Some 388 submissions were made to the inquiry – mostly from property-owners – highlighting frustration and anger at insurers’ seeming intransigence.

Witnesses said many insurers refused to quote for Queensland strata properties. In one case the owner approached 13 insurers and still couldn’t get insurance.

Committee member Warren Entsch – whose Leichhardt electorate takes in most of Far North Queensland – told the hearing most buildings damaged in cyclones were built before 1976, when building codes were altered to strengthen properties.

Witness Margaret Trimble criticised insurers for being “a bit like the airlines”.

“They give you wonderful service between Sydney, Melbourne and Brisbane, but if you live further away you get the lesser service,” she said.

“I am concerned that where the impact is low, some of the insurance companies are happy to be in there and are very competitive; but as soon as it is a little bit hard they do not want to be involved.

“Why should they be allowed to pick and choose?”

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

FROM THE PUBLISHER The last few months of 2011 were a bit like the “phoney war” of 1939, when nothing happened for six months as the protagonists organised their forces and prepared for the battles ahead.

For the insurance industry, the long wait for reinsurance rates to rise is well and truly over. The phoney war, where brokers prepared their clients and prognosticators promised it was about to happen, is over. As we report in this edition of Insurance News, Australian property reinsurance treaty premiums rose by around 50% at the January renewals, on top of 50% increases last year. And there is more to come at the next round.

Up until last year, easy access to global capital and a generally manageable claims environment kept the lid on rates in the Australian market. Competition ruled for far longer than most Australian brokers were comfortable with.

Last year’s catastrophes in the region changed all that. Just as the phoney war in Europe eventually ended in mayhem, the next 12 months will test the skills of brokers in Australia and New Zealand. Clients will want to review their insurance programs line by line, and underwriters will be far more demanding for information on risks.

This is an environment where the balance of power undergoes a subtle change. It’s no longer quite so much a buyers’ market. Higher-risk business will, over time, be harder to place.

We’ll see new entrants in the local market as specialist reinsurers and underwriters follow the lure of higher premiums. They’ll probably move out just as quickly when the market next softens, but for now the opportunists

Terry McMullan

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

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will provide valuable competition to local insurers.

Previous hard markets also attracted shysters who offered low premiums to high-risk companies hobbled by premiums they couldn’t afford. Bitter experience has revealed that those “insurers” were usually reliant on equally dubious reinsurance arrangements. Australia’s licensing and enforcement system has hopefully evolved sufficiently to keep such people toeing the line. Time will tell.

In this edition we’ve compiled a range of articles and opinions that examine the factors steering the industry today. We’ve spoken to a global reinsurance expert to gain an impression of how the local market is regarded in the financial capitals; and we’ve interviewed leading financial analysts to understand the repercussions of under-performance from the viewpoint of investors.

All this leads the discerning reader to wonder if insurers held on to that soft market for a bit too long. The legendary insurance cycle stayed at the “high investment yields/low premiums” end for a long time. Even when things were going bad through 2011, commercial premiums stayed remarkably stable.

Should premium rates have been going up significantly in early 2011 or even late 2010? Or is the insurance cycle a phenomenon controlled only by a bewilderingly vast range of market forces?

We can’t answer that one, but I hope you’ll find plenty of answers in this edition of Insurance News.

insuranceNEWS

February/March 2012

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.

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Withering Heights All insurers had a torrid time last year, but investors have singled out QBE for special punishment

By Ben Oliver

MARKET ANALYSTS ONCE CRADLED THE comments of QBE Chief Executive Frank O’Halloran like tablets handed down from Mount Sinai. But a severe surprise downgrade in QBE’s end of year profit has, for the first time in a long time, turned the faithful into the fearful.

“A disaster”, was how Platypus Asset Management’s Prasad Patkar described the insurer’s 40-50% profit downgrade announced in midJanuary.

The “extremely disappointing” result, ATI Asset Management Chief Investment Officer Simon Burge told The Australian, had caused an “extreme lack of confidence in the management”.

Peter Esho, Chief Market Analyst at City Index, says many market watchers now doubt QBE’s “tone of management”, while Deutsche

Bank analyst Kieran Chidgey said the result caused a “loss of credibility”.

“I think the market was quite surprised by this and left scratching its head about what allowed this to happen,” JP Morgan senior insurance research analyst Siddharth Parameswaran told Insurance News.

“We were surprised by the quantum of the downgrade and a downgrade this late in the piece.”

The shattered profit expectations of the Top 20 global insurer have caused a chilling effect that goes beyond its immediate fall in stock value.

Experts are now hedging their bets and discounting QBE’s future profit guidance – a lack of faith unprecedented during Mr O’Halloran’s long tenure as chief executive.

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insuranceNEWS

February/March 2012

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“Their business risk has changed through acquisition. It seems that, indirectly at least, these acquisitions have put them into business lines which carry more cat risk.”

Reuters

– Deutsche Bank analyst Kieran Chidgey

Crop failure in the US: farm losses experienced

by QBE “only happen once every seven years”

“The aura of QBE management has been damaged,” Credit Suisse analyst John Heargerty said.

“QBE has only got one or two ‘outperform’ ratings on their stock, which for QBE is unheard of over the past decade.”

Right until QBE delivered its profit warning, Merrill Lynch was telling the market – which considered the second half of last year the more benign – to expect an after-tax profit of $US1.56 billion. Instead, QBE will lodge less than half that.

To say the market was blindsided would be an understatement.

“It’s difficult for investors to get their head around the profit drivers for a company with such large global reach,” Merrill Lynch senior analyst Andrew Kearnan says.

The timing of QBE’s profit announcement was also curious. Hurricane Irene struck the North American continent in late April, while flooding in Bangkok and Thailand’s Chao Phraya and Mekong River basin had mostly dissipated by November.

Yet in October, nearly two months after the first floodwaters reached Muang Nong Khai municipality in northern Thailand, QBE was telling investors it remained on track for an insurance margin of 11-14%. That has now been slashed to 77.5%.

“The market expected them to have a good grasp on their losses by December,” Mr Chidgey told Insurance News.

“We haven’t seen this kind of volatility in their [catastrophe] numbers before, and it does make the market question just how good their reinsurance numbers are.”

If 9/11 was QBE’s D-Day, 12/12 could well be its Bay of Pigs. More than 32 million QBE shares changed hands on the Australian Securities Exchange as the company’s share price dived by $2, wiping $2 billion from its market capitalisation.

It was the insurer’s worst single day of trading since the collapse of the World Trade Centre.

QBE lost money in three key areas. While rising credit spreads wiped $US160 million and unrealised losses from discounting outstanding claims cost another $US200 million, it was an uninsuranceNEWS

February/March 2012

precedented level of natural disasters –– and QBE’s exposure to them – which burned a hole through its chequebook.

“We thought our initial allowance at the beginning of the year… was conservative, given the past seven years,” Mr O’Halloran said. “However, events in 2011 have proven otherwise.”

In Mr O’Halloran’s defence, natural disaster losses are now approaching stratospheric levels.

Local and international insurers have all suffered, and QBE is not the only insurer to be buffeted by unfavourable winds.

Global insurance losses in 2011 are estimated between $US103-107 billion, the highest or second-highest on record depending on the source, and are nearly three times insured losses from the previous year.

In this environment, QBE’s combined operating ratio (COR) – a measure of underlying insurance profitability – of 95.7, contrasted with the 100-plus CORs of Lloyd’s, Aviva and RSA – comes across as a risk management masterstroke.

In Australia, the Insurance Council of Australia says insured losses were $4.9 billion in 2011.

That’s an all-time record and more than double the losses sustained in 2010 – and an astounding 12 times higher than the losses of a decade ago.

Rival insurer Suncorp will pay out at least $200 million from the Christmas Day hailstorms in Melbourne, and its natural hazard costs are now at least $120 million over allowance.

Wesfarmers Insurance’s earnings before interest, tax and amortisation for the half year to December 31 will be down 67%, while IAG has been forced to lift its cat reinsurance cover by more than $100 million.

Insurers are also struggling to pass on cost pressures through rises in commercial premiums.

While analysts have seen increases in certain catlinked lines, most speak of a “two-speed” economy where rate rises above 5% are rare.

Many clients are simply choosing to increase their excess rather than pay more in premiums.

While investors wreaked havoc on QBE’s share price, the sharemarket was comparatively merciful 15

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with other listed insurers. Wesfarmers shed just 7 cents after its insurance division update, while IAG’s shares were unmoved after announcing its new reinsurance arrangements; they even rose 7 cents after its January 10 storms update.

Suncorp lost 22 cents to close at $8.42 after its Christchurch and Melbourne storm updates, but its share price is still higher than it was six months ago.

“Definitely, QBE has been the most interesting story,” Credit Suisse’s Mr Heargerty said.

The hook to this story is QBE’s shift into risk portfolios that seem destined to collide with the increasing frequency and intensity of natural disasters.

Mr Heargerty says that since the collapse of HIH Insurance, QBE has been steadily increasing its exposure to highly profitable – but volatile – property lines.

More than 55% of QBE’s book is now property risk, up from around 40% 10 years ago.

“If you look at one of their items, crop insurance in the US – that is clearly a recent acquisition that is more vulnerable to weather conditions,” Mr Heargerty says.

The downside to higher margins is, of course, greater exposure to expensive weather events, no matter how rarely they actually strike.

“They say the crop losses QBE has suffered in the US only happen once every seven years,” Mr Heargerty says.

Deutsche Bank’s Mr Chidgey agrees.

“Their business risk has changed through acquisition,” he says. “It seems that, indirectly at least, these acquisitions have put them into business lines which carry more cat risk.”

So will QBE’s depressed balance sheet suppress its appetite for acquisitions? Most analysts believe it will.

A rumoured move on HSBC’s non-life insurance operations, where QBE, Axa SA, and Ace are reportedly locked in a three-way $US1 billion “bidding war”, is likely to be bunkum.

As for smaller bolt-on acquisitions, Mr Chidgey says the company’s weaker capital position affectively “ties its hands”.

“Historically, QBE has been a very acquisitive company, but with their current capital position they can’t do that,” he said.

“For now, it’s more about delivering on earnings and slowly, organically rebuilding that position.”

Despite a dire start to 2012, QBE’s financials are still sound. In the past seven years, the group has averaged an insurance margin of around 18% and a COR under 90. Both its tangible book value and market capitalisation have also grown over the same period.

Despite the huge devaluation in its stock value, QBE’s share price trend and those of the ASX 300 and financials are near mirror images of each other.

Of course, problems do exist within the business. From a high of $35 per share in 2007, QBE is now languishing below $12.

Between 2007 and 2010, its return on equity also fell from 25% to 13%.

Dividend payment trends are also worrying shareholders. The anticipated second-half dividend payout will be at its lowest level since June 2004.

Since reaching a high of 65 cents in December 2008, paid dividends have plateaued while franking levels – a measure of how much tax is pre16

paid on a dividend by a listed company – have fallen from 50% in December 2007 to 10% in the first half of 2011.

An upside for potential investors is that at its current sharemarket price, QBE is an absolute bargain.

“It is cheap but there are question marks around margins and where they ultimately will be,” JP Morgan’s Siddharth Parameswaran said.

Merrill Lynch’s Andrew Kearnan describes a “dislocation” between the company’s current share price and its earnings guidance.

“QBE has missed earnings expectations for several periods now,” he said.

“We sense investors will seek greater comfort on the factors driving the earnings misses and the state of QBE’s balance sheet before buying back in.”

Reuters

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QBE’s Frank O’Halloran: the initial allowance was “conservative”, but events in 2011 proved otherwise

Alarmingly for QBE, hitting its 2012 forecasts of 89% COR and an insurance profit margin of 15% is almost completely out of its hands.

Anything other than a quiet start to 2012 will almost certainly see future downward revisions from the insurer.

“Hitting their guidance depends very much depends on cat outcomes over the next six months,” Mr Chidgey says. “That’s the big swing factor.”

As Lori Dickerson Fouché, the Chief Executive of US insurer Fireman’s Fund, said recently, “Hope is not a strategy, as much as we would like it to be. Underwriting discipline, operational effectiveness and pricing – these are the basics of running an insurance company.”

Hope also isn’t a commodity analysts and investors normally buy. They want a return to the certainty they’ve come to expect from QBE, even at a time when other insurers are experiencing

conditions every bit as torrid. insuranceNEWS

February/March 2012

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Repenting at leisure IAG’s pursuit of failed insurer AMI has upsides – but some past romances have ended in disillusionment

AIRING DIRTY LAUNDRY BEFORE A MARRIAGE IS CONSUMMATED is vital, particularly when both bride and groom have history.

IAG may be the white knight to AMI’s damsel in distress, but when it comes to starting new relationships the Australian insurer has a dating history chequered with liaisons that didn’t quite live up to expectations or – like its UK business – were trouble from the start.

This will be the fourth year in a row that IAG hasn’t hit its return on capital targets – a result partly attributable to a string of acquisitions.

Many analysts say the market would be happier for IAG to concentrate on its core business rather than embark on another acquisition spree.

But first it has to sort out the purchase of AMI, the New Zealand insurance mutual that last year found itself hopelessly compromised through a unbalanced exposure to Christchurch earthquake claims.

As IAG beds down that deal, the group’s Malaysian partners are also busy making new bedfellows.

Subsidiary AmG Insurance Berhad, 49% owned by IAG, has announced it will acquire Kurnia Insurans Berhad, the principal insurance business of Kurnia Asia Berhad.

The combined entity will be the largest motor insurer in Malaysia.

But on the other side of the world, IAG’s UK operations are continuing to cause problems.

Equity Red Star has been a weeping sore in IAG’s balance sheet for years. After injecting $365 million into its claims reserves in June 2010 due to a “significant deterioration”, the group announced last year it was restructuring its UK motor underwriting operations.

Managing Director Mike Wilkins insists the UK operation is not for sale, despite persistent rumours to the contrary.

IAG predicts its UK operations will break even or turn a small 18

insuranceNEWS

profit this year, but a scrape with Lloyd’s has further called into question its underwriting practices.

Equity Red Star narrowly avoided a £1 million fine from Lloyd’s earlier this year after it admitted two charges of “detrimental conduct” following an investigation into its underwriting standards.

Three former employees – former IAG UK Chief Executive Neil Utley, senior underwriter John Josiah and ex-UK Commercial Director Douglas Morgan – faced a disciplinary panel in London late last month.

Mr Utley left IAG by “mutual consent” in 2010 and is now the Chairman of Hastings Direct, a company he is preparing to float sometime this year.

Known for his flamboyant style, Mr Utley is one of the richest men in UK with an estimated fortune of £160 million. He has denied any wrongdoing.

AMI is another company with a troubling amount of baggage.

Even before the Christchurch earthquakes struck, AMI was being accused by competitors of selling premiums at irresponsibly low prices.

And when the earthquakes did hit, plucky AMI admitted she was broke and sought sanctuary in the form of a $NZ500 million bailout from the New Zealand Government.

Yet for all her obvious blemishes, AMI does have some inviting features. A merger would give IAG’ a 40% stake in the New Zealand insurance market, including dominant positions in motor (61%), home and contents (61%) and other personal lines (53%).

IAG says the two combined could achieve $NZ30 million in synergies within two years.

In seeking a suitor, AMI hired Goldman Sachs to get its affairs in order, which quickly got to work placing ads in the mergers and acquisition equivalent of Craig’s List.

Valued by the New Zealand Government at $NZ159 million, IAG has agreed to a dowry of more than twice that amount – $NZ380 February/March 2012

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million. The insurer had to raise $NZ150 million through a bond issue first, stating at the time it was for “general corporate purposes”.

Most analysts believe IAG could never have retained its 1.45 times minimum regulatory capital requirement and purchase AMI without the bond sale.

In return – consider it a wedding present – the New Zealand Government has agreed to retain AMI’s outstanding earthquake claims, or $NZ1.8 billion – about $NZ1.3 billion of which is expected to be offset by reinsurance covers.

But before a merger can be finalised, the New Zealand Reserve Bank, Commerce Commission and Overseas Investment Office must grant their blessing. Consent from the Commerce Commission hinges on its interpretation of the Commerce Act provision prohibiting mergers that lessen competition. IAG will have to convince the commission that the reduced competition would be in the public interest.

However, Merrill Lynch analysts Andrew Kearnan and Thomas Cherian said the deal could be blocked, as it would turn the New Zealand insurance market into “all but a duopoly”. The Commerce Commission will deliver its decision on February 29.

So, to quote CNN finance guru Richard Quest, was this deal the right deal? Those in the industry are deeply sceptical.

“The difficulty with AMI is that it has a disproportionate exposure to some very toxic business,” an industry source told Insurance News. “If you ring-fenced that business from a new operation, what would you actually be buying?”

Another informed source says reinsurers expect all New Zealand insurers to show responsibility in their pricing. AMI must raise its premiums to reflect risk.

“AMI needs to be showing that they’re looking after their reinsurers’ interests in the way they price their products,” he said.

Analysts contacted by Insurance News have neither panned nor insuranceNEWS

applauded the deal. All agree on its attractive structural elements, but are concerned about price and risk exposure.

“It increases IAG’s exposure in a country with pretty severe and unpredictable risk,” Morningstar insurance analyst David Walker told Insurance News. “Is that a good thing to do?”

Mr Walker says the crux of the deal is how successfully IAG can pass on costs through rate rises.

“That’s the pivot point,” he says “Insurers are doing that in Australia, but whether IAG can do that in New Zealand I’m not sure.

“Reinsurance covers for AMI are in place until June 30 2012, after which time we’ll probably see a double-digit increase.”

Synergy benefits and market expansion aside, Credit Suisse analyst John Heagerty says he can’t reconcile the risk IAG is accumulating.

“From our perspective, we wouldn’t be particularly happy with the increased exposure to risk,” he said.

“They paid a very high premium and that raised some questions.”

Deutsche Bank analyst Kieran Chidgey says IAG must meet its forecast cost synergies for the deal to make financial sense.

“There is potential to generate a 15% return, which would make it a good deal if they can get those cost synergies out.”

He says sourcing reinsurance may also be problematic for IAG – a problem that will be multiplied if more disasters strike the region.

Mr Heagerty is upbeat on AMI’s potential earnings, and believes IAG could navigate through reinsurance problems by packaging its Australian and New Zealand reinsurance programs.

“But this would mean the Australian operations would be subsidising the Kiwi operations,” Mr Heagerty says. “All things being equal, it should deliver some good returns, if there isn’t another big quake.

“In that case, they may not be able to get any reinsurance at all.”

February/March 2012

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THE MARKET: Signs of life Premiums are rising on the back of weather claims, reinsurance costs and low returns COMMERCIAL INSURANCE LINES HAVE suffered a long dark winter, but hints of a thaw are starting to appear.

All the levers are in now place for a price upswing. As capacity remains abundant, reinsurers have held prices steady across the board while passing on drastic hikes in the most risky classes – commercial property (up 31%), domestic motor (up 22%) and household insurance (up 31%).

Rises in reinsurance rates are affecting all prices by at least 2-3%.

While more cash is spent on reinsurance, less cash is returning from investment portfolios. Yields are stagnant at home and abroad. Even risk-free yields fell by 1.7% in the past six months, a worry for insurers looking to bank easy returns on long-tail lines.

When combined with last year’s insurance losses – now officially the highest of all time at $4.9 billion – the time for small talk and half-measures is over.

“There has been talk of rate rises for a while, and the industry is flagging bigger increases in 2012,” JP Morgan Senior Insurance Analyst Siddharth Parameswaran says. “We will get them.”

While thriving competition in commercial lines has prevented insurers from forcing through wholesale premium hikes, the overall trend appears to be up, according to JP Morgan and Deloitte.

Their latest general industry survey released on January 31 shows prices are rising to address a prolonged deterioration in commercial lines profitability.

Despite directors’ and officers’ (D&O), professional indemnity and commercial motor all showing improved combined ratios from the previous year, average combined ratios in commercial lines rose from 92% to 106% in 2011 as floods, fire and hail caused commercial property to jump a whopping 36 percentage points to 134%.

The biggest premium increases were seen in short-tail fire and industrial special risks and commercial motor, up 7% and 4% respectively.

That’s well above the commercial average of 3% for the 2011 financial year and largely

stable professional indemnity and D&O lines.

Insurance on commercial and domestic properties, which accounts for a quarter of all premiums paid in Australia, is expected to jump again over the next 24 months, particularly in commercial property, where insurers are hopeful premium prices will increase by 9% and 8% over the next two years.

Rises in commercial property premiums are indiscriminate across corporates, the middle market and SMEs. Mr Parameswaran says insurers have no choice but to lift premiums.

“Increases are needed from what we have seen over the past few years,” he said.

“Insurers haven’t made a reasonable return on capital on some of these lines for many years.”

As insurers reclaim money from underpriced premiums, money is also being saved by changes to deductibles in policy terms and conditions.

However, even with rising prices, clients are still getting a great deal on most premiums.

Based on JP Morgan/Deloitte data, commercial lines products are still cheaper than

Y “Survey participants expect the commercial lines combined ratios to sharply rebound by 11%, largely through normalising catastrophe costs and reduction in overall expense ratios which had crept out in the 2011 results.”

“Normalised” cat costs means drastically reduced, but insurers may need to recalibrate what constitutes a “normal” year.

The report says 2012 is expected to be another bad year for weather-related claims while the La Nina weather pattern remains.

“We have had it expressed to us by at least one expert on natural peril modelling that his research suggests La Nina periods are auto-correlated – that they tend to occur in clumps, meaning that there could be elevated natural peril claims for a few consecutive years,” the report said.

Combined ratios improvements this year may also be, as Mr Parameswaran states politely and frequently, “optimistic”. Where the insurance industry has forecast a combined ratio of 98% in 2012, JP Morgan and Deloitte have tempered that forecast at 133%.

Considerable reserve releases in many long-tail lines, especially workers’ compensation, compulsory third party and liability, also aided the 2011 combined ratio results.

“We call it a theoretical sanity check,” Mr Parameswaran said.

“We have had an above-average year for claims, and there is an expectation for improvement, but it’s the quantum of improvement we are not so sure about.”

The report says staffing and climate change still dominate the priorities of industry captains.

Regulatory changes and staffing issues are the two most common problems facing insurers, while half of the brokers interviewed feel climate change and distribution channels are the most pressing issues.

“The Australian Prudential Regulation Authority’s capital standards for life and general insurance capital reforms that are due to be implemented by the industry from 1 January 2013 will be a major reason for these results,” Mr Alexander said.

“The internet only accounted for 2% of sales back in 2003 when we first started asking about the use of the internet in our survey. In 2010, the use of this channel had increased to 11% and was forecast by the industry to increase to almost 20% in 2015.

“The rise of social media channels as a bona fide way to connect with customers also throws the skill levels and staffing shortages that emanate from such changes into

relief.”

“Even with rising prices, clients are still getting a great deal on most premiums.”

20

they were in 2006, and premiums on commercial property are only 1.12% more than the average paid five years ago.

Relatively cheap rates in commercial classes contrast sharply with domestic lines, where the average premium is 26% higher than it was in 2006.

Household premiums alone have increased by more than 45% on average over the same period.

While floods, fire, earthquakes and hail ensured insurers did it tough last year, most still managed to turn a profit, according to the Australian Prudential Regulation Authority’s (APRA) latest data.

Deloitte Insurance Leader Stuart Alexander says an expectation of fewer natural catastrophe claims and rising premiums has kept the industry “upbeat”, despite an exaggeration in expected premium rises from industry respondents. insuranceNEWS

February/March 2012

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50%

The pain begins Local reinsurance rates moved sharply up in the January renewals, and there’s more to come

By Jan McCallum AUSTRALIAN PROPERTY REINSURANCE TREATY renewals rose by around 50% at the January renewals, and there is more to come at the next round on July 1.

The increases come on top of a 50% rise at the July 2011 renewals for Australia and New Zealand covers as reinsurers move to recover losses from floods, earthquakes and bushfires.

Reinsurers have warned insurers of more increases as lossaffected policies in this region come up for renewal this year.

But brokers contend that the reinsurance market still has plenty of capital, which will limit its bargaining power.

The reinsurers are estimated to have incurred half the estimated $108 billion in insured catastrophe losses in 2011 [see report, page 50], considered by many to be the worst year on record for insurance losses.

An analysis by Guy Carpenter of the January renewals says programs exposed to both Australian and New Zealand catastrophe events sustained reinsurance rate increases of more than 50% compared with a global average increase of 9.5%.

“Rates increased considerably for lower layers as a result of loss experience,” the Guy Carpenter report says. “Upper layers also have experienced significant increases, as reinsurers reevaluated the cost of deploying their capacity to Australian and New Zealand catastrophe programs.”

Hannover Re Chief Executive Ulrich Wallin told European analysts a few weeks ago that the January renewals had been “satisfactory”, and he was looking for further increases this year, particularly in loss-affected regions such as Japan, Australia and New Zealand.

Japan renews its treaties on April 1, and many Australian and New Zealand covers come up on July 1.

Hannover Re reported an increase of up to 60% for its Australian covers that renewed in January.

Given the availability of capital, it seems that rates are flat on business that has not suffered loss.

Munich Re reported significant rate increases in natural catastrophe covers in the US, Australia and Southeast Asia but said “prices in other regions or classes remained unchanged, for example in European natural catastrophe business, or rose slightly, as in UK motor business”.

The Group’s Reinsurance Chief Executive Torsten Jeworrek told analysts at the profit announcement in early February that reinsurance markets “remain keenly competitive”.

About half Munich Re’s non-life reinsurance business came up for renewal at January 1 and the price level rose by 2%.

22

insuranceNEWS

Within that figure, Munich Re got increases in the low double digits for US natural catastrophe cover, and says prices were appreciably higher in Australia and Asia. The group expects further price increases from Japan in April and Australia and some American regions in July.

However, the Guy Carpenter analysis says reinsurance capacity has remained largely intact, with relatively small amounts of capital withdrawn from the market.

“With prices increasing to what many reinsurers perceive to be a more sustainable level, some underwriters have taken the opportunity either to increase shares or to return to a market where the pricing had been too challenging before.”

Guy Carpenter says that although 2011 was the one of the worst loss years on record, reinsurers were better capitalised than at any other time of heavy loss.

“Although much of the sector’s excess capital was reduced at mid-year, dedicated reinsurance sector capital finished 2011 near the same level where it began,” its report says.

“Improvements in enterprise risk management and effective capital management contributed to the success and strength of the industry.”

Willis Re sees the market segmenting, “with rate movements being driven by individual loss history and perceived exposure movements, rather than by an overall blanket increase”.

The reinsurance broker believes rate movements are being driven by the challenge for reinsurers of making a profit when interest rates are low, rather than by capital shortages typical of a hard market.

Willis Re Chairman of International Business James Vickers says that higher pricing for natural catastrophe risks has attracted fresh capital to the industry, primarily through specialised investment funds.

He says that despite reinsurers’ reasonable levels of capitalisation, their earnings from investment income look increasing bleak.

Aon Benfield Analytics says reinsurers were able to respond to a “seemingly unending series of catastrophes” in 2011, but the industry’s earnings and capital are challenged by low interest rates associated with sovereign debt issues in Europe and global economic uncertainty.

The company says demand from US and European insurers for additional reinsurance remains very price-competitive.

The July outcome will show just how much the reinsurers

have been able to talk up their prices.

February/March 2012

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The very model of a modern major disaster How insurance companies – and their money – help communities pick up and keep going after devastation

By Nicole Lindsay

SUNCORP TOOK AN UNUSUAL STEP last year in the aftermath of the summer’s devastating catastrophes. It asked analysts Deloitte Access Economics to investigate the insurer’s performance and the impact the money being poured into rebuilding homes and businesses has had on the Queensland economy.

Personal Insurance Chief Executive Mark Milliner says the report was commissioned to find out what role insurance companies really play in the recovery of a stricken community.

“From our point of view, it really needed to be done so we could show the value we add to the local and wider com-

24

munities,” Mr Milliner said.

In the space of a few weeks three major disasters hit Queensland. The floods in December and January in central and southern Queensland represented the biggest single insurance event in the state and one of the largest in Australia.

Cyclone Yasi followed in February, battering the north coast.

Crops were ruined, mines were flooded, homes were destroyed and businesses ground to a soggy halt. Lives were lost and survivors traumatised.

To date, Suncorp has received about 40,000 claims valued at just over $1 billion.

Residential claims are worth $767.7 million

insuranceNEWS

February/March 2012

and commercial claims $267.2 million.

Figures from the Insurance Council of Australia indicate that more than 130,000 insurance claims worth more than $3.7 billion were made following the Queensland disasters.

The report, The Road to Recovery, analyses Suncorp’s claims data and finds that more than $422.3 million has been pumped back into the economy this year by the company, adding 0.16 percentage points to Queensland’s shredded economic growth.

Using economic modelling, the report showed that Suncorp’s claims payments are expected to contribute $1.2 billion to the Queensland economy over the next 10 years.

The sheer scale of the combined disasters led inevitably to criticisms of the insurance sector, particularly over the precise definition of flooding and the slow processing of claims.

All but a couple of Suncorp brands covered flood – AAMI was one but it now offers the same sort of cover as the group’s 11 other insurance brands – consumer lobby group Choice controversially gave the insurance sector a “Shonky Award” – although it exempted Suncorp itself from the dubious award.

Mr Milliner says the report wasn’t designed to counter the post-disaster criticisms of claimants, consumer groups, the media and politicians, but to simply provide “proof” of the insurance sector’s worth.

“What we talk about a lot has been demonstrated and proved by economists and actuaries,” he told Insurance News. “I think it’s something the industry generally has lacked. This report is a support mechanism, and it shows we do a great job in securing local communities.”

The intensity and scale of the Queensland disasters showed how important the

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“The damage to Queensland's economy has been compounded by an understandable lack of demand from Japan – one of the state’s biggest customers.” insurance sector’s role is in putting the community back on its feet, he says.

And the lessons learned from the Deloitte research applies just as easily to other disasters around the country, such as the hailstorms that hit Victoria and the bushfires in Perth.

“It’s about us showing, to both the government and the community more broadly, that we play a critical role and do it exceptionally well,” Mr Milliner says.

He says that when it comes to recovery efforts, it’s obvious that insurance companies work faster than governments can.

26

“We are set up to do that. Governments are not set up to do that. They give out small cash payments, but the reality is we spend a lot more money than them in a short timeframe. That’s the critical role that insurance companies play in the community.

“Government comes back later on for the reconstruction of infrastructure,” he says.

And as Queensland illustrates, the cost to state governments is great. Overall, last summer’s disasters stripped $6 billion from Queensland’s gross state product, or 2.25%

insuranceNEWS

February/March 2012

growth, according to the State Government's budget papers for 2011/12.

The Federal Government has also paid out nearly $1 billion in hardship payments and was forced to introduce a flood levy bill to help fund $1.8 billion for reconstruction work.

The ongoing cost of infrastructure recovery and community support by state and federal governments (up until 2013/14) is expected to hit $6.86 billion.

Queensland industries were also hit hard by the floods, with losses in the coal, tourism and agricultural sectors costing more than $7 billion.

The first floods in December, which stretched from Rockhampton to Hervey Bay, closed coal mines and the railway tracks which carted the coal to the ports.

By March, coal exports had fallen 27%, and while there was some recovery, exports declined by 6.6% for the financial year ending in June. Coal production across the state fell by 27 million tonnes in 2010/11 – a loss of $5.7 billion.

In the agriculture sector, the floods hit sugar cane and cotton crops, and Cyclone Yasi knocked out banana and avocado crops at a total cost of $1.4 billion.

The loss of tourists to Queensland, which was more than half underwater at some points in the summer, cost another $400 million.

The report warns that the damage to Queensland's economy has been compounded by an understandable lack of demand from Japan – one of the state’s biggest customers – as it struggles to recover from its own devastating earthquake and tsunami in June.

Japan buys a quarter of Queensland coal, worth $6.6 billion, and 40% of its beef ($1.3 billion). Japanese tourists also

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“Choosing local suppliers and builders and tradesmen makes sense in terms of getting the economy back up and running.”

make up 11% of Queensland’s foreign visitors.

While the economic losses have been enormous, The Road to Recovery also shows how recovery and reconstruction can stimulate activity, especially in repair and clean-up operations that would otherwise never have been needed.

The spending from property damage claims had a huge impact in the retail and building sectors, where claims payments were spent on the replacement of domestic items and on reconstruction and repairs.

The report notes these areas have been the weakest part of the economy in recent years and were the largest direct recipients of the post-disaster insurance payouts.

Construction activity around Brisbane got a 1.22% boost over normal activity; central Queensland building activity rose 1.19% while activity in the north of the 28

state, where Suncorp is a major insurance presence, rose 3.23%.

However, the report suggests the impact of this spending should not be overstated; the benefits it brings are still outweighed by the costs of the disaster.

“It is important to note that much disaster-related spending is essentially brought forward from future periods, by necessity, and often comes at the expense of expenditures in later periods,” it says.

The report also warns that other areas of the economy can be adversely affected when there is an increased demand for particular skills and qualified workers to help with reconstruction work.

And when it comes to the huge task of rebuilding infrastructure, disaster recovery spending diverts available funds from one area to another.

The unemployment that can arise from insuranceNEWS

February/March 2012

disasters can also have a flow-on effect and reduce consumer confidence and spending.

Mr Milliner says Suncorp always tries to employ local tradesmen and businesses, and the report showed its activities helped create about 3700 jobs in Queensland last year.

“It really does make a lot of sense,” he told Insurance News. “Choosing local suppliers and builders and tradesmen makes sense in terms of getting the economy back up and running.”

But the reasons for choosing local workers aren’t just altruistic. There are strong economic reasons for doing it, he says.

“Part of the reason is if you have a roof re-done and there’s still a small leak, it's easier to get someone to come back and have a look at it if they are a local.

“If you start flying people in there’s a big additional cost in terms of accommodation.”

This interview took place as Queensland braced for a summer that weather experts have predicted will be wet and contain more cyclones.

“We just don’t know what will actually happen,” he says. “We can have four cyclones doing circle work around the Pacific Ocean and we just don’t know where they will go.

“If you look at these events in the past 50 years, they always come in clusters.

Climate change is happening, but we always have clusters of events.

“The most important point is that we are really well prepared. There is lots of information about what customers should do and we have our customer response units organised.”

Suncorp’s customer response units are made up of 10 to 15 people, including assessors, who can investigate and process claims on the spot.

“Customers love it,” Mr Milliner says.

“They can come in and talk to us on the ground, because when a disaster strikes there are always problems with communications.

“It differentiates us as a company. We even beat the media in.

“We had people in Ipswich, Toowoomba, Burdekin and up at Innisfail and Tully really quickly.”

Mr Milliner says the report on Suncorp’s performance really isn’t just about was the Queensland-based company.

“This is a good indication of how strong the industry is in Australia,” he says. “It’s a critical part of the fabric of our industry.

This is a really good indication that we are needed.

“It shows the important role that we play when disaster strikes. Insurance companies have a hugely important role to play in

the community and we do it very well.”

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Lessons from the quakes Canterbury businesses now know a lot more about insurance, and why having a broker is important

By Jan McCallum

Business as usual: pharmacy worker Hope Greenway ignores spilled goods caused by one of the more than 3300 quakes and tremors to strike the Christchurch area. Insurers and brokers have a role to play in helping clients plan for disaster

ONCE THE TREMORS HAVE SETTLED AND COMMERCIAL life is back to normal, Christchurch will be a great place for insurers to do business.

You might expect Bevan Killick, Business Recovery Co-ordinator of Recover Canterbury to say that, since his organisation is charged with helping businesses recover from the earthquakes. But Mr Killick, who has worked with Lloyd’s, the Lloyd’s run-off vehicle Equitas and as a risk manager with Torus Insurance in London, says both insurers and clients have learned lessons that will lead to a stronger and more vibrant market in future.

Canterbury Employers’ Chamber of Commerce Chief Executive Peter Townsend says the province’s oldest and most risky buildings have gone, the new ones will be built to the highest standards, and money will be flowing in for the rebuild.

“We are going to be a rapidly growing, very cash-rich community,” he told Insurance News. “It will be paradise for insurers in the future.”

Both Mr Townsend and Mr Killick say consumers have become more sophisticated about buying the right insurance, and as a result insurers and brokers have to lift their game.

Prior to the first earthquake in September 2010, New Zealand had enjoyed a relatively low incidence of claims. It was easy to get cover in a competitive market and regulation of insurers was fairly relaxed.

Premiums in Christchurch have since doubled or trebled 30

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and Mr Killick says while New Zealanders have accepted that they enjoyed low premiums for a long time and now have to pay more, they are also asking more questions to ensure they buy the right cover.

Mr Townsend says the greater awareness about insurance will benefit the industry going forward, but insurers and brokers need to do more to define and clarify policies so clients understand exactly what they are covered for, who is responsible for what and in what timeframe.

“More clarity in terms and definitions of insurance is fundamental.”

He says the earthquakes have highlighted a lack of understanding of insurance, with many insureds unaware of the details of their cover and how policies would be interpreted.

When business interruption cover was triggered there were questions about how business activity was measured before and after events, as well as the obligations of the insurer, broker and client.

“People have learned a lot of lessons about their contractual obligation to the insurance company,” Mr Townsend says. “The expectation that the insurer should bend the rules because of the magnitude of the disaster is not realistic.”

Mr Killick says business-owners who bought cover directly from an insurer have generally fared worse than those who used a broker, as brokers have ensured cover was tailored to their February/March 2012

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NZ Herald

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“Businesses should have a disaster response plan that flows into a business continuity plan, and the insurance industry should be asking for this.”

– Christchurch business consultant Eric Livingstone

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particular needs then acted as advocates for their clients with the insurers.

Managers are now more prepared to see a broker as part of their advisory team, along with their accountant and lawyer, and clients have a greater appreciation of risk management.

With premiums increasing, clients will have to consider their risk appetite and how they will manage risk and he says brokers and insurers need to work with clients on risk tolerance and trade-offs.

“I would love to see the industry be significantly more flexible – and they have been on the big industrial business – in terms of deductibles and excesses.”

Mr Killick says with premiums increasing, some insurers are still enforcing relatively low excesses, such as $NZ850 for a homeowner, when the client might be prepared to accept a higher excess for a lower premium.

At the other end, he has seen quite modest businesses given excesses of $NZ500,000, and says insurers need to be prepared to negotiate with clients who are prepared to manage their risk.

Christchurch-based business consultant Eric Livingstone has interviewed managers about their quake experiences and also believes insurers and brokers can play a greater role in encouraging clients to reduce risk.

Mr Livingstone, the Managing Director of Livingstone Board Services, identifies “human issues” as those that have caused the most concern for business owners. He says although these can be February/March 2012

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hard to anticipate, owners and managers can and should prepare.

He recommends businesses have a disaster response plan that flows into a business continuity plan, “and the insurance industry should be asking for this”.

And insurers should be asking how businesses will deal with emergencies as part of the risk mitigation involved in providing cover.

“Where is the board policy that requires management to have detailed plans, and why isn’t the insurance industry asking to see these documents?”

He believes two plans are necessary, as the disaster response is about ensuring safety while a business recovery plan is about keeping the doors open.

The disaster plan should ensure wardens are appointed to ensure emergency action is taken, that staff and everyone else on the site are safe, premises checked for safety and security and business records secured.

On the day of the February 22 quake last year, disaster plans were thrown awry because the earthquake occurred during the lunch hour, when many fire wardens and other key staff were out of the building.

Mr Livingstone says the event has shown that back-up people are needed when fire wardens are absent or cannot cope.

From his interviews following that quake, he estimates about half the designated fire wardens did not perform their duties.

Some were on leave or out, and others were more concerned with checking on their families.

Often people who were natural leaders emerged and took charge.

In the months afterwards, business-owners who could move to new premises still found it virtually impossible to restart quickly if their main computer server was not accessible and the backup was inadequate. Others found that their customers were no longer in business or, for retailers, there were no shoppers coming into the city and surrounds.

“Some people actually said ‘we had it all covered for in our business, but we didn’t expect half of our staff would not be there’.”

As the aftershocks continued, employers found staff would leave to see if their children were safe, or sometimes felt so jittery they couldn’t make it to work.

Mr Livingstone says these “soft issues” emerged repeatedly when he spoke to company managers. As they moved into the business recovery phase, employers spoke of the problems with absenteeism and increased turnover as people decided to leave Christchurch.

Managers of manufacturing businesses told him about staff who could not cope having to be removed from operating machinery. The health and safety officer at one site interviewed all the staff and decided about 10% were “flaky” or struggling to some degree.

Although Mr Livingstone believes businesses suffered when managers failed to empathise with staff, he says there has been a huge toll on executives and managers trying to keep the business running while dealing with traumatised staff and their own personal difficulties.

General managers found themselves doing things like having to drive to supermarkets to get lunches every day because there were no local cafes open, while being unsure how many employees would turn up for work and whether clients wanted to place orders.

“Their whole production schedule had gone out the window,” he says. “They might not even have all the staff they need to run some machines.”

Mr Livingstone says data backup must be at least five kilometres away and the business recovery plan needs to address options for other sources of telephones, internet and power as well as possible alternative premises.

“You also have to have a ‘practice’ disaster and test your plan, your back-up and recovery. Insurers can ask about this.”

Business-owners seeking insurance expect to be asked about their risk mitigation, and Mr Livingstone says the insurance industry can play a key role in reducing losses and keeping firms in business by creating expectations that their clients will be prepared

for disaster to strike.

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Plotting a new course After eight years as a niche insurer, Calliden is undergoing a makeover

By Ben Oliver

CALLIDEN HAS ALWAYS been a tricky company to define, and for shareholders a tougher one to love.

When Calliden was recast from the ashes of Reinsurance Australia Corporation (ReAC) in 2004, former Vero executive Nick Kirk saw an opportunity among sole traders, not-for-profit groups and niche personal insurance lines that he believed were under-serviced by the major players.

Analysts likewise saw great potential in the company’s unique tax situation. Due to its predecessor’s bank of franking credits and tax losses, Calliden could, theoretically at least, pay no corporate tax and pass on earnings to shareholders as 100% franked dividends.

Nearly eight years on, Calliden has fallen well short of those lofty ambitions.

Since its emergence as a niche alternative to the majors, Calliden’s story has been one of unrealised targets and unmet expectations.

After three straight years of losses, the company posted its first profit of $1.3 million in 2007, followed by a $9.147 million profit in 2008 and a loss of $396,000 in 2009.

A remarkable turnaround in 2010 saw the company bank $10.1 million – its best profit result – only to lose that amount and more in the upcoming 2011 results.

Volatility has been the core problem with Calliden’s business. Natural weather events incurred $5 million in losses in the second half of 2011 alone, February/March 2012

while reinsurance treaties took another $5 million.

Add in additional equity required for capital reserves, claims reserves and restructuring costs and it’s apparent where Calliden’s equity is being lost.

While recent natural catastrophes have played havoc with Calliden’s profits, Mr Kirk is the first to admit the weather is not the sole cause of the company’s woes.

“I’ve never said it’s just been about the weather,” he told Insurance News. “We’ve been responsible for building a company that has suffered some losses, some of which are caused by weather and some of which are the responsibility of the day-to-day running of the company. It’s all in the mix.”

Mr Kirk has now unveiled a new incarnation of Calliden that he says will streamline profits and smooth out the high and lows associated with the underwriting cycle.

In December last year, Calliden announced a strategic alliance with Great Lakes Australia, where Calliden will underwrite future commercial packages on behalf of the Munich Re subsidiary.

The company that has been in turn a reinsurer and then a speciality niche underwriter is now moving to a semi-managing general agent (MGA) model where the majority of its portfolio will be supported in tandem with another partner or capital source.

About 30% of the group’s premium is written on behalf

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“On balance I believe this new approach will deliver a better outcome in the long run. It trades off some upside for less risk.”

of Great Lakes, Lloyd’s and the New South Wales Government, and Mr Kirk wants to bring that figure up to 50% or higher as the company completes a strategic review of its portfolio over the next 18 months.

Mr Kirk says while more of Calliden will become an MGA over time, Calliden Insurance will always be retained as part of the mix.

He says the “new Calliden” won’t be as captive to lower investment returns, volatile natural catastrophe losses and impending tightening of prudential regulations.

“We’ve got a very volatile natural environment and that’s led to a change in the reinsurance market – or certainly the reinsurers’ perception of risk in Australasia,” he said.

“Then there is the protracted uncertainty in the investment and economic environment globally.

“With none of these factors likely to disappear in the near future, I believe uncertainty is the new norm.”

Mr Kirk says the newer, leaner Calliden does have some downsides, even if it does have a much decreased risk profile.

“As we move down this path there is a price to having a less volatile earnings profile.

“If, for example, we were to have no weather catastrophes next year and investment markets returned to ‘normal’, then of course we would be better off being a pure insurer.

“But on balance I believe this new approach will deliver a better outcome in the long run. It trades off some upside

for less risk and in doing so provides investors with more certainty.”

Calliden has streamlined much of its business ahead of the change in strategic direction. In July 2010 it offloaded its stake in Sports Underwriting, and in December Mr Kirk sold the group’s 50% interest in Claims Services Australia (CSA) for $8.3 million.

He says this restructuring puts the focus on the company’s core business. The deal with CSA to bring Calliden’s short-tail commercial claims processing in-house was done because “we felt it would be better managed by ourselves”.

And he says the decision to hand over Calliden’s commercial portfolio to Great Lakes wasn’t driven by poor returns.

“Creating an alliance with Great Lakes means we can actively compete in that segment and really get some scale and good profitable growth.”

Calliden’s new business direction will take time to bear fruit. Mr Kirk told Insurance News it will be at least a year before the new, stable earnings profile has a material impact on the company’s balance sheet.

For him and his impatient shareholders, correcting the company’s course can’t come soon enough. Calliden’s stock languishes at an all-time low of 14c a share and hasn’t traded above 50c since late 2007. Its combined ratio fell to 96% in 2010, and it’s expected to run well above 100% in the upcoming earnings announcement. insuranceNEWS

In the company’s 2004 annual report, Mr Kirk targeted a return on capital of 12.5% to 20% within five years.

A year later, he told a briefing the SME segment “has been far less volatile than other insurance markets and we believe our target business is going to be less price-sensitive than some of the more commoditised business that’s available”.

But in the 2009 financial year, the company posted a net loss of $396,000, a far cry from the $15.6 million profit goal it set and well short of a $12.5 million profit that would have met Mr Kirk’s realigned benchmark of 12.5% to 20% measured against return on equity.

But Mr Kirk is confident he has right recipe for the company’s future success.

“From an investor’s point f view, improved customer service, lower loss ratio and reduced expenses will lead to a better and more consistent

bottom line,” he told Insurance News.

“We might be criticised for saying that it is going to take a year or 18 months to get there, but I don’t see a shortcut – and the alternative looks far more challenging than moving in this

direction.”

Calliden’s Nick Kirk: the insurance operation will remain as part of the mix

February/March 2012

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Tell it like it really was

How intermediaries can use the facts on what really happened after last year’s catastrophes to build opportunities

By Shaun Standfield, General Manager Australian Intermediaries, QBE Australia (This is an edited version of a presentation to the AFMA/IAAA Conference on the Gold Coast this month)

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A FEW MONTHS AGO THE AUSTRALIAN insurance industry was singled out for a “Shonky Award” by consumer advocacy group Choice (see panel). Along with other adverse publicity, this “award”, made after a year like no other the global industry has experienced, has caused considerable reputational damage to our industry.

Worldwide catastrophes in 2011 were the costliest ever in terms of economic and insured losses. Munich Re puts the economic loss for 2011 at $380 billion and insured losses at $105 billion.

The top three catastrophes occurred in the Asia-Pacific region: the Japan earthquake and tsunami with insured losses of $40 billion; the New Zealand earthquakes with insured losses of $13 billion; and the Thailand floods.

In Australia the insured losses from insuranceNEWS

February/March 2012

last year’s catastrophes are close to $5 billion, and more than 260,000 claims have been lodged – with 80% of the catastrophe claims lodged in the first 90 days of 2011.

In January the Queensland floods led to more than 58,000 claims worth $2.4 billion, while more than 72,000 claims worth $1.3 billion were a result of Cyclone Yasi, and nearly 8000 claims worth $122 million a result of the Victorian floods. In February the Perth bushfires saw more than 400 claims costing $35 million, and just one month later, storms in Victoria led to 50,000 claims worth $412 million. In November the Margaret River bushfires in Western Australia led to 400 claims worth $52 million, topped in December by the Melbourne Christmas Day storms which have raised nearly 80,000 claims estimated at $550 million.

The 2011 catastrophes are today considered a 1-in-400 year event. However, in spite of these figures, I think these events of last year and the poor publicity they attracted have actually created a great opportunity for us all – an opportunity to revisit the way in which we engage with our existing clients and adjust our approach with prospective clients.

What this “shonky award” highlights to me is the lack of understanding of how insurance works, confusion around coverage and how as an industry we weren’t proactive in engaging stakeholders to get the facts out there.

Facts like this: • Gross written premium for the Australian general insurance industry now exceeds $34.3 billion a year.

• The industry employs 60,000 people.

• It contributes an average of $95 million each working day in claims payments.

• 2% of personal lines claims were rejected in 2010.

• 99% of all claims that occurred in January/February last year had been assessed and determined by June.

It’s important we understand the macro-contribution we make to the Australian economy in terms of gross written premium, claims payments, employment and the real facts around claim denials.

Choice lists five practices it describes as “particularly shonky”.

Here’s my take on their list: 1.“Policyholders were dissuaded from making claims by insurance company staff.” It is ultimately the role of the broker to establish relationships with insurers and their staff, to understand claims processes and provide clients with advice.

2.“Claims were summarily dismissed

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C WHAT CHOICE SAID:

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Choice made its decision to award the Insurance Industry a Shonky based on information provided by those dealing face-to-face with the many consumers who have seen their flood claims denied. In a number of cases, due to unclear wording and because salespeople led them to believe they were covered, consumers mistakenly believed they were covered.

We have this information primarily from Legal Aid Queensland (LAQ), in an August 2011 report made available to Choice, as well as from interviews with the organisation earlier this year. This was when policyholders were facing what LAQ called “large-scale refusals�. We believe LAQ to be a well-placed, independent and informed source of information.

However, LAQ is not the only stakeholder to draw attention to the longstanding inadequacies of insurers when it comes to being up-front with consumers about flood cover; nor is LAQ the only stakeholder Choice has talked to or heard from. The issue has also caught the attention of government.

In August Financial Services Minister and Assistant Treasurer Bill Shorten said: “It is clear the rate of disputes for flood claims is unacceptably and substantially higher than for other natural disasters such as bushfires, cyclones and hailstorms.�

out of hand without investigation.� Brokers are in a position to explain how policies work.

3.“Verbal assurances were conveniently forgotten or denied after the event occurred.� Clients have an opportunity to ask additional questions and/or their broker can obtain information via a needs analysis.

4.“Confusing or complex claims processes.� Brokers know how to navigate this process, including managing client expectations, particularly in a time of natural catastrophe.

5.“Communication was as ‘clear as mud’; many policyholders required lawyers to assist in deciphering the excessive verbiage.� Brokers assisted their clients in understanding letters and the next steps in the claims process, including alternative channels for review.

So how many of these so-called practices are relevant to brokers or their clients when they have claims?

Put simply, not one.

The key reason for so much adverse publicity in 2011 was not systemic market failure in terms of service or responsiveness; it came down primarily to coverage.

Insurance is the final link in the chain after an event, and there’s lots that can be done to prepare for and mitigate risks.

Consider the following: • Flood mitigation: I believe less than $30 million was spent last year on flood mitigation in Australia, when on average floods cause $300 million in damage each year. That doesn’t include the total economic impact that floods cause. • Town planning: Fifty years ago around 70% of rain in urban areas was absorbed into the ground. Today runoff levels are at an all-time high. Now, with smaller building blocks and more hardsurfaced areas, less than 25% of rainwater is absorbed into the ground. Most of it runs into a drainage system that was built up to 100 years ago. • Many urban areas now lie in known flood zones: For example, there are now potentially 18,000 homes in the Hawkesbury-Nepean basin to the west of Sydney that could experience a significant flood event. Many of the residents insuranceNEWS

in this basin are living without any understanding of the potential risks, and most homes have been built on concrete slabs.

Many people are calling for national disaster pools, but ultimately we need people to understand the risks they face and to make sure that they’re adequately insured against those risks.

The Insurance Council’s 10-point plan requires a co-ordinated effort from both the public and private sectors to ensure future generations are properly informed, prepared and insured against the natural perils that are part of the Australian landscape.

The events of the last 12 months do create an opportunity for brokers to reevaluate the way they sell to both new and existing clients.

These events remain in the consciousness of all Australians. If brokers can do anything differently, I’d hope they can explain to their clients the contribution our industry has made and where the insurance cycle is at present.

Most importantly, brokers can ensure clients have adequate sums insured, appropriate levels of business interruption insurance and a clear understanding of the coverage and limits they have.

Of the 25,000 claims QBE received from Australian catastrophes in the first 90 days of 2011, fewer than than 1% went to internal dispute resolution, and of those less than a third were referred to the Financial Ombudsman Service.

I attribute these figures to those clients who had an advocate working with them to lodge claims and resolve issues; a broker who enabled them to be better informed about their policies.

It’s an often underused, but very real reason why clients should use an intermediary.

The facts are out there, readily available for brokers to use to assist in building understanding of the value they and the wider industry add. For brokers, the benefits are many – with growth in their businesses and the level of cover their clients should have hopefully at the top of

that list.

S M

Photo courtesy of d’Albora Marinas Akuna Bay

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Life & work in

NYC Want to take your skills and move overseas?

Meet some transplanted Australians enjoying the ‘city that never sleeps’

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THERE HAS ALWAYS BEEN A romantic, fatalistic attraction in packing your bags and heading overseas into that great unknown.

For insurance professionals, the greatest unknown – job security – is a little more secure; from London to Ireland, New York to Berlin, and Hong Kong to Singapore, the jobs market for young, mobile and skilled workers is booming.

“There is high demand for insurance professionals in general following recovery from the global financial crisis,” Hays Insurance Director Jane McNeill told Insurance News.

“Employers are looking to Australia to fill a number of available openings and many have become negotiable on language skills.”

As the three Australians in this article who were transferred to New York City by their companies can attest, working for their companies

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overseas is fulfilling on a personal and professional level.

The working world of insurance professionals has shrunk, with more employees planting roots offshore than ever before. According to global recruitment website eFinance Careers, 38% of finance professionals have relocated overseas to secure a new job or position.

Sixty per cent of directors and 42% of executives have left home at some stage for better opportunities abroad.

More than half of those seeking a move have up to five years’ experience.

And more global companies operating in Australia are using the lure of an overseas posting to attract the best local candidates.

“One of the benefits of working for a global company is the opportunity to be able to transfer overseas to learn new skills and experience living in a different country,” Ms McNeill says. insuranceNEWS

February/March 2012

The advice from many young Australians who’ve worked overseas with their companies is simple: ask for it.

“Don’t be shy about telling your bosses you want to travel and work with the company overseas,” one recently returned Australian told Insurance News.

“You won’t get it if you don’t ask.

“And the better you are at your job, and the more willing and co-operative you are at work in Australia, the better your chances of getting a gig in one of the company’s overseas locations,” she says.

“Everyone’s looking for qualified and experienced people, and if your boss is aware you want to travel and really values your work, then he or she is likely to help you get a job in an overseas office, because that way they’re not going to lose you entirely.

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qualifications up and make sure they know you want to gain international experience.”

Luckily for Australians working in insurance, local certifications and qualifications are globally recognised.

With so many jobs on offer, where should one begin looking? London has always been insurance Mecca, a reputation reinforced by Aon’s recent decision to relocate its headquarters there. Insurance brokers in the UK are also among the best paid in the country, ranking seventh on a recent list of the top-paid professionals.

Harriet Hall, a consultant with financial recruiter Marks Sattin, says the UK Government’s restrictive immigration policies have exacerbated candidate shortages. With the closure of the Tier 1 highly skilled migrant scheme, candid-ates must seek sponsorship – itself an incredibly onerous procedure – or apply for the Tier 5 Youth Mobility Scheme, a twoyear non-extendable visa.

Insurance professionals in risk and capital management, particularly in Germany and Switzerland, are in short supply due to demands placed on companies preparing for Solvency II. Crisis has created opportunity in the United States. Recent labour market figures show despite the loss of 7611 jobs in the finance sector last month, insurance added 1186.

Attaining permission to work through the US Government’s Machiavellian visa program has been simplified with the introduction of the E-3 visa, which accepts 10,500 Australian applications every year.

Those feeling lucky can also register 40

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for the Green Card lottery.

But it’s the emerging markets in Asia where insurance jobs are being minted at a frenetic pace. In Hong Kong, a December 2011 survey by PricewaterhouseCoopers shows Chinese insurance companies intend to grow their workforce from 17,665 to 24,551 in 2014. In Singapore, Lloyd’s is already very active.

Ms McNeill says overseas vacancies are most acute in actuarial, underwriting and claims roles. Marks Sattin director Graeme Bradley says professionals with actuarial experience in Hong Kong “can almost write their own ticket”.

“Actuarial guys are at the top of the food chain,” he said.

“The Asia-Pacific region is in its infancy. They are hungry for qualifications and experience.”

Besides the excitement and novelty of an overseas stint, how are your job prospects on returning home? Recruiters agree that an overseas posting can be beneficial towards your career, with some caveats.

Mr Bradley says local recruiters often look favourably on a candidate with international experience.

“It’s never a bad reflection on the individual, especially in the early years,” he says. “It’s a case of getting [travel] out of your system.”

But Ms McNeill says professionals should never expect a smooth return and should plan their homecoming well in advance to be sure of getting a suitable job quickly.

“Australians who are returning from overseas are finding it challenging to insuranceNEWS

February/March 2012

re-enter the market. Employers are requesting that candidates have already established contacts in the market.”

While the idea of an overseas adventure is tantalising, the reality is compounded by the culture shock and initial loneliness of a new place that some find overwhelming.

Candidates should explore the various visa options on offer and decide which one best suits their longterm ambitions. Having a solid track record, diversified skills set and openness to a pay cut or demotion will also help your chances of employment.

Ms McNeill says candidates for foreign jobs should also consider working for smaller insurance firms where fewer layers of management mean more hands-on experience.

“Things generally move faster in a smaller organisation and candidates will often have more responsibility.”

Experience and qualifications are often localised, so insurance professionals planning to find a job overseas should ensure their resume is as generic as possible.

“You don’t want to create ambiguity by calling it something only an Australian would call it,” Mr Bradley said.

Above all, be bold. As Belinda Walmsley, a spokesman for UK financial services recruiter Randstat says: “Don’t worry about what you read in the papers as to the state of the market.

“Do your own research and if you feel comfortable with what you find, sort out your visa, book your flight and come over.”

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Nadia Bagijn Regional Underwriting Manager, Chartis US, New York

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DON’T SIT AROUND WAITING FOR someone to offer you an overseas posting, says Nadia Bagijn; make sure your bosses know you want international experience.

She says work in foreign places is one of the advantages of being employed by global companies like Chartis. If you have the qualifications – Nadia has a masters in corporate finance and banking – and a solid work record, the opportunities are more likely to emerge.

“But only if you make it known that’s what you want to do,” she told Insurance News in a bustling coffee bar off Wall Street.

New York is Nadia’s second foreign posting with Chartis. The daughter of a Dutch father and French mother, she was born in France and moved to Montreal and then Philadelphia before the family moved to Sydney.

After more than three years working as a team leader and Chief Underwriting Officer in London, she scored a transfer to New York City, where she is a regional underwriting manager in Chartis’ New York office.

She’s aiming to spend at least two years in New York, and has a hankering to spend some more time in London and Europe eventually.

“There was a corporate reorganisation that led to an opportunity to work in New York. Who wouldn’t jump at it?” insuranceNEWS

February/March 2012

The New York job offers less social interaction with insurance brokers than she had experienced in Sydney or London. However, she says she enjoys meeting management from around the world in New York.

“I’m learning a lot here and the professional and personal experience has been incredible.”

She says her training in Australia has proved valuable in London and New York.

“In Sydney I had to go out and meet brokers all the time. I had to learn quickly.

Everything I learned in Australia I’ve used in my overseas jobs.”

New York is more expensive than Nadia expected it would be, with rent making the biggest dent in her salary. But Manhattan is pumping 24 hours a day, and she’s very happy living in the leafy downtown district of Battery Park.

From New York Australia seems a very long way away, and Nadia says she has moments where she misses the beaches and her friends. “The warm weather, the sounds of the birds, the wide open suburbs – it’s the ordinary things you just take for granted that I miss most.”

But modern travel means home is only 24 hours away, so there’s no feeling of being isolated from her family.

“I’d love to go back to live in Australia one day, but not for a while,” she says.

“That’s way in the future. There’s a lot more I want to do yet!”

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Adam Hill New York Metro Environmental Hub Leader, Marsh USA Inc AUSTRALIANS AREN’T EXACTLY RUN OF the mill in Marsh’s New York office, but as Adam Hill likes to point out, they’re not insignificant, either. After all, the US Chief Executive of Marsh is fellow Australian expatriate David Bidmead.

Adam is an expert in environmental risks, including law, risk management and engineering. The legal and regulatory mix of 50 states as well as federal government laws makes environmental risk a very challenging field to work in. And it makes Adam a very valuable member of Marsh’s US team.

It’s complex work, but also very fulfilling for this highly qualified and ambitious Sydneysider, who started with Marsh in his hometown in 2006 and quickly demonstrated his abilities.

“My portfolio in Sydney grew very quickly to include businesses in the Asia Pacific area,” he says. “It was really interesting work. I dived in and haven’t stopped since.”

In 2008 he spent five months working in Marsh’s US operations in the Boston and Atlanta offices before making the big move to the company’s New York headquarters in July 2011.

To get to work from his apartment in the upper west side of Manhattan involves a walk through Times Square, “and that’s when it always hits me that I’m really working in this fantastic city, right where I want to be”.

Adam had already lived in London for several years before he joined Marsh in Sydney, so he isn’t intimidated by the pace of New York life and commerce. But the size and volume of some of the businesses he’s working with keeps him on his toes.

“Having worked in the Asia Pacific division back in Sydney, I’ve had a really good grounding in the complexities of environmental issues in some of the countries that US companies invest in,” he says. “Every state, and come to that every country, has a different approach,

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and it’s important to understand those differences and help our clients to deal with them.”

He says Marsh recognises individuals’ achievements and provides “terrific” career opportunities for its staff around the world. “The people in this building come from all over the world.”

His own career goal at Marsh is to one day be the global practice leader in environmental business, and he believes his broking career “is right where I want it to be”.

“I set myself three-month, six-month and one-year goals, and I’m on track.

I’ve created my opportunities, and the company has responded by making them happen. There will always be opportunities if you do things the right way.”

Adam believes networking is important for young professionals working inside large companies like Marsh, just as developing and maintaining client relationships is important for brokers.

He says working in a city as crowded, fast-paced and noisy as New York is a case of “you either love it or you don’t”, and sometimes there’s a need to get away from the non-stop activity. He and wife Amy – a Californian he met in 2008 and married in 2010 – agreed before moving to New York from Australia that they would get out of the city at least once a month.

Like most Australians abroad, his thoughts sometimes turn to Australia and its more laidback lifestyle and wide horizons.

“I miss surfing, and I miss the beaches. But I learned to get on with life when I lived in London for four and a half years, so I don’t get homesick.”

His advice for young brokers starting their careers and interested in working overseas is simple and direct: “Have a three-to-five year plan and stick to it. And don’t wait for opportunities to work overseas – make your own.”

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“I’ve created my opportunities, and the company has responded by making them happen.”

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Joel Laventure Regional Vice President – East Coast, Major Brokers division, QBE the Americas IT’S MID-SUMMER IN AUSTRALIA, BUT snowdrifts are sweeping across the pavements of East Manhattan as Joel Laventure makes his cautious way along crowded pavements to QBE the America’s financial district headquarters.

Raised in Perth, where it never snows, Joel doesn’t let the freezing weather get him down. He says New York’s incredible extremes of weather are all part of the experience of living there.

“You get blizzards in winter, and scorching hot 40-degree days in summer,” he says.

Joel has worked for QBE for the past 10 years. After stints in Perth, Sydney and Adelaide he transferred to QBE’s Asian operation in Singapore.

In August 2010 he moved to the group’s New York office, where his Singapore experience in the international broker business proved valuable when QBE set up the new Major Brokers division in New York.

At the time they arrived his wife Alisa was eight months’ pregnant with their daughter Neve, “so the focus was all about trying to find a place to live, and find a doctor and hospital that would take us in”.

He was surprised to find New York is quite an easy place in which to live. “The people here have learned to make the most out of limited spaces for living and recreation. There are plenty of open spaces and facilities throughout the city that allow for recreation and sport. It’s also surprisingly child-friendly.”

What about the legends of frantic 24hour activity in what Frank Sinatra called “the city that never sleeps”?

“I wouldn’t call it any more frantic than other cities such as Melbourne or Sydney, which was one of the surprises when we moved across to New York,” Joel says.

“I expected it to be much more frantic than it is.

“Everything is in walking distance or reachable by subway or cab. You’d be crazy to own a car in Manhattan.”

But he agrees it’s wise to get

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out of the city once in a while. “Living on top of each other on a small island tends to get claustrophobic.”

Work-wise, he’s been surprised to discover that Australia’s insurance industry is leading the way in the use of e-commerce when compared to other markets around the globe.

“Many direct insurers make good use of technology where their customers can purchase insurance online. Australia… uses e-commerce far more extensively for intermediated business. There is more manually transacted business when dealing with intermediaries in the US.” The fact that all 50 states have their own insurance regulations is a major contrast to Australia’s centralised federal regulatory system.

“There’s a very high level of regulation that varies from state to state, which makes doing business more challenging,” Joel says. “Each of the 50 states have their own rules and regulations, and insurers must comply with these in order to transcat business.

“As you can imagine this significantly increases the complexity of doing business across each state.”

But the difficulties are offset by the opportunities. “The size of the insurance market is significantly bigger than other markets, which provides a fantastic opportunity for growth.”

Joel says the directness of Australians in the way they approach business issues is something he has learned to value.

“I miss the ‘cut to the chase’ approach to business in Australia. It’s not until you are away from Australia that you realise it is quite a progressive work environment.”

Working and living a long way from family and friends is always difficult, but the impact is softened by annual trips home and the benefits of technology.

“Being away is part of the sacrifice you make when living abroad,” he says.

“Skype has become something we rely on to keep in touch with family.”

But there are some things that he’ll always regret leaving behind, and which he knows will bring him back to Australia eventually.

“From a personal perspective I miss the fantastic beaches and open spaces.”

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“The people here have learned to make the most out of limited spaces for living and recreation.�

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Steering straight in stormy waters

General Reinsurance Corporation’s John Cholnoky: spectre of inflation adds to the challenges

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Uncertainty reigns in reinsurance as catastrophes multiply and economies turn down

By Terry McMullan THE ROLE OF REINSURERS IS PROBABLY better understood by the general public now than ever before, even if the pressures and priorities that drive the industry aren’t. The sector is riding a wave of uncertainty at present, reflecting both the size and severity of global catastrophes in 2011, and also the troubled state of the global economy affecting the investments that underpin reinsurers’ stability.

Like most major global reinsurers, Gen Re – a significant part of the Berkshire Hathaway empire – is focusing on steering a straight course in an increasingly uncertain world.

As Gen Re Corporation President John Cholnoky sees it, it’s not that risk in the region has changed; it’s just the perception and understanding of what that risk really is.

Mr Cholnoky accepts that right now uncertainty is a common problem that’s affecting almost every area of the reinsurance business at present. And that includes rates.

“There is uncertainty about the health of the global economy and unprecedented volatility in financial markets around the world,” he says. “It’s a challenging operating environment for both the insurance and reinsurance industries around the world.

“Interest rates are depressed globally, and this is having a significant impact in the systemic reduction of insurance companies’ operating income. And we have the spectre of inflation to add to the challenges going forward.”

Mr Cholnoky told Insurance News during a visit to Australia late last year that while some reinsurers may have to reassess the risks they cover and the amount they charge, that’s not how Gen Re works.

“We focus on assessing underlying exposures, being transparent and treating clients fairly, and that will not change.

“We try to look at each client, their portfolio and experience, individually. We don’t take a ‘market’ approach when it comes to assessing appropriate rates.

“Having said that, catastrophe experience has been well outside of both general and mod-

elling expectations, so logically some adjustment to reflect that makes sense.

“It will vary significantly based on the specifics of a company’s portfolio and experience.”

Mr Cholnoky manages Gen Re’s direct property/casualty operations as well its direct treaty, marketing, underwriting, facultative and claims divisions.

A 28-year Gen Re veteran – he joined the company on graduation from Dartmouth University – he has also been a non-executive director of General Reinsurance Australia since 1997.

He acknowledges the Munich Re assessment from late last year which noted that reinsurance rates so far have really only risen in the countries where major losses have been experienced, but adds: “It will be interesting to see if the Thai flooding changes that.”

It’s a year since Gen Re Chairman and Chief Executive Tad Montross told Insurance News reinsurance rates would have to start rising because low interest rates and dismal profits were turning off investors, and that waiting for a large catastrophe to push rates up wasn’t realistic.

Much has changed since then, but Mr Cholnoky makes the point that the return on investment is what ultimately drives capital levels in the market.

And while there seems to be sufficient capital coming into the reinsurance market at present, “we are always one large catastrophe event away from people seeing the industry’s capital adequacy very differently”.

“It will be interesting to see what the impending regulatory changes across the world do to real and perceived capital requirements.

“Companies need to generate a return for shareholders. Reinsurers need to be paid for the exposures we assume. Low interest rates and dismal profits do not change that fundamental requirement. I believe that that was Tad’s point about rates.”

As the market hardens, will innovations like catastrophe bonds become more insuranceNEWS

February/March 2012

ECONOMIC CRISES AROUND the world have taken some of the urgency out of the climate change debate, with governments acknowledging their limitations in dealing with such issues as carbon offsets and alternative energy programs.

While he points out that he’s a reinsurer and not a climate scientist, Mr Cholnoky nevertheless highlights the extraordinary number of natural catastrophes experienced around the world in the past few years, and the strain they have put on the industry.

While earthquakes – a risk not related to climate change – have been a major source of concern recently, he says the rising incidence of floods and severe storms around the world remain a major factor in a looming reassessment of the risks insurers and reinsurers are assuming “In the United States the insurance industry has historically experienced about $US6 billion a year in nonhurricane severe storm activity,” Mr Cholnoky told Insurance News. “For the last few years these losses have grown to about $US10 billion annually. Last year it was above $US20 billion.

“It certainly strikes me that this would cause one to reassess how the industry thinks about charging for both insurance and reinsurance products that will be impacted by that growth in paid claims activity.”

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common? Mr Cholnoky believes “traditional” reinsurance is still the most reliable way to transfer risk.

“While capacity and price are important issues, there are other qualitative issues such as value-added expertise that also drive reinsurance purchase decisions,” he says.

“Also, we’ve seen the problems with catastrophe models in the past year. Traditional reinsurance protects the ceding company from risk in a way catastrophe bonds often can’t. So I think that to some extent the jury is still out on the wider use of cat bonds.”

Innovation is important to reinsurers, however.

“At its core, insurance remains a business of assessing exposures and being paid for accepting risk. We sell a product that we don’t know the final cost of when we sell it. Primary insurance products are constantly evolving and reinsurance coverages are always adapting to those changes.”

There’s already evidence that Bermudians and other second-line reinsurers are entering markets in the region – particularly New Zealand – to take advantage of steeply rising rates.

Mr Cholnoky says hardening markets do tend to attract new capital, but “the question really is [whether] new entrants into a market understand the underlying fundamentals, exposures and dynamics of that market”.

The smaller market entrants’ more opportunistic approach tends to irritate the long-established reinsurance giants, and while he declines to be critical of them Mr Cholnoky points out that his company has been in the local market for around 50 years.

“History has shown that there can be periods of disruption that accompany new entrants moving into markets,” he reminds Insurance News. “That’s all part of the evolution of things.

“We have offices across the world and this worldwide footprint gives us the advantage of understanding markets.”

As markets stabilise – the United States commercial market, for example, has finally bottomed out – industry leaders are warning participants against “talking prices down” – an approach taken by some reinsurance brokers that earned criticism from Tad Montross last year.

Mr Cholnoky thinks attempts to dampen rises are, in the long run, counter-productive to the interests of insurance-buyers.

“Over time rates need to reflect the underlying risk you are assuming,” he says. “Delaying any necessary and prudent adjustment to pricing only increases the disruption to buyers when the inevitable happens.

“Adjusting in smaller steps over time is a lot easier for everyone to deal with than enormous change in a short timeframe.

“Anyone who is delaying the inevitable is doing themselves, or their clients, a disservice.”

Recent experience has also shown that some insurers in the region have tried to contain premium pressures by shaving their reinsurance programs. It’s an approach that can lead to disaster when large-scale catastrophes strike.

He says insurers should always be aware that increased retentions change their risk pro48

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“Primary insurance products are constantly evolving and reinsurance coverages are always adapting to those changes.” files. “Insurers have to understand the impact of the additional retained volatility on their capital position before they decide if an increased retention is part of a longer-term strategy to retain more risk.”

While he’s sure 2012 is going to be a challenging one on the underwriting, risk management, regulatory and investment fronts, Mr Cholnoky is confident there is light at the end of the tunnel – eventually.

“No matter the environment going forward, financially strong, focused and

well-managed companies can prosper.” insuranceNEWS

February/March 2012

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The worst of y Reduced to matchwood: a block of homes in Tuscaloosa, Alabama, after massive tornadoes ripped through seven states in the southern United States in April. About 250 people died in the storms

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f years

Reuters

Earthquakes and floods ensured 2011 will be remembered as the industry’s most expensive yet

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2011 WAS REGULARLY PUNCTUATED BY devastating earthquakes, floods and even fires. It’s the year that will go down in the record books as the worst and most expensive for reinsurers and insurers.

Estimates of global economic losses and insured losses vary by a few billion dollars, but there’s little debate that the final bill is nearly two-thirds higher than the previous record year, 2005.

The earthquakes in Japan in March and New Zealand in February alone caused almost two-thirds of these losses.

And as the year ended insurers and reinsurers were counting the cost of Thailand’s devastating floods.

Munich Re estimates the total insured catastrophe losses for 2011 at $US105 billion. Swiss Re says $US108 billion.

But there weren’t more catastrophes last year – they were just bigger. Munich Re says the 820 loss events of 2011 were in line with the average of the past 10 years.

Some 90% of the recorded natural catastrophes were weather-related – but nearly two-thirds of the economic losses and about half the insured losses stemmed from geophysical events, principally from the large earthquakes.

Normally the weather-related natural catastrophes are the dominant loss drivers. On average over the past 30 years, geophysical events have accounted for just under 10% of insured losses.

The distribution of regional losses in 2011 was also unusual. Around 70% of last year’s economic losses in 2011 occurred in Asia.

Some 27,000 people died in natural catastrophes.

This figure does not include the countless numbers of people who died as a result of the famine in northeastern Africa, which was the greatest humanitarian catastrophe of the year. Civil war and political instability have made it very difficult to bring effective aid to the victims.

The most destructive loss event of the year was the earthquake of March 11 in Tohoku, Japan, when a seabed quake of 9.0-magnitude occurred about 400 kilometres northeast of Tokyo. It was the strongest quake ever recorded in Japan – the last comparable quake was 1143 years ago – but the real damage came from the tsunami that followed.

Waves up to 40 metres high devastated the northeast coast of the main island, Honshu, overwhelming protective dykes and a sophisticated early warning system. Entire towns were washed away and about 16,000 people were killed.

Economic losses from the event came to $US210 51

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“The La Nina weather system has been singled out as a prime cause of most of the major weather-related catastrophes last year.”

Reuters

A massive task: workers at a micro-electronics factory in central Thailand clean up after floodwater receded from parts of the plant.

Estimates of damage to this factory’s machinery are expected to reach $US30 million

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billion, making this the costliest natural catastrophe of all time. Insured losses may be as much as $US40 billion.

The February 22 earthquake in Christchurch followed a larger but less destructive quake six months earlier. The epicentre was located at a shallow depth and only a few kilometres from the city centre.

Munich Re estimates the economic losses at around $US16 billion, of which about $US13 billion was insured.

Tremors continued throughout the year, including three strong earthquakes on December 24.

The La Nina weather system has been singled out as a prime cause of most of the major weather-related catastrophes last year.

It contributed to extraordinary flooding in Australia, as well as Cyclone Yasi, which cost insurers and reinsurers about $1.3 billion.

La Nina is also blamed for massive flooding in Thailand in the last few months of the year. It also influenced windstorms in the United States through the middle of the year, with cool weather fronts from the northwest moving over the central US and meeting humid warm air in the south.

The result was the worst tornado season on record – even worse than 2010.

Tornadoes caused economic losses totalling about $US46 billion, of which $US25 billion was insured.

Insured losses were thus twice as high as in the previous record year of 2010.

A particularly active North Atlantic hurricane season was also expected, but although the 18 severe storms that did form was well above the long-term average of 11, only six became hurricanes.

While only three hurricanes made landfall in the US last year, one of them, Irene, traveled from the Caribbean to southeast Canada, causing $US7 billion in insured damage.

The floods in Queensland and Victoria during the southern summer last year caused insured losses estimated by the Insurance Council at about $2.5 billion.

But this cost was dwarfed by the floods in Thailand that inundated the country’s central plain, swamping hundreds of thousands of homes and seven giant industrial areas where factories owned mainly

by Japanese companies were situated.

Thailand’s rainy season usually starts in May and ends in October, but weather experts say the La Nina phenomenon started early and continued on past April-May, when it usually peters out.

This led to a protracted and intense monsoon season that forced authorities to release stored water from dams, causing the Chao Phraya River to flood.

The world is now experiencing shortages of vital electronic components and some vehicles that were manufactured in factories in central Thailand.

Swiss Re has placed insured losses from the Thailand floods at $US8-11 billion, although some estimates have been much higher when claims related to global commercial supply losses are added.

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Reinsurance helps us ride the storms An insurer explains how reinsurance helps counter the various factors that push premiums up

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Suncorp’s Anthony Day: reinsurance is an ‘enabler’

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SINGLING OUT REINSURANCE AS THE major influence on rising premiums is too simplistic, says Suncorp Commercial Insurance Chief Executive Anthony Day. He believes it’s not the primary factor behind rising premiums, and warns that without reinsurance “the Australian general insurance industry would be in dire straits”.

In a paper written to explain the role of reinsurance in the region – a draft of which has been obtained by Insurance News – Mr Day says the cost of meeting claims like those experienced last year would be impossible without reinsurance.

“The spate of major disasters has heavily impacted on insurers’ costs [and] without the support of reinsurance the increase in costs could be even steeper.”

Mr Day is well qualified to speak about the influence of the reinsurance industry on the overall market – Suncorp has one of the largest reinsurance programs in the world.

He says reinsurance helps to deal with “other pressures” such as the need to preserve shareholder value and to meet regulatory obligations.

“It seems ironic that rather than increase insurance costs, reinsurance in fact reduces them,” he says.

“Instead of putting aside greater amounts of capital to pay claims, insurers can use that capital to ultimately provide better service to customers.

“As Australia faces another year of potential major natural catastrophe events, insurers will again turn to reinsurers to help them – and, more importantly, their customers – ride the storm.”

Mr Day says the natural catastrophes in Australia and New Zealand in the past year have thrown reinsurance and its contribution to increased insurance costs to customers into stark relief.

Insured loss estimates from last summer’s Queensland floods, Cyclone Yasi, the Perth hailstorm and the New Zealand earthquakes totalled $25.6 billion – $16 billion of which will be recouped from the reinsurance industry.

Earthquake-devastated Christchurch was rocked by a new series of quakes just two days before Christmas and Melbourne was insuranceNEWS

February/March 2012

battered by storms on Christmas Day, triggering more than $550 million in insurance losses.

Such catastrophes mean most local insurers have inevitably faced increased reinsurance costs in their January contract renewals.

“This has become a major topic, with commentators citing reinsurance costs as the main reason for increases in premiums,” Mr Day says.

To counter that argument he quotes Aon Benfield Asia-Pacific Chief Executive Malcolm Steingold, who told a recent industry conference that the impact on consumers and businesses from the catastrophes “has been lessened because of the role reinsurers played in assuming losses from the region’s insurers”.

The cost for people to insure their properties or businesses will inevitably climb, Mr Day says, acknowledging it’s one of the key challenges faced by the community as weather-related disasters increase in frequency.

His main theme is that reinsurance actually lowers the cost of insurance. He says that when they buy reinsurance insurers tap into a global, diversified balance sheet which allows them to purchase capacity for a cheaper price than if they had to provide it themselves.

Reinsurance being a cost to the insurer, it is an “enabler”, freeing up capital that insurers would otherwise have to put aside for claims and allowing them to reinvest that capital.

Mr Day says the cost of being an insurer and, subsequently, the cost of premiums for customers, is governed by a variety of influences. They include:

Regulatory requirements The Australian Prudential Regulation Authority (APRA) requires insurers to buy a minimum amount of catastrophe reinsurance. The current prudential standard is for a 1-in-200 year event.

Now APRA is expected to bring in a new set of standards that will require insurers to set aside more capital and/or buy more aggregate reinsurance cover.

But reinsurers have the capacity to 55

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provide reinsurance even if insurers have to increase their reinsurance needs. Global reinsurance capital levels remain strong and competition between reinsurers for business is still competitive.

Increased catastrophe claims within net retention The increase in the number and severity of natural catastrophes has had a significant impact on the industry.

The claims from the severe weather catastrophes that hit globally – including Australia, Japan and New Zealand – are currently estimated at more than $US430 billion. This compares with the average annual economic loss of $US89 billion from 2004 to 2010.

With any major loss – that is, anything over $500 million – reinsurers bear 75-95% of the total insured loss, thus reducing the cost of claims to insurers and, ultimately, consumers.

Claims costs are significant for insurers and, obviously, affect the overall costs to the consumer. Without reinsurance the ultimate costs would probably see insurance become too costly for much of the community.

“Hardening markets are often influenced by increasing costs in reinsurance, but in the current climate it is insurers who are taking the lead, with some of the benefits being passed on to reinsurers.”

Claims costs Insurers could well experience more weather-related claims in the near future.

The Bureau of Metrology’s national outlook for February to April says: • The tropical north of Australia and Western Australia are more likely to have a wetter wet season this year; and • Parts of southeastern South Australia and western New South Wales are more likely to have a drier summer.

So the threat of floods and bushfires has not gone away.

Claims inflation Claims inflation is the gradual increased cost in repairs over time. In the case of largescale catastrophes, labour and materials costs can be affected by “demand surge”.

The Insurance Council of Australia (ICA) pointed out in its submission to the Natural Disaster Insurance Review last year that many communities are becoming more prosperous and densely populated.

Consequently, construction and rebuilding costs increase annually, as do the values of individual assets.

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cent years as states and councils become more aware of the risks associated with major weather events, properties and businesses continue to be developed in high-risk areas.

ICA and individual insurers and reinsurers have campaigned extensively to promote community resilience, but progress to “weather-proof” communities is slow.

Investments The current global economic uncertainty and volatile financial markets are expected to continue throughout the coming year. The underlying strength of the local economy should once again protect Australia from the full impact of the global issues.

The state of investment markets has a profound impact on insurers, which rely not only on premium income but also heavily on investment income.

The general insurance industry is much less exposed to equity markets than life insurance. However, the general insurance industry has – at present – a larger exposure to credit spreads, given its substantial fixed-interest portfolios.

According to APRA, the local industry bounced back from last year’s disasters, although a $217 million loss for the sector was recorded in the September quarter.

But APRA noted that income from investments helped turn around the underwriting losses, despite the volatility of global markets.

During the 2011 September quarter, insurers managed to increase their investment totals from $63.7 billion in September 2010 to $66.5 billion.

Taxes State and Federal taxes and levies have a major impact on the cost of premiums, with insurers finding themselves acting as tax collectors.

Taxes on insurance have escalated considerably in recent years – from $2.1 billion in 2000 to $3.7 billion in 2006.

Industry estimates show that about a third of the cost of insurance to a small business is in the form of taxes.

A hardening market This happens particularly when all insurers in the local market are suffering, but they can also be undermined by offshore companies or new entrants who seek to opportunistically gain market share by undercutting rates.

Hardening markets are often influenced by increasing costs in reinsurance, but in the current climate it is insurers who are taking the lead, with some of the benefits being passed on to reinsurers.

The future Mr Day says he doesn’t doubt that as Australia faces another year of potential major natural events insurers “will again turn to reinsurers to help them – and, more importantly, their customers – ride the

storm”.

February/March 2012

4857 Su

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companyNEWS

Oops: the Sutton’s prime mover was in for a minor repair, but ended up seven metres underwater in Brisbane’s 2011 flood

Back on the road again: Queensland’s floods didn’t keep these truck operators bogged down for long GOOD NEWS DOESN’T always get the attention it should, and the role of commercial insurers in getting clients back to work following last summer’s Queensland floods has been all but ignored.

Two such good news stories have been noted by Brisbanebased truck insurance specialist NTI, which found itself in the middle of the action as many transport operators found their equipment going underwater.

Chief Executive Tony Clark says NTI was able to settle more than 95% of its Queensland flood claims within five weeks, “thanks to the tireless efforts of our claims staff, extra repair managers in the field and the ability to provide on-the-spot electronic fund transfer settlements”.

A couple of examples: In the Western Queensland town of Emerald, more than 1000 homes and businesses were flooded. One company 58

that relied on its vehicles to stay in business is local telecommunications provider Blue iQ, which uses a truck and six other smaller vehicles to deliver fibre-optic cabling and telephone systems to mining, government and local clients in the region.

Company principal Julie McCarthy says she and her staff did “everything we could” to prepare for the flood.

“We moved our truck and vehicles to higher ground, but even so we couldn’t escape what Mother Nature served up to us.

“The truck and vehicles got 1.2 metres of water through them. It was devastating.”

The truck – an Isuzu NPR 300 – had only been in service for a month and had only covered 1100km.

Blue iQ’s broker, William Paull of Consolidated Insurance Brokers – had moved the Blue iQ account to NTI just one month before the flood. He insuranceNEWS

contacted NTI and things started happening quickly.

NTI “took control right away and arranged for our truck to be towed to Townsville the next day,” Ms McCarthy says.

The Isuzu was assessed as a write- off, and three weeks later a replacement was delivered to Blue iQ. “Brisbane was flooded, Townsville was flooded and Cyclone Yasi hit North Queensland in the weeks that followed Emerald’s flood,” Ms McCarthy said. “Despite all of this we had our new truck delivered before the end of January.”

In another case, Brisbane furniture transport business operators Angus and Doreen Sutton were facing ruin when swift action by their insurer kept them on the road. The Suttons have owned the business for more than 45 years, and use two prime movers.

One of those trucks was in the Mercedes Benz centre in February/March 2012

Rocklea when the Brisbane River flooded.

Less than 24 hours after the truck went into the workshop to have a simple air-conditioning hose replaced, it was seven metres underwater.

“It was extremely devastating, Ms Sutton says. “It’s not just a truck we faced losing, but our livelihood.”

The prime mover had to be written off, but their broker Brett Newton from Regional Insurance Brokers and NTI worked to expedite the claim quickly.

The claim was paid out four days after the truck was assessed, and within three weeks of the loss the Suttons had bought a replacement truck and were back in business.

Mr Clark says vehicles are the “engine room” of many small businesses. “If you can’t get on the road, you can’t service your customers, and you

can’t earn money.”

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Workers Wo kers Compensatio on

Training raining Calendar 2012 Keeping you one step ahead

Be informed and keep one step ahead.

QBE’s courses are designed to educate you and your customers across a spectrum of safety and injury management solutions.

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Bookings are essential …

A refreshed 2012 calendar includes eight additional topics, visit the QBE website to find out mor more. e.

Register online at: www www.qbe.com.au/workerscompensation/training .qbe.com.au/workerscompensation/training or email: training@qbe.com.

QBE Q BE A Australia ust ralia Proud to be your NIBA General Insur Proud Insurer er of the Year Year 2002 – 2011* To T o lear learn n mor more e about QBE’ QBE’ss latest initiatives contact your local QBE rrepresentative, epresentative, or visit www www.intermediary.qbe.com.au .intermediary.qbe.com.au QBE Insurance (Australia) Limited ABN 78 003 191 035 AFS Licence No 239545 *Awarded *Awar *A warded to a QBE Gr Group oup Company

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companyNEWS

A healthy level of protection: National OHS harmonisation has placed statutory liability in the spotlight STREAMLINING THE MYRIAD OCCUpational health and safety (OHS) laws that abound in Australia makes sense from a national viewpoint, but how does it affect insurance coverage?

As federal, state and territory governments inch closer to a uniform OHS framework, underwriters have been tackling policy wordings and protections on a national level – a key concern among insurance brokers.

Currently New South Wales and Queensland have passed legislation aligning OHS laws, with Tasmania and South Australia soon to follow.

National health and safety laws have been on the agenda since 2008 as a central means of stemming the cost of work-related injures and illnesses, estimated at about 6% of annual GDP. Increased fines of $3 million for a corporation, $600,000 or five years’ jail for an officer and $300,000 or five years’ jail for an individual accompany the new laws.

Specialist Underwriting Agencies Director John Iles says companies are seeking secure insurance arrangements to meet the demands of the national OHS system which came into force on January 1.

“There has been some concern from brokers about how harmonisation will effect policies,” Mr Iles says.

To ease such concerns, SUA has released a new Corporate Practices Protection policy, based on a previous Business Practices policy that has been modified for the broader corporate sector.

The policy covers almost all acts of Parliament covering OHS, an improved Inquiries Costs Indemnity cover and a Reputational Expenses inclusion covering the cost of a communications consultant during an event.

Mr Iles says the policy is the only one of its kind to provide indemnity for enforceable undertakings and associated legal costs to negotiate a settlement.

“Every policy that we have seen covering statutory liability talks about penalties that are payable to the regulatory authority, but enforceable undertakings are payable to any third parties,” he said.

“The reputational expenses cover is also quite a new one for larger entities.”

Insured definitions have also been extended to cover all employees, not just directors and officers and can be extended to cover voluntary workers.

Indemnity limits of up to $5 million are also available.

“We believe this is the broadest statutory liability policy in the market,” Mr Iles

says.

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Bridging the gap: Market needs meet insurer ingenuity STAND-ALONE LIMITS FOR DEFENCE costs covering directors and officers have been available in Australia for years, but a lack of demand saw many of these products shelved.

Now they’re coming back with a vengeance.

Ripples from the High Court of New Zealand’s recent Bridgecorp ruling [see Insurance News, Dec 11/Jan 12] are being felt on both sides of the Tasman as company officers pore over their insurance policies.

Thanks to the legal precedent set by the court, directors and officers facing criminal or civil charges may not have access to defence costs under their company’s D&O policy if those costs exceed their D&O limit.

The ruling means companies – and their insurers – are examining extensions to D&O policies, with several insurers moving quickly to fill the void.

Ironshore Australia announced enhancements to its professional liability policies for defence cost coverage [Insurance News, Dec 11/Jan 12). Now, three more insurers have stepped forward to present products of their own.

Chartis Australia, Zurich Australia and New York-based Navigators Group have unveiled new defence costs policies specifically designed for the Australian and New Zealand legal landscapes.

Zurich National Underwriting Manager Financial Lines Susan Elias says updated D&O policies are now necessary due to similarities between the New Zealand and NSW, ACT and Northern Territory legal codes.

“The Bridgecorp decision was based on an Act which has traditionally only apinsuranceNEWS

February/March 2012

plied to motor and personal injury insurance,” Ms Elias said.

“However in this instance it was applied to a liability policy, giving thirdparty claimants precedence over the insurance funds, thereby over-riding the contractual agreement between the insurer and insureds.”

Zurich’s new “companion” policy provides accompanying cover for insured persons “Side A” and company reimbursement “Side B”. Non-aggregating capacity of up to $10 million is also provided.

Chartis Commercial Institutions Manager Financial Lines Jeremy ScottMackenzie says the Bridgecorp ruling has added another layer of uncertainty.

“We thought it pertinent that a solution be offered to our clients in Australia who seek the comfort of an additional level of protection,” he said.

Chartis’ new D&O Gold Costs and Expenses Policy acts as a companion to the company’s existing D&O Gold product suite to defend a director should payment from the existing D&O limit be prevented.

Directors with this policy will have the means to fund their defence where their existing D&O limit is subject to a charge.

Navigators Group’s “NavDefence” works in a similar way to cover defence costs where a charge has been placed on the main D&O policy.

The group’s Lloyd’s syndicate, Navigators Syndicate 1221, underwrites the product.

Syndicate head Carl Bach says the New Zealand High Court ruling has spawned an emerging risk that Navigators

hopes to address.

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peopleNEWS

Kokoda – tough but inspiring: IAA colleagues tackle the famous PNG track and raise funds for wounded soldiers

Comrades on the track: posing with fellow Kokoda Track trekker General Peter Cosgrove (centre) are, from left, Jason Howard of Chubb Insurance and IAA managers Helen Moore, Adrian Kitchin, Drue Castanelli, John Burke and Jill McMillan INSURANCE BROKERS HAVE STOOD shoulder-to-shoulder with members of the Australian Defence Forces in an annual pilgrimage along the Kokoda Trail.

Nearly 70 years have passed since Australian soldiers battled Japanese forces in the jungles of Papua New Guinea in a campaign now encoded in our national psyche.

The inaugural RSL Soldiers Kokoda Trek saw 50 hikers, including employers of Insurance Advisement Australia (IAA) and army veterans, complete the nine-day, 96km hike through the Owen Stanley Range.

IAA was the major sponsor of the inaugural RSL Soldiers Kokoda 2011. IAA Director Adrian Kitchin says the broking group will continue as a major sponsor for at least the next three years.

Of the 50 hikers in last year’s trek, 21 were current servicemen, the majority aged in their mid-20s and already veterans of the conflict in Afghanistan.

Mr Kitchin says many hikers carried severe emotional and physical injuries.

Among those who completed the gruelling trek were former commando Damien Thomlinson, who lost both legs in an attack on his Bushmaster vehicle in Afghanistan 18 months earlier. Fellow commando Scott Palmer saved Mr Thomlinson’s life by pulling him from the wreckage of the vehicle, only to die in a helicopter crash several weeks later.

“Seeing these young guys blossom and come out of themselves was extraordinary,” Mr Kitchin said. “One fellow had his legs blown off and others are missing parts of

limbs. So for them to be able to finish the track was excellent.”

All money raised during the trek will be used to assist soldiers and their families with their ongoing rehabilitation.

Mr Kitchin says the Kokoda Track ranks among the most difficult things he has undertaken.

“It was ridiculously hard,” he told Insurance News. “But after finishing, it was a feeling of absolute elation, a real sense of accomplishment and sense of belonging to the team.

“The people I went with were pretty good mates and colleagues beforehand, but we shared something that is fairly hard to describe that was physically and emotionally

exhausting.”

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peopleNEWS

A touch of the Orient The Year of the Dragon is considered the luckiest of the Chinese zodiac, and Adelaide-based MGA Insurance Brokers will be hoping some of that luck rubs off in 2012.

Getting celebrations off to an early start, delegates at the MGA Broker Assistants Conference in Adelaide were treated to an afternoon of dragon boat racing along the Torrens River as part of a two-day conference.

More than 50 delegates flocked to Adelaide’s Intercontinental Hotel for the fourth annual conference, where industry legend Frank Hoffman ran a series of technical workshops before several breakout sessions.

The gala dinner was held at Jolley’s Boathouse and attended by 110 guests, including MGA Chairman and co-founder John George.

The location of next year’s conference? That’s a closely guarded secret.

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peopleNEWS

Zurich’s global boss receives a warm welcome Zurich Global Chief Executive Martin Senn received a warm welcome when he visited the group’s Australian operations in December – and not just due to the temperature difference from his native Switzerland.

In his first visit to Australia since taking over as chief executive in January 2010, Mr Senn was the guest of honour at a black tie event at Sydney’s Mint that brought together many of the local industry’s leaders and their partners.

Mr Senn and his wife Guen Soo met Zurich staff, chief executives of companies insured by Zurich in Australia, and Zurich’s leading intermediaries and advisers.

The former banker spent two days in Australia inspecting the group’s local operations.

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Prost! Allianz cheers its star brokers Beer, bratwurst, Brownlow and Blue Eagles kept Allianz and its broker partners occupied during a week of activities in Western Australia late last year.

Beginning with broker training in Fremantle, Allianz hosted motivational speaker Matt Church before members of the One Allianz team spoke about workers’ compensation, injury management and motor fleet among other topics.

A luncheon for Allianz’s Blue Eagle brokers was later held at Matilda Bay Restaurant, where a Brownlow Medal-style countdown was conducted by WA State Manager Brett Jackman to announce the five brokers attending the Blue Eagle broker event in Queenstown, New Zealand.

Delegates concluded the week with an Oktoberfest dinner at Elmars in the Swan Valley, complete with jugglers, firewalkers and clowns.

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Specialist Underwriting Agencies – always thinking We have revamped our image to reinforce the core things that set SUA apart – (a) we think outside the square and (b) we’re always thinking.

Sure, we look different now, but SUA still continues to provide our broker partners with unique, innovative and niche insurance solutions.

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Call 07 3624 9400 today, or visit our new website at www.sua.com.au, and get SUA working with you.

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Austra

peopleNEWS

Reaching out and digging deep Comedy duo Hamish and Andy, comedian Anh Do, Miss Universe Australia Jesinta Campbell and Melbourne Demons football great Jim Stynes were among a starstudded list of guests for the annual McLardy McShane Reach Christmas Lunch in December.

Hosted by Melbourne insurance brokers McLardy McShane, the event attracted more than 600 people drawn from the industry and the wider community. The annual lunch raises money for the Reach Foundation, supporting young people.

Guests at the lunch, held at the Melbourne Docklands venue Peninsula at Atlantic, raised $155,000 for the charity.

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peopleNEWS

Here come the girls!

The second Ladies of Lumley event has provided plenty of inspiration for the rising generation of female brokers.

About 40 women – and Lumley’s NSW E-commerce Manager Heath Francis representing the blokes – attended the event at Sydney’s Arthouse Hotel in November, to hear presentations by guest speakers Austbrokers General Manager Broking Operations Rebecca Wilson, Marsh Managing Principal Client Retention and Development Sonia Battistel and Lumley Queensland State Manager Kerrie Challenor.

Ms Challenor told the brokers much has changed in the past decade for women working in insurance.

“It was a fantastic forum for women to ask their peers frank questions about issues that really concern them,” she says. “And the feedback I got from brokers afterwards was hugely positive.”

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peopleNEWS

Insight’s view getting better all the time Insight Insurance Brokers Association business partners and industry supporters drank in some spectacular views – not to mention a few cocktails – during the broking group’s annual meet and greet in Sydney a few weeks ago.

Held at the Harbour View Hotel, the cocktail party marked the appreciation of Insight members and their strategic partners for the support the association has received in the past year.

More than 65 members and partners attended the function.

Insight has increased its membership numbers from 15 to 46 in the past five years and now has 190 participating branches nationwide.

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peopleNEWS

eQuipping young professionals eQuip, QBE’s special training initiative for young professionals, recently continued a series of annual graduation dinners to celebrate the successful completion of the formal learning component of the program.

Hosted by QBE’s General Manager Australian Intermediaries Shaun Standfield, the dinners also provided an opportunity to officially welcome the class of 2012.

Program graduates are invited to join the eQuip alumni so they can maintain and enhance the industry networks they have started to develop. eQuip gives participants resources and tools to maximise their professional development and mature in their roles as the future leaders of the Australian general insurance industry.

Over the next year the class of 2012 will complete three modules – leadership, insurance acumen and sales and relationship management – the key competencies QBE believes will drive ongoing success.

Our pictures were taken at the Sydney, Perth and Brisbane events.

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YOUR FIRST MISSION

WALK KOKODA

At Insurance Advisernet we’re tough on our new recruits.

In fact, as an AR for IAA, you might just be asked to walk the Kokoda track. We go all the way to support our partners which includes the RSL Soldiers Kokoda walk each year.

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The bad news is we don't make systems as good as this available to just anyone. You have to be the best to get the best. And by best we mean you’ll have to have a track record of great sales, business growth and delighting your customers before you’ll even get to first base. And you have to be willing to do something for others too, like support the Kokoda walk.

We’re not trying to be funny, or egotistical. We just want you to know that if you do join the team, you won’t be let down by your colleagues because you know they’ve been through the same recruitment process as you.

We believe that by having the best team, everyone wins. You’re only as good as your weakest link.

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maglog »

Sam Pentecost Contributor

THE DECISION BY GUILD INSURANCE TO SET UP a new broker-facing brand called Acerta raises a few questions. The most important one – well, really the only one – is, what the hell does “acerta” mean, anyway?

It’s like when Vero came along all those years ago.

We know that “Vero” means “truth”, as any Latin student (or person who read the PR stuff when the brand was launched) can tell you. But what about “acerta”?

Is it even Latin?

It took a while to find the meaning of acerta, and I really have no way of knowing if the meaning I found is what those gentle people at Guild meant it to mean.

In the Latin dictionary acerta means “force”, but apparently not in that stirring sense of a large brigade of Guild Insurance staff striding purposefully towards the camera, chins up and chests out.

It appears acerta means “assertive”. In fact, the Portuguese language has retained the word for everyday use, in which context acerta apparently means “to hit”. Ouch.

There’s also an Acerta listed on the web in Antwerp, which appears to be an HR company of some repute, although who could really tell because their website was in Belgian or Dutch or something that uses the letter J a lot.

There’s also various companies called Acerta in Spain, the UK and Brazil, the latter where the word gets used alongside a rap style called “underground rap street”. All very dark and confronting, I’m afraid.

Not that anyone will care. The logo is colourful and Acerta sounds nice and helpful in the Guild version. I’ll bet it did well with the focus groups.

But it’s worth remembering that using a dead language to find a name reflecting your company’s values can be tricky. Turning an attractive-sounding adjective from any language into a noun in another language is fraught with difficulty.

Let us never forget that Mitsubishi’s hulking Pajero four-wheel-drive doesn’t convey the intended tough and free image when used in Spanish-speaking countries, where it means – well, look it up yourself.

The Chevrolet Nova’s name means “doesn’t go” in Spanish, and the names of the Honda Fitta, Opel Ascona and Ford Pinto are more than a little embarrassing in Scandinavia, Spain and Portugal.

A friend who previously worked in the very sharp end of the corporate world decided some years ago to quit his wretched but lucrative life and become a high school teacher. He discovered after a few years that teaching teenagers the proper use of apostrophes and spelling involves lots of rules; but he missed the free and rich imagery of the language he used to be able to rattle off in office cube farms.

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So he began collecting the very best of “corporatespeak” words and phrases. His list is very long and often hilarious, and I offer only a small sample of his vast collection here, which you’ll see is in three separate lists. The words: 1. Integrated. Total. Systematised. Synergised.

Parallel. Functional. Responsive. Synchronised.

Balanced. Best practice. Upskilled. Rationalised.

Conceptualisation.

2. Management. Organisation. Monitored.

Reciprocal. Digital. Blamestorming. Logistical.

Transitional. Incremental. Workshopping. No-brainer.

Over-arching. Maximised. Relational.

3. Option. Flexibility. Capability. Mobility. Outside the square. Contingency. Strategic objective. Fiscal boundaries. Mission statement. Life cycle. Mindset.

Core competency. Hard yards.

In my friend’s own words: “Just integrate any of the phrases or just mix’n’match any of the words from any of the three lists into your next inter-office corporate memo or presentation, and you’ll get your message across without ever revealing your true thoughts or even if you have any.”

Every company uses its own patois when applying corporatespeak, so make up your own list to complement this base list. Keep an eye out for them – they’re everywhere. Please send any great examples on to me.

For now, to help you get moving, here’s one I prepared earlier: “In regards to your recent email, I am forced to respond with parallel reciprocal flexibility in presenting a systematised relational mindset.

The over-arching strategic objective of course requires a synchronised capability for the life cycle of the project, which may preclude the contingency of workshopping this through conceptualisation.”

Translated: “Got your email. I like the idea. Let’s work on it together and see if it’s feasible.”

And that’s all it takes. Use corporatespeak as often as you can and you’ll notice after a few days that your brain is definitely lighter.

Someone told me this is a true story. A young insurance executive was heading out of the office late one evening when he met the chief executive clutching a piece of paper and standing beside the office shredder.

“Can you help me?” said the boss. “My EA has gone home and this is a really sensitive document. Can you make this thing work?”

“No worries,” said our executive. He took the paper, inserted it and pushed the button.

“Thanks for that,” said the boss. “I only need one copy.”

The moral of the story: Don’t assume your chief executive knows what he’s doing.

insuranceNEWS

February/March 2012

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WHEN THINKING BUSINESS, THINK CGU. CGU is known for its comprehensive cover within business and office insurance. As we move into 2012, we’re hungry to grow across a variety of industries and covers. So next time you think about insurance for your customers, think CGU. Whoever your commercial customers are, whatever they do, talk to your CGU Business Development Manager or visit cgu.com.au today for business and office information.

CGU Insurance Limited ABN 27 004 478 371 AFSL 238291. This is general advice only and does not take into account you/your customer’s individual objectives, financial situation or needs. When making decisions about the product you/your customer should consider your customer’s personal circumstances and the product disclosure statement available from CGU at www.cgu.com.au CGU0087

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