Sutherland insights insurance news flash august 01 2014

INSURANCE NEWS FLASH August 01, 2014

Table of Contents Sales & Marketing ................................................................................................................. 3 Finance ................................................................................................................................. 7 Technology .......................................................................................................................... 15 Strategy .............................................................................................................................. 20

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Sales & Marketing Lloyds may set aside additional $847M to compensate consumers wrongly sold insurance on loans July 30, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/30/lloyds-may-set-aside-additional-847m-tocompensate The bill keeps rising for Lloyds Banking Group Plc’s misdeeds.

The lender may need to set aside 500 million pounds ($847 million) more to compensate consumers who were wrongly sold insurance on loans, according to four analysts’ estimates compiled by Bloomberg. That charge would come just days after Lloyds’s behavior was called “reprehensible” by Bank of England Governor Mark Carney and it was fined 226 million pounds for manipulating interest rates.

The new provision for payment-protection insurance would be in addition to the 9.8 billion pounds, more than any other British lender, it has already set aside. Barclays Plc said today it took a 900 million-pound charge in the second quarter to cover costs for mis-sold loan insurance, bringing its total bill to 4.9 billion pounds.

As Chief Executive Officer Antonio Horta-Osorio looks to build a case to pay a dividend and return Britain’s largest mortgage lender to full private ownership before next year’s national elections, he will still be digging out of past scandals when he reports first-half earnings before the market opens tomorrow. Costs for selling its TSB Banking Group Plc consumer unit may also weigh on statutory earnings, analysts at Deutsche Bank AG, led by Jason Napier, who has a buy recommendation on Lloyds’s shares, wrote in a note to clients.

SFO Review “You would have thought by now the taxpayer’s stake in Lloyds probably would have been placed,” said Simon Willis, an analyst at Daniel Stewart Securities Plc in London. “There’s a continuing series of supposed one-off charges” that is slowing that process, he said.

U.K. prosecutors are reviewing whether traders’ manipulation of the BBA Sterling Repo Rate constituted criminal conduct, the Serious Fraud Office said on July 28. The U.K. Financial Conduct Authority earlier this year gave the SFO information about its findings on Lloyds and repo-related manipulation, which the agency is reviewing as part of a wider Libor-rigging investigation, said a person with knowledge of the issue.

Lloyds may report a 25% increase in underlying pretax profit to about 3.6 billion pounds for the six months through June 30, according to the average estimate of six analysts’ surveyed by Bloomberg.

Revenue will decline 3% to 9.1 billion pounds, according to the survey.

Shares Down

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The bank, still 25% owned by the U.K. after receiving a bailout of more than 20 billion pounds, will be facing comparisons with the Royal Bank of Scotland Group Plc, the largest government-owned bank.

Edinburgh-based RBS said July 25 that first-half profit almost doubled as impairment charges fell.

The shares surged the most in more than four years on that day.

Lloyds’s shares, which at 75.9 pence are above the British government’s 61 pence break-even price, have declined 2.8% this year. That contrasts with RBS rising 6.8%, making it the only major British lender to see gains this year.

“The management is going to do whatever is necessary to clean the books and their act to make sure the sale can progress further,” Guy de Blonay, a London-based fund manager at Jupiter Asset Management Ltd., said in an interview.

The government in March sold a 4.2 billion-pound stake in London-based Lloyds to institutional investors, offering shares at 75.5 pence apiece, after it sold a 3.3 billion-pound stake at 75 pence last September.

Dividend Plans Lloyds has said it plans to apply to the Bank of England in the second half of the year for permission to resume dividend payments, suspended since its bailout. A bank spokesman declined to comment on the earnings report or future dividends.

“They’re going to have a very long, hard look at conduct risk before signing off,” said Mike Trippitt, an analyst at Numis Securities Ltd. who has a buy recommendation on the stock. A dividend at Lloyds would put “a bit of juice in the price,” of the shares, he said.

Lloyds isn’t ready for a full return to the private sector, said Pat McFadden, a Labour Party member of the Treasury Committee.

“I don’t think the job is complete,” he said in an interview. “The most important thing about return to private sector is it’s done with a total focus on what’s best for the public interest and for the wider economy and not any politically motivated timetable.”

Are digital insurance sales alienating customers?

July 29, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/29/are-digital-insurance-sales-alienatingcustomers A new report from Bain & Co. suggests that many carriers are getting their digital investments wrong in the U.S. property and casualty insurance market, and as a result, alienating some of their most valuable customers in the process.

While many carriers may be getting carried away by the digital tide, the research suggests that these companies are investing to please the wrong customers. The study shows that digital-only customers are the least valuable in terms of loyalty, and suggests that insurers should focus their investments in a multichannel approach that emphasizes the human touch, not just their website.

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As the industry continues to grow, carriers rely on acquisitions, retention and cross-selling to establish themselves and earn customers’ goodwill, creating more promoters in the customer base.

Measuring the performance of each of these areas in various companies, the survey found that few carriers excel in both acquisition and retention. While acquisition leaders attract customers who are price-sensitive, they are more likely to defect when presented with a lower-priced offer. In contrast, companies that lead in retention have a greater share of people in their customer base who value peace of mind. These customers tend to be older, more affluent and have more complex insurance needs.

However, for new customers, price seems to be the dominating factor in choosing a carrier, followed by the carrier’s reputation.

Most are open to driverless cars, but wouldn't entrust their children to them July 28, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/28/most-are-open-to-driverless-cars-butwouldnt-entru Over 75% of drivers would consider buying a car with autonomous capabilities, and the number jumps to 86% if doing so resulted in much cheaper car insurance, a new survey indicates.

The survey, conducted online in June by Insurance.com, polled 2,000 drivers, showed while people are open to the idea of autonomous cars, some reservations remain.

For example, 76% say they would not trust a driverless car to take their children to school, and 61% say a computer is incapable of the same decision-making in a car as a human. In fact, just 31% say they would let the computer drive whenever possible.

A story on the survey posted to Insurance.com, written by Mark Vallet, notes the two different approaches companies are taking toward the goal of autonomous cars: “Traditional automakers such as Nissan want to ease us into the computer-driven future as they slowly add autonomous features to traditional vehicles. Google, on the other hand, wants to plunge straight into the deep end with podlike cars that lack a steering wheel, gas pedal and brakes.”

Drivers seem to prefer the former option.

While only 24.5% of respondents say they would never consider an autonomous car (that drops to 13.7% if owning one resulted in cheaper car insurance), just 22.4% say they’re “very likely” to buy a self-driving car (37.6% with cheaper car insurance.

For some, though, the future cannot come soon enough. The survey indicates 31.7% would not continue to drive once autonomous cars were available instead. Insurance.com Managing Editor Des Toups says in a statement, “Spend time in traffic anywhere and it’s clear many people would rather be doing something else.”

And most drivers also recognize the automobile world is changing. Seventy-three percent say they don’t think the cars of 2040 will operate in ways familiar to the drivers of today.

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Among top-10 advertisers, Geico far outspends 6-10 combined July 21, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/21/among-top-10-advertisers-geico-faroutspends-6-10 Geico spent $935.1 million on advertising in 2013—over $280 million more than its closest competitor, Allstate, a new report shows.

In its “U.S. Insurance Weekly” update, Nomura reveals the top-10 insurers for ad spending in personal lines. For some perspective, Geico spent nearly $100 million more on advertising in 2013 than the 6th through 10th ranked companies combined.

Geico also experienced 11.2% personal-lines growth in 2013, outpacing its 9.1% growth in 2012.

Nomura says, “Berkshire Hathaway’s auto-insurance company Geico has been a growth machine in recent years and the advertising data…show just how important good advertising is to growth.”

Liberty Mutual saw the second-largest growth in personal lines for 2013 among the top-10 advertisers at 10.7%, although Nomura says, "Liberty Mutual has been more active in the M&A space to grow its market, on top of materially increasing its advertising budget."

John Cusolito, Liberty Mutual vice president and manager, public and media relations, contested that point, stating that personal-insurance growth was "100% organic in 2012 and 2013." He says auto and homeowners grew 10% and 12% respectively, adding, "Growth was achieved through a combination of rate and new-business acquisition. Strong new-business acquisition can be tied directly to the increases in advertising...."

Nomura analyst Clifford Gallant clarifies that the report does not attribute overall growth specifically to 2012 and 2013, and adds that Liberty Mutual has done several deals since 2007 to grow.

USAA placed 10th in ad spending ($133 million), but first in its ad-spending growth from 2012 to 2013 (120.2%). USAA saw 9.8% personal-lines growth last year.

State Farm, the largest insurance group by net premiums written, dialed back its adveritising slightly (0.2%) in 2013 compared to 2012, but the insurer still placed third among ad spenders at $608.1 million. The company saw 5% personal-lines growth for the year. From 2011-2013, State Farm’s market-share gain was 1.3%, tops among the 10 insurers. Geico was second at 1.2% Nomura says Geico’s main direct-channel competitors—Progressive and Allstate’s Esurance—are struggling to keep up. “Esurance is growing rapidly, but still working off a relatively small base and generating an underwriting loss for Allstate,” says Nomura, “while Progressive has been rapidly increasing its advertising budget in recent quarters.” The firm adds Geico has “consistently been outpacing [Progressive] in almost every growth and underwriting metric.”

Progressive increased its ad spending by 18.7% in 2013 and ranked 4th among the top-10 spenders at $604.2 million. It experienced 6.5% personal-lines growth for 2013.

Mutual personal-lines competitors, such as State Farm, “can be more aggressive on pricing and bundling discounts given they are not beholden to shareholder-return expectations,” Nomura says.

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Finance Workers' comp insurer Employers Holdings rallies as profit climbs July 31, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/31/workers-comp-insurer-employers-holdingsrallies-as Employers Holdings Inc., the provider of workers’ compensation insurance in the western U.S., rallied today after second-quarter earnings beat analysts’ estimates.

Employers jumped 11 percent to $21.32 at 12:53 p.m. in New York. That narrowed the decline this year to 33 percent for the Reno, Nevada-based insurer.

Chief Executive Officer Douglas Dirks has been seeking to limit losses in California by raising prices and slowing policy count growth, after higher-than-expected claims in 2013. Second- quarter net income increased to $45.6 million, or $1.42 a share, from $14.6 million, or 46 cents, a year earlier, the insurer said yesterday in a statement after the close of regular trading.

“The bull case on the stock calls for stability and improvement in Southern California claim trends,” Amit Kumar, an analyst with Macquarie Capital who has an outperform rating on Employers, said in an investor note. “The stock will react positively on the report.”

Kumar said operating profit, which excludes one-time items and a gain tied to reinsurance, was 27 cents a share, beating his estimate of 22 cents and the average of 21 cents in a Bloomberg survey.

Allstate Q2 profit rises 41% on sales gains July 31, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/31/allstate-q2-profit-rises-41-on-sales-gains Allstate Corp., the largest publicly traded U.S. property-casualty insurer, said second-quarter profit advanced 41% and beat estimates as revenue climbed.

Net income rose to $614 million, or $1.39 a share, from $434 million, or 92 cents, a year earlier, the Northbrook, Illinois-based company said today in a statement. Operating income, which excludes some investment results, was $1.01 a share, beating the 65-cent average estimate of 22 analysts surveyed by Bloomberg.

Allstate Chairman and Chief Executive Officer Thomas Wilson has focused on winning and retaining customers after price increases caused some homeowners to defect. Second-quarter results were helped by an increase in policyholders for its namesake brand of coverage.

“We’ve got all of our businesses operating at the right return and you’re seeing our growth momentum build, particularly in the Allstate agency channel,” Wilson, 56, said today in a phone interview. “We’re feeling good about where we’re headed.”

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Allstate-brand homeowners policies in force reversed a decline that started in June 2006, after Hurricane Katrina slammed the southern U.S. The insurer had 6.07 million home policies in force at the end of the quarter, compared with 6.06 million on March 31.

Allstate rose 2.6 percent to $58.39 in extended trading at 4:45 p.m. in New York. It’s risen 4.3% this year, compared with the 4.6% gain by the Standard & Poor’s 500 Financials Index.

Policies in force at Allstate’s namesake brand increased 1.5% in the second quarter, led by a 450,000-policy jump in the auto unit. The insurer made 2.6 cents for every premium dollar in its property and liability coverage unit, compared with 3.9 cents a year earlier.

Book value, a measure of assets minus liabilities, rose to $47.97 a share from $46.70 as of March 31.

Investment income narrowed to $898 million from $984 million a year earlier.

Revenue growth drives strong Q2 for Marsh & McLennan July 29, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/29/revenue-growth-drives-strong-q2-for-marshmclenna Marsh & McLennan Companies reports 2014 Q2 net income attributable to the company of $431 million, up from $388 million in 2013’s second quarter, as the firm experienced 7% revenue growth.

Risk and Insurance Services revenue was $1.8 billion, or growth of 6%, including 7% growth at Marsh and 3% at reinsurance broker Guy Carpenter.

Consulting revenue was $1.5 billion, or 8% growth, including 3% growth at Mercer and 23% growth at Oliver Wyman Group.

President and CEO Dan Glaser says in a statement, “This was our strongest quarterly revenue performance in two years, with all operating companies contributing. Adjusted operating income grew 11%, with margin expansion of 60 basis points to 19.8%.”

In a conference call with analysts, Marsh executives touched on Guy Carpenter and the reinsurance market during the Q&A session, acknowledging that rates are under pressure in general. But Glaser said while it won't be a "banner top-line year" for Guy Carpenter, he does expect to see growth over the entire year.

He added Marsh & McLennan as a whole has a team that is used to operating in competitive markets with downward pressure on rates.

An analyst asked how Guy Carpenter was able to achieve organic growth in the quarter. Guy Carpenter President and CEO Alexander S. Moczarski indicated the reinsurance broker saw "very good new business” in the quarter by offering the right products and finding the right clients. He added retention has been good, noting Guy Carpenter has not lost clients. "I can name maybe one we lost in the last quarter," he said.

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W.R. Berkley has solid Q2 as rate increases continue July 29, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/29/wr-berkley-has-solid-q2-as-rate-increasescontinue W.R. Berkley Corp. reports Q2 net income of $180 million, up from $116 million in 2013’s second quarter, as rate increases continued to outpace loss costs.

Net premiums written increased to $1.5 billion in the quarter compared to $1.3 billion for the same period last year.

In a statement, Chairman and CEO William R. Berkley says, “We were able to grow our top line by about 11%. Price increases for our domestic insurance businesses were approximately 4%; thus, for the twelfth quarter in a row, prices increased at a rate in excess of loss costs. We believe that in such an environment our goal should be to grow selectively.”

The company’s GAAP combined ratio was 94.4, an improvement from 96.6 reported in Q2 2013.

W.R. Berkley saw a jump in net investment gains in the quarter: $109.2 million compared to $33.1 million a year ago. Berkley says, “"We have maintained the quality of our fixed-income portfolio, while at the same time investing an increasing portion of new funds into alternative investments with the goal of generating capital gains.

“As a result, we have sacrificed some ordinary investment income to achieve the level of capital gains currently flowing into our income statement. Our investment returns from our fixed-income portfolio declined slightly, reflecting both the current interest rate environment and the shortening of our portfolio duration, while other parts of our investment activities have generated attractive returns over the recent period.

“The sale of a property from our real-estate portfolio resulted in a substantial gain this quarter. We also continue to achieve gains from our common stock and private equity investments.”

State of the market In a conference call, President and COO W. Robert Berkley said the market remains a “mixed bag,” with domestic casualty risks among the most promising as far as the ability for the insurer to get rate. He called workers’ comp a “bright point,” but also warned against painting any line with too broad of a brush.

Robert Berkley touched on the impact capacity in the reinsurance market was having on property catastrophe risks, and said professional lines are “flat-ish,” although he noted these risks vary greatly, adding there are opportunities to grow business.

Commercial auto, Robert Berkley said, remains an “area of concern,” and he reiterated comments made in the company’s Q1 conference call that this like is “poised for hardening.”

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In general, Robert Berkley said the market is not experiencing a “classic insurance cycle,” but he said he remains encouraged by the opportunities that are available. W.R. Berkley, he said, is focused on striking the right balance between rate increase and exposure growth.

Chubb misses Q2 estimates, lowers forecast as profit declines July 25, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/25/chubb-misses-q2-estimates-lowers-forecastas-profi Chubb Corp., the insurer of corporate boards and mega-yachts, said second-quarter profit fell 14% and lowered its 2014 forecast after margins worsened on claims costs tied to fires.

Net income was $499 million, or $2.03 a share, compared with $579 million, or $2.21, a year earlier, the Warren, New Jersey-based company said today in a statement. Profit excluding some investment results was $1.70 a share, missing the $1.90 average estimate of 20 analysts surveyed by Bloomberg.

Results were hurt by “severe weather in the United States as well as an unusually high level of homeowners’ and commercial fire losses,” Chief Executive Officer John Finnegan, 65, said in the statement.

The insurer spent 90 cents of every premium dollar on claims and expenses in the second quarter, worse than the 88.8 cents of costs a year earlier. Finnegan has sought to boost prices for coverage as weather-related damage drove up costs in recent years.

Finnegan’s company now expects full-year operating profit of $6.75 to $6.95 a share, Chubb said today. That compares with a projection in January of $7.10 to $7.40.

Chubb declined 10 cents to $92.76 at 4 p.m. in New York. It has fallen 3.9% this year, compared with the 0.6% gain by the seven-company Standard & Poor’s 500 Property & Casualty Insurance Index.

Results were released after the close of regular trading.

Share Repurchases Book value, a measure of assets minus liabilities, rose to $68.60 a share from $66.36 as of March 31.

The insurer spent $375 million in the second quarter on buybacks, repurchasing about 4 million shares at an average price of $92.95.

Travelers Cos., the only property-casualty insurer in the Dow Jones Industrial Average, said on July 22 that second- quarter profit missed analysts’ estimates on natural disaster claims. Allstate Corp., the largest publicly traded U.S. auto and home insurer, has said its costs tied to catastrophes such as hail storms and tornadoes were $936 million before taxes in the quarter.

Chubb’s policy sales rose 4 percent to $3.22 billion. Investment gains narrowed to $125 million before tax from $179 million a year earlier.

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Aon shares tank on Q2 reinsurance losses July 25, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/25/aon-shares-tank-on-q2-reinsurance-losses Aon Plc, the world’s second-largest insurance broker by market value, fell the most since February after revenue missed estimates as reinsurance sales declined.

Aon slipped 4.2% to $87.14 at 9:40 a.m. in New York, the biggest decline in the 84-company Standard & Poor’s 500 Financials Index.

Revenue was $2.92 billion, compared with analysts’ estimates of $2.96 billion in a survey by Bloomberg. Reinsurance commissions and fees fell 4.3 percent to $360 million, the London-based broker said today in a statement.

The reinsurance slump was “the key negative in the quarter,” Meyer Shields, a Keefe Bruyette & Woods analyst said in an investor note today. The decrease probably “reflects rate declines and shrinking demand.”

Net income was $304 million, or $1.01 a share, compared with $241 million, or 76 cents a share a year earlier.

Allied World swings to Q2 profit, but misses estimates July 24, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/24/allied-world-swings-to-q2-profit-but-missesestima Allied World Assurance Co., the seller of aviation and environmental insurance, fell the most since February as second-quarter profit missed analysts’ estimates amid a decline in sales.

Allied plunged 4.3% to $37.04 at 11:06 a.m. in New York. The stock has dropped 1.5% this year, compared with the 7.5% increase of the Russell 1000 Index.

Operating income was 76 cents a share, missing by 8 cents the average estimate of 9 analysts surveyed by Bloomberg. Net policy sales fell 4.7% to $553.9 million as a decline at the reinsurance unit overwhelmed gains from the U.S. and international insurance segments, the Zug, Switzerlandbased company said in a statement late yesterday.

“In reinsurance they’ve been shrinking their exposure to catastrophes,” Matt Carletti, an analyst with JMP Securities LLC said in a phone interview. “That segment drove the miss.”

Reinsurers have been forced to lower prices or settle for lower sales amid competition from catastrophe bond investors willing to shoulder weather-related risks. Everest Re Group Ltd. also reported results late yesterday that missed analysts’ estimates, and the Bermuda-based company dropped 2.2%.

Allied World’s second-quarter net income was $151.9 million, compared with a loss of $1.9 million a year earlier that was driven by investment results.

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Aspen's Q2 net income soars; CEO says aviation war-risk rates set to rise July 24, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/24/aspens-q2-net-income-soars-ceo-saysaviation-war-r Aspen Insurance Holdings reports second-quarter net income after tax of $130.8 million, up from $40.1 million reported in Q2 2013.

The specialty insurer and reinsurer saw a jump in gross written premiums to $779.3 million in the quarter, compared to $687.3 million for the same period a year ago. The corresponding jump in net earned premiums—to $616.2 million from $544 million—more than offset a slight up tic in losses and loss-adjustment expenses ($337.1 million compared to $333.4 million in Q2 2013), and underwriting income was reported at $66.7 million compared to $15.7 million.

Net investment income inched up to $46.1 million from $45.9 million, and all told, operating income before tax jumped to $107.5 million from $54.7 million.

Aspen’s combined ratio improved to 90.1 compared to 97.1 in 2013’s second quarter. Net favorable development on prior-year loss reserves of $31.8 million (compared to $27.4 million a year ago) shaved 5.2 points off of the combined ratio.

Net catastrophe losses dropped to $22.1 million compared to $58.7 million in last year’s second quarter.

For the first half of the year, Aspen reports net income after tax of $251.2 million, up from $131.9 million in the first half of 2013.

Chris O’Kane, CEO, says in a statement, “Aspen’s strong, high-quality results fort he second quarter and first half of 2014 demonstrate the benefits of the investments we have made in our business, our operating focus and our successful strategy to manage a dynamic market.”

He credits the results to “top-line growth, sound underwriting, impressive performance in our reinsurance business and increasing scale” in the company’s U.S. insurance platform.

Stern Agee analysts Dan Farrell and Nitin Chhabra say Aspen’s underwriting results are in line with guidance, and that Aspen’s reported operating earnings per share of $1.40 is slightly above recent guidance range.

Gross written premiums were within the company’s guidance, Stern Agee adds, but net written premium was lower.

Aviation war-risk rates should rise In a conference call, O'Kane noted headwinds in the market, namely continued low investment returns and rate pressure in some insurance and reinsurance lines. He said, "Within insurance, aviation and energy property are the most profoundly affected." But he noted the recent Malaysia Airlines losses should put "meaningful upwards pressrue on the aviation war accounts." He says Aspen will push for increases of 100% for primary aviation war risks. For reinsurance, aviation war risk rate increases could be in the 200%-300% range.

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But O'Kane said he doesn't expect the rate increases for war risks to spread to primary avation hull risks.

Allianz is lead reinsurer of $97.3M plane in Ukraine July 18, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/18/allianz-is-lead-reinsurer-of-973m-plane-inukraine Allianz SE is the lead hull and liability reinsurer on a Malaysia Airlines passenger jet that was shot down over eastern Ukraine.

The aircraft’s value is about $97.3 million, London-based insurance broker Aon Plc, which tracks the market for aviation coverage, said yesterday in a report. Atrium Underwriting Group Ltd. was the leader for war coverage, which could pay claims if the damage is tied to terrorism, Aon said.

“As leading reinsurer of Malaysia Airlines for aviation hull and liability coverage, Allianz Global Corporate & Specialty stands by to support our client as fully and quickly as possible,” Jacqueline M. Maher, a spokeswoman for Munich- based Allianz, said in an e-mailed statement. “It is much too early to comment on reports of this tragic incident while details are still being confirmed, except to extend our deepest sympathy to all those affected by this crash.” Atrium’s Liz O’Rourke declined to comment.

The Boeing Co. 777 crashed near the town of Torez, about 30 kilometers (18 miles) from the Russian border, killing all 298 people on board. The plane was en route to Kuala Lumpur from Amsterdam.

The government in Kiev blamed the attack on pro- Russian rebels, an accusation the separatists denied.

The attack threatens to raise tensions in Ukraine’s civil war. Carriers including Deutsche Lufthansa AG, Air France-KLM and OAO Aeroflot are shifting planes away from the region, which sits astride some of the busiest air routes between Europe and Asia.

On war exclusions and coverages: Aviation insurance info. after MH17 crash Malaysia Airlines flight MH17, flying from Amsterdam to Kuala Lumpur, crashed near the UkraineRussia border today. As early reports indicate...

Atrium provides coverage through the Lloyd’s of London market. Enstar Group Ltd. purchased a majority stake in Atrium last year.

Willis Group Holdings Plc brokered the coverage, said Colleen McCarthy, a spokeswoman for the company.

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Insurers now offer coverage for virtual currencies, N.Y. state proposes bitcoin regulations July 17, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/17/insurers-now-offer-coverage-for-virtualcurrencies The New York State Dept. of Financial Services is proposing a "BitLicense" to regulate firms that accept Bitcoins and other Internet currencies to protect consumers from money laundering schemes.

Benjamin Lawsky, New York's superintendant of financial services, says that companies that receive, transmit or store virtual currencies will have to obtain a license and hold the same amount of virtual currency that they owe customers. Companies also must issue receipts to customers who pay in bitcoins and verify customers' identities and addresses.

This proposal is open to public comment for 45 days beginning July 23, and after which face additional review and possible changes.

In a statement, Lawsky says that it's vital to set up the long-term future of the virtual currency industry and to protect the safety and soundness of customer assets. “We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity—without stifling beneficial innovation,” he says.

In March, the IRS said it would treat bitcoins and other virtual currencies as property and not currency, giving a boost to investors. The price of a bitcoin has increased substantially since early 2013, where it went from $13 to more than $600 today. The value of a bitcoin is faster to figure out than ever, as Google Search now supports Bitcoin in its currency calculator.

Insurance offerings and implications Insurers have been hesitant to provide coverage to businesses that operate on virtual currency.

“Insurance companies do not understand [bitcoin], and even fear it,” Xapo CEO Wences Casares told CoinDesk. Earlier this year Lloyd's was the first to offer coverage to Elliptic Vault, a bitcoin storage service, but it's deal fell through as CoinDesk reported. Other insurers have since joined the arena.

In June, Great American Insurance Group announced that it will offer virtual currency coverage through its Fidelity/Crime Division to both commercial and government policy holders. In a statement, Great American said that "Standard crime insurance policies, including Great American's crime policy, currently do not automatically provide coverage for virtual peer-to-peer mediums of exchange. Crime insurance coverage for Bitcoins can now be granted by an endorsement to an existing crime policy." Coverage is available in most states.

Bermuda-based Meridian Insurance offers virtual currency coverage to Xapo, an online bitcoin vault based in California. Senior Vice President of business development Ted Rogers told CoinDesk that the company's policy is "much larger than $15 million" and part of the reserve is held in bitcoins.

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Technology Why social media must be part of your marketing strategy July 30, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/30/socially-acceptable At the recent ACE conference, Katie Peet, social media director for State Auto Insurance Companies, discussed how social media has grown over the past year, the public’s expectations of how it will be used, and why it’s vital to reaching insureds.

According to the Red Cross, 76% of people turn to social media during a disaster. They use it to connect with others they care about and to get information.

Peet said that 20% of Americans will be active on Twitter in the next year and that number is expected to grow. During a disaster, 24% use social media to let people know they are safe; 37% use it to find supplies, shelter or survival resources; and 44% of people use social media to ask their friends to contact responders for help.

Interestingly, 80% of survivors of a major event expect to be heard on social media, anticipating that emergency agencies will monitor and respond there. Older residents actually expect agencies to monitor social media even more than their younger counterparts.

For the people who get their information from social media during a crisis, Facebook is the number one outlet with 18% of users receiving emergency information from it.

What makes social media so popular during a crisis? “People share their experiences on social media,” explained Peet. “They want to feel more connected in their worst moments, and they can get instant feedback.”

Insurers are finding that they can use social media proactively to educate residents before an event occurs. Travelers uses it to warn residents before a hurricane with recommendations on how to prepare for the storm. Chubb also offers tips for protecting unoccupied homes during hurricane season. The Weather Channel spreads warnings over multiple channels when severe storms are heading to a specific part of the country.

Another option is providing “just-in-time updates” to respond to a specific event and get residents the information they need immediately. Social media can also be used to correct misinformation such as reports of tornadoes or hail striking a particular area. Insurers can use it to provide information from the front lines before, during and after a disaster.

Launching your social media effort The best use of social media involves a concerted effort beyond just the designated social media team. Definitely ask them which social media outlets they use and monitor. Know what the plan is to respond for a disaster and especially for any complaints.

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If you’re not used to being on social media, select one network to begin with and use it to solve a problem, answer a question or fill a need. You can’t use it if you don’t understand how it works.

Schedule about 15 minutes every few days to see what’s out there. Use social media to get information and follow someone on Twitter. (You can basically search Twitter for any topic.) Twitter uses hashtags to label topics such as #Joplin, #Moore or #Sandy for major disasters.

Be prepared to respond. Create standard answers to common questions and know what information to release when based on customer needs. Keeping the lines of communication open between the adjusters on the front line and the social media team will help ensure that accurate information gets out at the right time.

Don’t be afraid to use smaller weather events as a dry run for large catastrophes. It’s a great way to see how the company needs to respond and to formulate a workable strategy. Be proactive and always consider – what does our customer need to know?

Survey IDs top online quote tools; are you nervous yet?

July 30, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/30/survey-ids-top-online-quote-tools-are-younervous Direct insurance sales via the Web are the hot-button issue in the industry of the moment.

Many expect the trend to not only continue but accelerate in the coming years as more and more customers become comfortable with buying their own policies directly from the carriers and the tools to help them do that grow and evolve. That's coming, and there's very little that can be done to slow this train.

With that in mind, CarInsurance.com recently commissioned a survey to determine which carrier currently offers the best online quoting tools, and the results might worry some agents who are committed to the legacy, offline model of the insurance industry.

All 13 of the major car insurance carriers reviewed by CarInsurance.com performed "extremely well" in the study, with four acing the test with perfect scores. Perfect scores!

UK to allow driverless cars on public roads next year July 30, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/30/uk-to-allow-driverless-cars-on-public-roadsnext-y The United Kingdom government announced driverless cars will be allowed on public roads starting in January 2015, reports BBC News. Ministers also ordered a review of the UK's road regulations to provide appropriate guidelines for the new technology.

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UK engineers have been experimenting with driverless cars, but concerns about legal and insurance issues have restricted the machines on private roads, until now. The Department of Transport originally pledged to let self-driving cars be trailed on public roads by the end of 2013, says BBC News.

The UK joins the U.S. states of California, Nevada, and Florida in approving tests of driverless vehicles. In California alone, Google's driverlss car has done more than 300,000 miles on the open road, says BBC News.

Nissan carried out Japan's first public road test of a driverless vehicle on a highway in 2013. The Swedish city of Gothenburg has given Volvo permission to test 100 driverless cars, starting 2017.

The UK is inviting cities to compete to host one of three trails of the driverless technology in January.

The tests will run for between 18 to 36 months.Business Secretary Vince Cable says the move will put the UK "at the forefront of this transformational technology," and provide new opportunities for the country's economy, says BBC News.

9/11 commissioners: U.S. at 'Sept. 10' preparedness level for cyber attacks July 22, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/22/9-11-commissioners-us-at-sept-10preparedness-leve The terrorist threat against the U.S. remains dangerous 10 years after the 9/11 Commission issued its first report -- only now the risk is greater online.

In a report issued today, members of the panel that studied the 2001 attacks urge Congress to enact cybersecurity legislation, the White House to communicate the consequences of potential cyberattacks to Americans, and leaders to work with allies to define what constitutes an online attack on another country.

“The struggle against terrorism is far from over -- rather, it has entered a new and dangerous phase,” according to the report, sponsored by the Bipartisan Policy Center and the Annenberg Public Policy Center. “America can not afford to let down its guard.”

The panel, led a decade ago by former New Jersey Governor Thomas Kean, says U.S. readiness against hackers is poor, quoting one unnamed former U.S. agency official who said “we are at September 10th levels in terms of cyber preparedness.” The U.S. is writing cybersecurity policies to prevent electronic attacks, spurring calls by privacy groups for tougher safeguards and lobbying by companies seeking exemptions.

The report defends National Security Agency operations to collect and analyze data about hacking and terrorist threats. The NSA has confronted a domestic and international backlash over the extent of its digital spying exposed in documents leaked by former agency contractor Edward Snowden.

Recruiting hurt However, the spying revelations appear to have “seriously affected recruiting efforts” to lure young, talented workers to government service.

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“NSA applications reportedly fell by one-third in the wake of these disclosures, and the NSA was apparently disinvited from conferences at which it had recruited in the past,” the panel said.

Congress should pass legislation giving companies legal protection for sharing information about threats to their computer networks with the government and each other. Such legislation has passed the House and is advancing in the Senate. It’s opposed by some privacy groups that argue it lacks safeguards to prevent violations of U.S. citizens’ rights.

“The Internet’s vulnerabilities are outpacing the nation’s ability to secure it,” according to the report.

“A growing chorus of senior national security officials describes the cyber domain as the battlefield of the future.” ’Growing threat’ The report says al-Qaeda still poses a threat with new “breeding grounds” for attacks in Iraq and Syria.

The commission completed its work in 2004, after submitting its report and recommendations to then President George W. Bush.

The former commissioners point fingers at Congress for being resistant to reduce the 92 committees and subcommittees that have oversight of the Department of Homeland Security, which impedes the department’s work. They also said Congress has similarly left the intelligence budget fragmented. The panel says the administration of President Barack Obama has similarly failed to communicate to citizens the threat from hackers, according to the report.

“The American people remain largely unaware of the daily onslaught of cyber-attacks against our nation’s most sensitive and economically important electronic networks,” the group said.

“Unfortunately, cyber readiness lags far behind this rapidly growing threat.”

Remote workers pose increased threat to cyber security: 4 tips to manage risk July 18, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/18/remote-workers-pose-increased-threat-tocyber-secu Employees who access company data outside the office on a company or personal device create an increased cyber risk for businesses. Hackers are increasingly targeting small businesses, as those more likely to have weak online security, less likely use cloud services without encryption technology and lack full-time IT support. Symantec, an online security company, says that cyber attacks rose 200% for small businesses in 2012, and increased another 62% in 2013.

Small businesses are not thinking about these risks, according to Hiscox, as only 4% of the surveyed 1,023 small business owners are concerned about security breaches exposing data or impacting sales.

Outlined by HostReview, these four tips can help remote workers protect the data of their small businesses:

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1. Password protect all business devices. This includes computers, tablets and smartphones.

Prompt employees to change passwords frequently and not select easily hacked combinations like "1234" or "password." This is the first step to data security, so change them often.

2.

Take advantage of cloud services. Cloud services ensure that data won't completely vanish when a device is lost or stolen. Encrypting data ensures that your company is the only one with access to the files. LifeHacker details the best cloud storage services with encryption, which include SpiderOak, Wuala, Tresorit and Mega.co.nz.

3. Know the wireless connection. Give employees Wi-Fi guidelines. Private networks provide security, unlike open networks found in airports or restaurants. When accessing company data, employees should disable their personal smartphones to automatically conect to nearby Wi-Fi networks.

4. Set up tracking and remote wipe services. Keep a company inventory of all devices and ensure that each has enabled GPS tracking features turned on in case the device is lost or stolen. Install technology to remotely wipe data from a missing device.

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Strategy MetLife CEO cautious on buybacks amid regulatory uncertainty July 31, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/31/metlife-ceo-cautious-on-buybacks-amidregulatory-u MetLife Inc. Chief Executive Officer Steven Kandarian, who last month announced the insurer’s first stock buyback since 2008, said it’s hard to commit to additional repurchases as he awaits clarity on U.S. capital oversight.

“We were cautious and remain cautious in terms of the capital management because of the uncertainty,” Kandarian told analysts today. “Returning capital to shareholders is a high priority for us. We have to do that consistent with a regulatory environment in which we find ourselves, and as we learn more about that we’ll have more to say.”

MetLife said last month that it would buy back $1 billion of shares, a sum that Kandarian called “modest.” The repurchase offsets the dilution of units that were converted into common stock as part of the 2010 purchase of American Life Insurance Co. Hartford Financial Services Group Inc., a smaller rival, yesterday increased its buyback plan to about $2.8 billion for this year and next.

Kandarian’s company, the largest U.S. life insurer, is in the final stage of review by U.S. regulators to determine whether it is a potential threat to the financial system. Such a designation would subject New York-based MetLife to oversight by the Federal Reserve and possibly stricter capital standards, though final rules haven’t been written.

Randy Binner, an analyst at FBR Capital Markets, asked Kandarian on a conference call whether he could conduct buybacks beyond those needed to offset equity dilution.

“Until we have more information it’s going to be difficult for us to answer that question,” the CEO said.

MetLife declined 1.6 percent to $53.56 at 9:43 a.m. in New York trading, erasing its gain for the year.

The insurer late yesterday announced second-quarter profit that missed analysts’ estimates as profit in the Americas group-benefits unit fell on costs tied to dental insurance and disability claims.

Endurance ends $3.2 billion hostile bid for Aspen Insurance July 30, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/30/endurance-ends-32-billion-hostile-bid-foraspen-in Endurance Specialty Holdings Ltd. terminated its offer to buy Aspen Insurance Holdings Ltd. after the target company rebuffed the hostile bid.

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“Aspen’s focus on defensive self-preservation tactics rather than value creation” made the offer impractical, Endurance Chairman John Charman said in a statement today. Endurance had offered about $3.2 billion in cash and stock, based on its share price on June 2, when the company made its second bid.

The withdrawal is a victory for Aspen Chairman Glyn Jones who worked to fend off the bid and urged his shareholders to reject proposals from Endurance to shake up his board. The target company said last week that its investors opposed Endurance’s plans to increase the size of Aspen’s board to 19 from 12 to ease a takeover.

Aspen slipped 2.8 percent to $40 at 4:24 p.m. in extended trading in New York.

Aspen had said Endurance offered too little and that combining the Bermuda-based insurers would alienate clients seeking to spread their risk. Endurance had said a combination would create a stronger, more diversified insurer.

AIG chairman: U.S. corporate tax rate causing companies to rush for the exits July 21, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/21/aig-chairman-us-corporate-tax-rate-causingcompani American International Group Inc. Chairman Steve Miller said lawmakers should bring U.S. corporate tax rates in line with other nations’ to halt firms from switching their legal address to cut obligations.

The U.S. corporate tax rate of 35% is the highest in the world, which causes companies to rush for the exits like people do when there’s a “fire in the theater,” Miller said today on Bloomberg TV’s Surveillance program.

AbbVie Inc., maker of the arthritis medicine Humira, announced a deal last week to move its tax home to the U.K. in a purchase for more than $50 billion of Shire Plc. Senate Finance Chairman Ron Wyden, an Oregon Democrat who first said he wanted to address such inversions as part of a broader tax revamp, said last week that he’s exploring near-term options. His committee is scheduled to hold a hearing on the maneuvers tomorrow.

“Our politicians want to lock the doors,” Miller said. “The real answer would be, let’s put out the fire, which means to make our U.S. tax system competitive on a global scale.”

AIG accumulated losses through the financial crisis that enabled the company to avoid payments to the U.S. in recent years after returning to profitability. The New York-based insurer in 2011 announced the hire of Clarissa Potter, former deputy chief counsel of the Internal Revenue Service, to help protect tax assets.

The insurer last month announced that Peter Hancock, 56, would take over as chief executive officer, replacing Robert Benmosche, 70, effective Sept. 1. Miller said Benmosche handled his duties capably while fighting cancer since 2010, and praised JPMorgan Chase & Co. for disclosing this month that CEO Jamie Dimon, 58, will undergo treatment for throat cancer.

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CEO succession “The most important thing, I think, is get out as much as you can about the facts of the situation,” Miller said. “Because if you don’t, you will make it into a long-running story of people speculating and guessing as to what is really behind what hasn’t been said. I think in Jamie Dimon’s case they kind of said it all.”

Miller also said that AIG is “just about complete” in its efforts to resolve disputes with banks over the insurer’s losses on mortgage-related investments. The company announced a deal last week in which it will get at least $650 million as part of a settlement with Bank of America Corp. over faulty home loans.

“This is certainly the largest” deal tied to soured mortgages, he said. “This was a fair way to finish it on both sides.”

Conservative House members digging in on slimmed-down TRIA July 18, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/18/conservative-house-members-digging-in-onslimmed-d Conservative House Republicans intend to hold legislation reauthorizing a federal backstop for terrorism risk insurance hostage unless they get the slimmed-down version of the bill they support, they indicated Thursday.

They said that means Congress would have to accept a slimmed-down version of the bill this year, no bill at all, or an eight-month extension of the program that would be taken up next year by what they foresee as a Congress where both the House and Senate are controlled by Republicans.

In reaction, a key House Democratic staffer saw no end to the impasse. He said one Republican, Rep. Peter King, R-N.Y., has the support of 30 urban and moderate Republicans for an extension closer to the Senate version, and there are some 20 Republicans “on the other side,” that are demanding a smaller bill.

Rep. Jeb Hensarling, chairman of the House FSC, and Rep. Randy Neugebauer, chairman of the Housing and Insurance Subcommittee of the FSC, both R-Texas, said they will stretch out the process while they educate members of the House on their version of the bill.

“Essentially it looks like TRIA’s not going to be considered in July,” said a Neugebauer aide who declined to authorize use of his name. He made his comment in the wake of passage of a Senate version of the reauthorization bill supported by the industry by an overwhelming vote of 93-4, a vote designed by the Senate to indicate support for TRIA. Neugebauer and Hensarling believe they have the support of the House Republican leadership in their quest to have their version of the legislation as the House companion to the Senate version, which makes much smaller changes in the program. “We are all locking arms, committed to moving this bill,” the Neugebauer aide said.

“We want to negotiate only once with the Senate, not with our bill on the House floor,” then again during negotiations to reconcile the two bills, the aide said.

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The aide meant that Neugebauer and Hensarling would vehemently oppose the House using Democratic votes to send to the Senate a bill much more similar to the Senate bill than the one they have crafted.

The Neugebauer aide said the CBO study “is not an issue” because the Senate bill violates House rules. In a statement, Hensarling also made that point. “Unfortunately, the Senate’s bill is essentially a status quo bill that uses a phony Washington budget gimmick as a pay-for, meaning it can’t even come to the House floor as written,” he said in a statement.

The Neugebauer aide said the headcount undertaken earlier this week by the House Republican leadership indicating the Hensarling/Neugebauer bill would not pass the House as reported out by the House Financial Services Committee is misleading.

The Senate bill is S. 2244, the Terrorism Risk Insurance Program Reauthorization Act of 2014. It would replace a terrorism risk insurance backstop that expires Dec. 31.

The House bill is H.R. 4871, the TRIA Reform Act of 2014.

The House bill calls for gradually increasing the program trigger for all non-nuclear, biological, radiological, and/or chemical (NBCR) events, from $100 million to $500 million by 2019, effectively phasing out the program for non-NBCR events.

“The narrative that’s being driven is everyone’s opposed to our bill and opposed to the process moving forward,” the Neugebauer spokesman said. “That couldn’t be further from the truth. We received a tremendous amount of support from stakeholders. … Perhaps they haven’t been as vocal.”

However, a number of the companies and trades cited by the Neugebauer aide said they supported passage of H.R. 4871 only to start the process of reconciling a House bill they hate with the more acceptable Senate bill.

A key issue for many insurers was cited by Sen. Tim Johnson, D-S.D., in his comments Thursday during floor debate of the Senate bill.

He said the Senate raised the insurer co-pay from 15 percent to 20 percent and the mandatory recoupment from $27.5 billion to $37.5 billion [over five years].

Johnson noted, however, that, “we were careful” in reaching this compromise that the Senate did not raise the trigger, which would drive smaller insurers out of the market and reduce affordability of coverage for business nationwide, and that “this bipartisan bill does not pick what modes of terrorism attacks would get preferential treatment over the other forms of attacks.”

The Neugebauer aide cited a number of insurance trade groups and underwriters and producers that said they support the House bill, but several of the trades and companies he cited said they supported passage of the House bill only to keep the process of ultimately getting a bill moving.

The House Democratic aide was scathing in reaction to the House impasse. He said that, “If so many insurers are supporting the House bill, why are they asking us to help them get a version of the bill more like the Senate version.”

He was also leery as to whether Hensarling has any interest in compromising.

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“Hensarling has a different vision of government than most people,” the aide said. Moreover, he said, “Hensarling is not one to make deals.”

MarshBerry acquires assets of Gill & Roeser Inc. July 17, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/07/17/marshberry-acquires-assets-of-gill-roeser-inc MarshBerry acquired assets of New York City-based boutique investment banking and reinsurance intermediary firm, Gill & Roeser Inc. Gill & Roeser is an independently owned capital management advisor to the insurance industry, providing capital management strategies and reinsurance services such as reinsurance brokering, program structures, alternative markets, risk pooling, valuations and more.

MarshBerry is hiring staff of Gill & Roeser including chairman Dale A. Myer and president and CEO Steven K. Bolland.

"By acquiring Gill & Roeser, MarshBerry is able to expand its knowledge in the insurance carrier and managing general agent marketplace," said John Wepler, MarshBerry’s chairman & president. "The experience Steven Bolland and Dale Myer bring to the table immediately allows us to expand our footprint in the market and offer a broader portfolio of services to the insurance industry."

Myer believes both Gill & Roeser and MarshBerry have the experience to foster the growth of the business.

"Gill & Roeser, like MarshBerry, has been in business for over 30 years. Both of our firms have developed an immense amount of experience and knowledge for the markets we serve. By joining MarshBerry we can now provide investment banking and reinsurance services to insurance and reinsurance companies, wholesalers, managing general agents, managing general underwriters, and third party administrators on a much larger scale," Myer said.

Welper agrees, "We are excited to expand MarshBerry's capabilities and knowledge as we to continue to grow our organization in new areas.”

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