INSURANCE NEWS FLASH 16th September 2013
Table of Contents Sales & Marketing ................................................................................................................. 3 Finance ................................................................................................................................. 9 Technology .......................................................................................................................... 14 Strategy .............................................................................................................................. 18
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Sales & Marketing Ace receives license to open in Tunisia 12 September, 2013 |Insurance Insights http://www.insuranceinsight.com/insurance-insight/news/2294329/ace-receives-license-to-openin-tunisia Ace Group has received approval from the Tunisian Ministry of Finance to establish a reinsurance operation in Tunisia as part of its continued strategy to grow its business throughout its Middle East and North Africa region. The licence has been granted under the country's offshore regulations for facultative reinsurance business. Ace expects to formally open its operation in Tunisia later this autumn as a branch of Ace American Insurance Company. It will be led by Kamal Kaabi, a senior insurance and reinsurance executive with 16 years of insurance industry experience. Mr Kaabi joined Ace in 2011 after a distinguished career working for companies such as Tunis Re, Africa Re and AIG in a wide variety of territories including Tunisia, Bahrain and Saudi Arabia. He is a Tunisian national. In addition to underwriting reinsurance business within Tunisia, Ace plans to operate its Tunis office as a hub for servicing the facultative reinsurance needs of North Africa more widely, across a number of business lines including the growing energy, power, construction and infrastructure sectors. Steve Dixon, regional managing director, Middle East and North Africa at Ace, said: "At Ace, we have a firm belief that there is no substitute for an on the ground presence in order to operate effectively in each of our target markets in MENA. By establishing a presence in Tunisia under Kamal's leadership, we can better serve our clients and brokers in the country and throughout North Africa. "We are delighted to have been granted this licence and would like to express our thanks to the Tunisian Ministry of Finance for their support and guidance throughout the process. "Despite recent uncertainty, we are confident about the long-term economic outlook and insurance opportunity within North Africa. We look forward to developing strong relationships with brokers and cedants in Tunisia and contributing to the continued growth of the wider region's thriving reinsurance market."
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Report: AIG Halts Berkshire Reinsurance Deals as Rivalry Heats Up 11 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/11/report-aig-halts-berkshire-reinsurance-dealsas-ri American International Group Inc has decided to stop signing new reinsurance contracts with Warren Buffett's Berkshire Hathaway Inc. due to competitive reasons, Bloomberg News reported, citing an unidentified person familiar with the decision. AIG stopped entering new deals with Berkshire units including National Indemnity Co. and General Re about two months ago, but existing contracts will not be affected, Bloomberg said, citing the person. The decision comes after Berkshire hired away senior AIG executives and Buffett said he planned to expand his company's commercial insurance operations that compete with AIG. A spokesman for AIG declined to comment. A spokeswoman for Berkshire did not immediately return a request for comment.
Satellites and Solar Flares Among Emerging Risks 09 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/09/satellites-and-solar-flares-among-emergingrisks Widespread panic due to solar flares and satellite collisions is no longer the stuff of science-fiction now that these risks have the potential to create prolonged business interruption and billions in insured losses. What goes on in the sky can affect those on the ground, says a Guy Carpenter report on the reinsurance industry’s emerging exposures, and can disrupt entire communities and halt economic activity. With more satellites than ever in orbit, our reliance on them for global communications, broadcasting, air traffic control and weather forecasting makes the world a vulnerable place should anything disrupt their service. “Space debris poses a serious risk to operational satellites,” says the report. “Indeed, debris amounts are increasing as objects continue to collide with one another, producing more fragments.” According to the U.S. Strategic Command’s Space Surveillance Network, there are more than 20,000 objects greater than four inches in size orbiting Earth. Of these, only 1,000 are active satellites; the rest are abandoned rocket stages and pieces of satellites and fragments.
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Tens of millions of smaller particles are currently orbiting at sufficient velocity to cause significant damage to operational satellites—which is what happened to Ecuadorian satellite Pegaso in May 2013 when it hit debris left by a Soviet rocket; to Russian research satellite BLITS in January 2013 when it collided with space debris; and to a U.S. commercial satellite in February 2009. Two orbits hold particular risk to hosting sites of collision: the lower earth orbit (LEO) less than 1,243 miles from earth that houses space stations, government communications and earth observation satellites, and the geosynchronous orbit (GEO) more than 22,369 miles from earth that contains communications, broadcast and meteorological satellites. “Despite end-of-life deorbiting strategies that now exist for the latest generation of satellites deployed in the LEO that involved a controlled re-entry into the Earth’s atmosphere, no sustained debris mitigation measures are in place to catch existing space junk and pull it out of orbit,” says the report, citing that catastrophic collisions will occur in the LEO at least every five to nine years over the next two centuries. Swiss Re puts the total value of insured satellites in the LEO at around $1 billion, but expects it to increase as more private companies explore satellite imagery and mapping. The majority of insured satellites are in the GEO because of the commercial communication, broadcasting and meteorological satellites deployed here, sharing space with 500 obsolete satellites, 200 rocket bodies and thousands of smaller fragments. Perhaps the greatest space risk comes from the sun, whose temperamental conditions can affect the performance of technology on Earth. Solar disturbances can flow through expensive conductive structures on the ground, disrupting electricity supply, causing satellite damage and triggering GPS signal disturbances to the tune of “billions or even trillions of dollars of losses.” Lloyd’s of London estimates that a large solar disturbance could cut power to up to 40 million people along the Eastern U.S. seaboard with an economic cost of up to $2 trillion and losses of up to $30 billion for satellite operators. According to Guy Carpenter, reinsurance options are available to cover risks during launch and orbit, as well as third-party liability for damage caused by the satellite or launch vehicle or for in-orbit collisions. “While the cost of insuring a satellite during launch has traditionally been higher than its life in orbit, this is likely to change as underwriters become increasingly aware of increased collision risks,” says Guy Carpenter. The best bet for interstellar risk-takers is to improve technical infrastructure, design early-warning systems for satellite collisions and solar flares and create improved space weather forecasts to soften the blow of whatever happens up there before its impact is felt on Earth.
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Reinsurers Mull Response to Growing Competition 06 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/06/reinsurers-mull-response-to-growingcompetition Reinsurance executives gathering for their annual get-together in Monte Carlo this weekend will be considering their response to increasingly popular alternative insurance-linked investments that are driving down prices in the industry. Investment funds looking for higher yields in a low-interest rate environment have funnelled billions of dollars in recent years into so-called "catastrophe bonds", which are sold by insurers to share the risk they take on for natural disasters. Reinsurers, whose business is to help shoulder the risks faced by insurers in exchange for part of the profit, have seen their pricing power diminish and their relevance threatened. The competition is blamed for pushing reinsurance prices down by more than a fifth in the lucrative market for hurricane coverage in the United States when contracts there were renewed in June and July. That downward pressure may spill over into other lines of business when reinsurers and their insurance company clients renew a further round of contracts on January 1, brokers said. James Vickers, chairman of broker Willis Re International, said price pressures will lead some reinsurers to shift their attention to speciality areas like marine or aerospace insurance, while others may opt to return excess cash to shareholders if prices are too low. "The redeployment of capital that may not be used in U.S. catastrophe business is the most interesting conundrum," Vickers said. The world's biggest reinsurer, Munich Re, has already said it is considering buying back its own shares, while No. 2 player Swiss Re has said its "first priority" is growing its dividend. Credit rating agency Standard & Poor's calculates that the reinsurance sector held $34 billion in excess capital last year. ALTERNATIVE THREAT As long as interest rates stay low, investors in alternative insurance products like catastrophe bonds look set to keep gnawing away at the profitability of traditional reinsurers. Around $10 billion of new capital flowed into insurance-related investment structures over the last 18 months, with the total market now worth around $45 billion, reinsurance broker Guy Carpenter estimates.
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New issues of catastrophe bonds may reach $7 billion this year, matching a record set in 2007 before the financial crisis, industry observers say. Despite the challenges, credit rating agency Moody's gave an upbeat assessment of reinsurers at a briefing in London, arguing that most firms have embraced the new environment. "While a continued inflow of alternative capital has the potential to alter the core business model of reinsurers, many firms in the sector have been preparing for this eventuality for years," said James Eck, a senior credit officer at Moody's But rival S&P, also in a London briefing ahead of the Monte Carlo gathering, said there was a risk to the long-term survival of many reinsurers. "Reinsurers who aren't willing to adapt or try and stay ahead of the curve are going to be pushed to the sidelines or pushed out," said Dennis Sugrue, a reinsurance specialist at S&P. There could be a wave of consolidations in the industry, particularly among smaller operators, Sugrue said. On Wednesday the chairman of insurance market Lloyds ofLondon warned the rush of money into alternative insurance products could destabilise the industry, potentially leading to a new financial crisis. Lloyds boss John Nelson said the industry must avoid capital becoming detached from risk, a mistake which he said caused the banking industry's "systemic problems" from 2007. But many reinsurers are clearly trying to ride the wave of alternative insurance investing, taking advantage of their own specialist understanding of risk to not only buy the bonds for their own portfolios but to advise others, too. In Europe, reinsurers Swiss Re, Munich Re and Hannover Re are active issuers of cat bonds to protect their own reinsurance book and on behalf of insurance clients. U.S. players such as Allstate Corp and Chubb Corp are also regular issuers. "Most reinsurers need and are beginning to develop some sort of third-party fund management capability," said Willis Re's Vickers. "Everybody is dabbling in the alternative capital area."
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Brit expands global distribution network with Bermuda office opening 06 September, 2013 |Insurance Insights http://www.insuranceinsight.com/insurance-insight/news/2293084/brit-expands-globaldistribution-network-with-bermuda-office-opening Brit is targeting an expansion of its distribution network with the opening of a Bermuda office. The office will focus on underwriting excess workers compensation reinsurance as well as US property catastrophe reinsurance, retrocession and industry los warranty covers. Brit's new Bermuda operation, the opening of which is subject to approval by the Bermuda Monetary Authority, will be headed up by former Markel Bermuda senior vice president Joe Bonanno. Joining Bonanno in Bermuda will be Julia Henderson, previously a vice president at Partner Re, who will be charged with building the business in the areas of US property catastrophe reinsurance, retrocession and ILWs covers. Commenting on the office opening - which is subject to regulatory approval - Matthew Wilson, Brit Global Specialty chief executive, said: "Opening a branch office in Bermuda will enhance the distribution capability of the group by affording Brit broader access to both casualty and property treaty business. "These are areas in which the group already has significant expertise and where profitability has been strong. This is another key step in developing Brit's global offering." On the appointments of Bonanno and Henderson, Wilson added: "We are excited to add Joe and Julia's significant experience to the Brit team and hope this expansion in our distribution capability will enable us to get closer to both our clients and brokers, offering them products that we do not currently provide in London."
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Finance Assurant Acquires U.K. Mobile Phone Insurer in Effort to Diversify 12 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/12/assurant-acquires-uk-mobile-phone-insurerin-effor Specialty insurer Assurant, Inc. says it will purchase U.K. mobile phone insurance insurer Lifestyle Services Group for $160 million, a move Moody’s Investors Service says should help diversify Assurant’s sources of net operating income over time. Assurant CEO Robert B. Pollock says in a statement, “Our acquisition of Lifestyle Services Group strengthens and expands our global mobile presence, which is an important strategic priority.” Moody’s analyst Jasper Cooper notes in the ratings agency’s “Weekly Credit Outlook” that the purchase price is equal to 8.5 times LSG’s earnings before interest, taxes, depreciation and amortization (EBITDA). Moody’s adds that Assurant plans to pay for the acquisition with cash at the holding company, “which appears to be manageable given that the holding company as of June 30 had significant liquidity totaling $890 million in cash and liquid securities, excluding $476 million set aside for a February 2014 debt maturity.” Regarding the impact on Assurant’s business mix, Moody’s points out that most of Assurant’s net operating income in recent years has come from its Specialty Property segment, “which consists mainly of lender-placed homeowners and mobile home insurance.” Lender-placed, or force-placed, homeowners policies have come under regulatory scrutiny in New York and other states, leading to settlements with insurers, Assurant included, that include refunds to policyholders and reforms in how the coverage is sold. This week, JP. Morgan Chase and lawyers for homeowners who paid for force-placed insurance settled a lawsuit in Miami requiring Assurant to make payments to homeowners equal to 12.5 percent of the insurance premium each affected homeowner was charged. The deal could be worth as much as $300 million and could include up to 1.3 million homeowners nationwide. Moody’s says it expects the LSG acquisition to “help the company diversify its sources of net operating income over time." LSG will become a part of Assurant Solutions, which accounted for 38 percent of Assurant's 2012 net-earned premiums, but only 23 percent of its net operating income, according to Moody's. Moody's also says, "About 31 percent of Assurant Solutions' revenue is from international markets, and on a pro forma basis, the LSG acquisition will boost the international share to about 37 percent."
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Munich Re Plays Down Hit from Pension Fund Investors 10 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/10/munich-re-plays-down-hit-from-pensionfund-investo Munich Re played down the threat to its reinsurance portfolio from insurance investors like pension funds, saying it expected a stable outcome when it renews contracts with its insurance company clients in the coming months. The world's biggest reinsurer on Sunday said it was seeing increasing price competition from institutional investors, who are buying into the securitisation of insurance risks such as hurricane damage in the United States, in direct competition with traditional reinsurers like Munich Re. These investors pumped around $44 billion into the lucrative market for natural catastrophe risk cover last year, representing about 17 percent of worldwide reinsurance capacity for those risks. But the figure is expected to grow to $75 billion in 2016, or about 25 percent of global capacity, Munich Re board member Torsten Jeworrek told a news conference at the annual meeting of the reinsurance industry in Monaco. This new supply of reinsurance was putting continuous but moderate pressure on the price of traditional reinsurance, particularly in catastrophe markets, Jeworrek said. "We have a concern. We take a very serious approach here, particularly when the new capacity undermines current price levels," Jeworrek said, adding that the company was actively managing its book to keep it profitable. However, the natural catastrophe segment makes up only 1.5 billion euros in premiums or less than 10 percent of Munich Re's 17 billion euro property and casualty book, Jeworrek said. "The general impact is manageable and one should not exaggerate," he said. Institutional investors hungry for yield have been increasingly attracted to insurance "catastrophe bonds" because they pay high returns compared with other bonds available in the market. The downside of the bonds for investors is that they risk losing some or all of their capital to pay damage claims in the event of a big storm or earthquake. Jeworrek said it was unclear how long traditional reinsurers, who help insurance companies shoulder the risk of big damage claims in exchange for part of the premium, would have to face the competitive threat from pension funds.
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Institutional investor interest in catastrophe bonds might diminish if general interest rates start to rise, and the "cat bond" investors have yet to face big losses, which might one day dampen their enthusiasm, Jeworrek said. Big reinsurers like Munich, Swiss Re or Hannover Re can also diversify their risk through other lines of business, rather than concentrate on catastrophe risk. Jeworrek said there was no clear trend for the market when reinsurers renew annual contracts with insurance companies for risk cover starting on Jan. 1, 2014. "All in all, we expect still very fragmented and heterogeneous markets and profitability levels," he said. The effect of third-party investors on reinsurers' prospects is a major theme of the industry gathering. Broker Willis Re said the new money may "crowd out" traditional reinsurers. "The influx of third-party capital into the reinsurance market may displace up to $40 billion of traditional equity capital, which could either be returned to shareholders or redeployed elsewhere in the reinsurance market," Willis Re said in a statement on Sunday. Munich Re has already said it is contemplating buying back its own shares.
Asia-Pacific region had average COR of 103% from 2008 to 2012 10 September, 2013 | Insurance Insights http://www.insuranceinsight.com/insurance-insight/news/2293606/asiapacific-region-hadaverage-cor-of-103-from-2008-to-2012 Aon Benfield research has found 32 of the top 50 insurance markets have a five year (2008-12) average combined ratio under 100% while the EMEA area leads the way regionally with a COR of 98% overall. The Americas reported an overall COR of 100% and the Asia Pacific region 103%. Only 10 individual markets have a COR below 90%, the study found. The Insurance Risk Study links profitability metrics to other factors including premium growth, economic growth and political risk in order to rank the insurance opportunity by country. Highest opportunity countries include Singapore, Indonesia, Nigeria, Chile and Norway. The study reports more than $3.5trn of capital is dedicated to insurance globally, with $1.2trn supporting property casualty lines, $1.8trn life and health and $0.5trn reinsurance. Global capital increased 7% year-on-year.
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The study also revealed that within the $1.5trn of global property casualty premium, motor accounts for 45%, and was also the fastest growing component, increasing 7.3%. Property accounted for 32% of premium and grew at nearly 6%, while liability dropped to 23% of the total premium with virtually no growth year-on-year. The data found nearly two thirds of top quartile companies in terms underwriting results remain at the top after one year - and that this out-performance generally persisted over a much longer period. Stephen Mildenhall, global chief executive of analytics for Aon, said: "Our results show that underwriting excellence is possible and sustainable over the longer term, but that it requires the support of the best underwriting and pricing tools, used in a disciplined and effective manner."
Commercial Prices Up for 10th Straight Quarter 09 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/09/commercial-prices-up-for-10th-straightquarter Aggregate second-quarter commercial insurance prices were up 6 percent compared to the same time a year ago, according to Towers Watson. The latest results of the company’s Commercial Lines Insurance Pricing Survey (CLIPS) marks the tenth consecutive quarter for price increases. According to the survey, workers compensation and employment practices liability lines saw the largest price increases, but most lines had mid to upper-single digit increases. Tom Hettinger, Towers Watson’s P&C sales and practice leader for the Americas, observes “tempered” price increases in property insurance during the second quarter and taking into account reinsurance renewal pricing, he would “not be surprised to see a repeat in the third quarter, especially if we continue to see favorable windstorm experience.” No line had price increases of less than 4 percent during the second quarter, says the survey, which compares prices charged on policies underwritten during the quarter to policies written during the same quarter last year. Towers Watson observes an improvement among survey participants of between 3-6 percent in loss ratios in accident year 2013 to date, excluding catastrophes, compared to year-to-date 2012. “Although carrier estimates of claim cost inflation remain relatively low, the potential for greater inflation over the medium term looms and may give the steady price increases we’ve been experiencing some additional staying power,” says Hettinger.
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$100bn of reinsurance capital to enter market, says Aon Benfield 09 September, 2013 |Insurance Insights http://www.insuranceinsight.com/insurance-insight/news/2293350/usd100bn-of-reinsurancecapital-to-enter-market-says-aon-benfield Aon Benfield has said insurers and reinsurers will benefit from $100bn of alternative capital that will enter the reinsurance market over the next five years. The report, entitled 'Post Convergence: The Next $100bn', its annual reinsurance markert outlook report, reveals how the value proposition of reinsurance will improve as the cost of underwriting capital is reduced for reinsurers. The report states that the "post-convergence market brings unlevered collateralized products that are more accretive to insurers than traditional reinsurance for peak risks." According to the report, "reinsurers in the post-convergence market will innovate their capital structures to incorporate the additional $100bn of alternative capital flows." It says reinsurers will engage in three categories of transactions with investors: insurance-linked securities (ILS or cat bonds) to lower the cost of underwriting capital supporting peak tail risks; sidecars to lower the cost of underwriting capital across the portfolio risk spectrum; and the formation of asset management divisions that will allow reinsurers the opportunity to accept asset management mandates from investors. Bryon Ehrhart, chairman of Aon Benfield Analytics, said: "The benefits of this new capital will begin to extend beyond property catastrophe and mortality risks that are common features of the current ILS market and extend into many other reinsurance lines where loss frequency and severity are more predictable." He commented: "The 1 January 1 renewal market for our clients will benefit materially from an excess of traditional reinsurance capacity and new alternative capital flows over light demand growth for reinsurance capacity. Our clients should expect to benefit from a competitive market even if a moderate hurricane season should develop." Torsten Jeworrek, Munich Re Board member responsible for global reinsurance business commented at the Monte Carlo Rendez-vous: “The overall economic situation remains clouded by uncertainty. Reinsurance is still indispensable for many primary insurance clients because of their growing need for tailor-made solutions.� Munich Re expects the prices renewals on 1 January 2014 in the primary and reinsurance markets to remain largely stable, because of the low interest rate environment. In its other business segments, Munich Re also predicts no significant changes in prices and conditions.
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Technology Insurer IT spending to grow strongly in Asia-Pacific 16 September, 2013 |Insurance Insights http://www.insuranceinsight.com/insurance-insight/news/2294720/insurer-it-spending-to-growstrongly-in-asia-pacific Insurance spending in the Asia-Pacific region is set to grow strongly over the next five years according to industry research. Analyst Ovum's research suggests: "Insurers are prioritising investment that will drive customer acquisition and retention and improve operational effectiveness. This is a stark change from the five years of substantial IT budget cuts, which were necessitated by the global economic slowdown." IT expenditure in the life insurance sector in Asia-Pacific will see the most rapid growth – expanding at 11.6% to 2017, overtaking Europe as the second-largest regional market. "The sharp decline in new business growth across all life insurance markets following the global slowdown led most insurers to rapidly and significantly cut their IT budgets," said Charles Juniper, senior insurance analyst, financial services technology, Ovum. "However, accelerating year-on-year growth in 2013 following some cautious expansion from 2011 confirms that life insurers are now moving from a cost-cutting mindset toward reinvestment in strategic IT projects." According to the research, the key IT priorities for insurers in the emerging Asia-Pacific countries will be implementing core processing platforms and developing digital channels to capture the rapid market growth. The research suggest that overall global insurance IT budgets will grow at a 6.5% compound annual growth rate, with total IT spend reaching $109bn by 2017.
Allstate: One Billion Miles Driven on UBI Product Drivewise 13 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/13/allstate-one-billion-miles-driven-on-ubiproduct-d Allstate says it has hit a major 'mile'stone in July as its Drivewise customers register more than one billion miles driven over the course of about 38 million driving hours of data. Meanwhile, the usage-based insurance product launched in Kentucky and Montana on Sept. 9, making the product available in 22 states.
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Drivewise measures drivers' mileage, hard braking, excessive speed, and the time of day when an automobile is used to calculate insurance premiums savings. Once a driver is signed up to use Drivewise, he receive savings equal to 10 percent of premium. After the first six months of use, customer savings are based on driving performance calculated from the data collected. Allstate says seven of 10 Drivewise users are saving money and no one gets premiums increase for using the product. Of those getting a discount, the average savings is about 14 percent per vehicle. Allstate Product Operations Executive Vice President Steve Sorenson says, in a statement, "We are proud to offer customers a deep view into the way they really drive and, at the same time, reward them for safe driving habits – habits that can help make the roads safer for themselves and others." Allstate continues its expansion plan with Drivewise and expects to see the program available in the majority of the country by year end. During a Barclay’s investor conference in New York on Sept. 9, CEO Thomas J. Wilson said Allstate is "moving from a relationship with customers that's based on restoration to one that's more aligned with the concept of prevention." He told investors Allstate agencies are selling Drivewise and "customers have responded well."
ISCS Claims Suite Enhanced For Faster Fraud Detection 12 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/12/iscs-claims-suite-enhanced-for-faster-frauddetect Insurers and service providers alike continue to intensify efforts to combat the multi-billion-dollar fraud pandemic, adopting fresh strategies and utilizing increasingly sophisticated technologies. For their part, technology providers are fine-tuning and expanding their offerings. In keeping with this, ISCS has made enhancements to the claims component of its modern enterprise suite, SurePower Innovation. "Claim[s] management is an expensive process for insurers, made further complicated by an increase in the frequency and severity of fraud over the last several years," said Doug Moore, CTO at ISCS. "Any steps we can take through SurePower Innovation to help insurers alleviate costs associated with claims fraud are certain to be beneficial and well-received by ISCS customers." This latest version, SurePower Innovation Claims 3.0.6, includes various features designed to accelerate fraud detection: •
Rule-based ranking of the probability of fraud for a specified claim. The capability for users to add company-specific rules to the framework.
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•
Alert creation for potentially fraudulent claims as they are adjusted and paid.
One noteworthy feature of the enhanced fraud detection framework is the ability to create a fraud score. According to ISCS, this means that during the evaluation of an actual claim, a claimant or policyholder's fraud score is calculated based on a number of factors, including how many claims were made against the related policy in the last 12 months, as well as the dates of the claims. As with other modules within the company's SurePower Innovation suite, SurePower Innovation Claims can be implemented independently or as a suite and is available as a complete managed SaaS solution in the cloud via the ISCS SurePackage deployment option.
Hiscox Technology Portfolio Now Includes Cyber-Crime Protection 10 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/10/hiscox-technology-portfolio-now-includescyber-cri Specialty insurer Hiscox says it will add a new Cyber Crime protection endorsement to its Technology Privacy Cyber portfolio, providing protection against exposures related to cyber-crime connected to business bank accounts. Hiscox's Technology Privacy Cyber portfolio provides US-based businesses specialized protection for cyber crime and data breaches, says Hiscox. In addition to Cyber Crime protection, the portfolio offers coverage for: •
Technology Errors and Omissions.
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Privacy and Network Security Liability.
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Data Breach Costs.
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Cyber Business Interruption.
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Cyber Extortion.
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Miscellaneous Professional Liability.
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Multimedia Liability.
“Most businesses would not be able to withstand an attack that emptied their bank account, but without proper coverage, getting reimbursed is not guaranteed,” says Matt Donovan, technology underwriting leader, Hiscox USA. “Hiscox has added the Cyber Crime protection endorsement to provide these businesses with protection not provided by many banks.”
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Hiscox, citing Guardian Analytics’ 2012 Business Banking Trust Study, notes that as much as $1 billion per year is being stolen from small- and medium-sized businesses’ bank accounts, but financial institutions are only fully reimbursing those companies about 25 percent of the time. “Business bank accounts have less protection and significantly higher liability for fraud than personal accounts,” says Hiscox. “Often, if the compromise occurs at the business and not at the bank, the bank will not reimburse companies for their losses.”
AIR Now Offering Non-Catastrophe Modeling on Touchstone 10 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/10/air-now-offering-non-catastrophe-modelingon-touch AIR is updating its modeling software platform, Touchstone, with the ability to analyze noncatastrophe risk using the same exposure data existing clients use for their catastrophe modeling. Noncatastrophe perils are dominated by fire and also include lightning, explosion, vandalism, sprinkler leakage, fallen trees and wind. Touchstone users will now be able to calculate noncatastrophe expected losses for each location within an exposure data set; distribute noncatastrophe expected losses into excess loss layers; launch both cat and noncat analysis for the same exposure data; and view and export both sets of analysis results. “We envision that in future releases of Touchstone, companies will have the ability to add their own loss cost data for individual locations, both inside and outside of the U.S.; and to enter adjustments to loss costs based on their specific exposures,” says Ming Lee, president & CEO of AIR Worldwide. He continues, “Our vision for Touchstone is driven by our goal to provide the broadest range of analytics and services to help our clients develop a comprehensive risk management strategy, beyond our traditional focus on catastrophe events. That includes noncatastrophe loss information from ISO as well as analytics from other Verisk companies such as AER and Xactware, which will supplement the catastrophe loss analyses companies are undertaking today.” In August, AIR announced a milestone of providing risk modeling and analytical services for more than $25 billion in total catastrophe bond issuance since the market’s inception in 1996, including more than $15 billion for the 17 out of 22 property-based bonds issued to date in 2013. In April 2009, AIR was the first firm to have modeled more than $10 billion in catastrophe bond limit, a figure that included the first ever catastrophe bond.
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Strategy MontpelierRe Launches Online Risk Institute 13 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/12/montpelierre-launches-online-risk-institute Montpelier Re has launched the virtual Montpelier Risk Institute in partnership with the University of Western Ontario, the Institute of Catastrophic Research, and several private European research institutions. “By fostering collaboration between scientists and insurance specialists, MRI will seek more accurate ways to assess risk across various scales, territories, and perils,” says Gero Michel, chief risk officer and head of Risk Analytics at Montpelier Re, who is overseer of MRI’s steering committee. He says, “As risk becomes more interconnected in a changing environment and climate, it is very important that our models and risk assessment techniques evolve as well.” The Risk Institute’s aim is to bring together scientists and insurance specialists to target new methods for quantifying risk, promote global research and model and quantify new developments in catastrophe and manmade risk. Montpelier Re president Chris Schaper calls MRI a “win-win for Montpelier and our research partners.” He says, “Participating scientists gain access to our extensive modeling capabilities for use in their research, and Montpelier benefits from additional talent to help us further enhance our risk analytic services for both our Montpelier and Blue Capital clients.”
Congress Expected to Act Late on 'Critical' TRIA Renewal 11 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/11/congress-expected-to-act-late-on-critical-triaren Policy expert Robert Gordon with the Property and Casualty Insurers Association of America says he is "not overly optimistic" Congress will move promptly to reauthorize the Terrorism Risk Insurance Act before it sunsets next Dec. 31.
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Gordon, PCI's senior vice president of policy development and research, said during a conference call today that Congress may continue to wait until the last minute before re-upping TRIA—just as it has done for two prior reauthorizations of the federal backstop since it was signed into law in November 2002. Congress has chosen to do so even though the program is "critical," Gordon said. Moreover, Gordon said, Congress is unlikely to act even though there is already anecdotal evidence that the uncertainty of a TRIA renewal is already impacting the insurance industry. He cited concerns voiced by rating agencies, and especially the impact on renewals of workers compensation policies. Insurers are inserting riders in WC policies indicating they are null and void if TRIA is not reauthorized. Reinsurance capacity, too, is drying up, as the markets gird for potential shutdown of the program. PCI unveiled a new poll indicating that 79.5 percent believe that the federal government would bear the major cost of paying for a terrorist event, and 67.6 percent support renewal of the program. The poll also showed that 90.1 percent of respondents believe that paying for a terrorist attack "should be at least in part a responsibility of the federal government." The poll also indicated that the rural/urban divide on the issue is virtually “nonexistent,” according to the polling firm, GS Strategy Group. Gordon and Tom Litjen, a PCI vice president, scheduled the meeting in advance of a hearing on the issue tentatively scheduled for Sept. 19th by the House Financial Services Committee. Litjen called the hearing of “very serious importance,” and said it is likely to be the first of several hearings Congress will hold on the issue. Gordon added that PCI has submitted papers dealing with the program to the House FSC at the committee’s request. He acknowledged that members of the committee are seeking ways to amend the program, but quickly noted that any “changes would see greater costs to consumers.” Gordon said that terrorism risk “is clearly a national problem.” He further noted that TRIA only protects against a national terrorist attack. As for changes, Gordon said PCI would certainly support changes in the TRIA program’s certification program so that the Treasury secretary has clear rules he would follow on the deadline and other components dealing with certifying a terrorist event. Gordon also addressed a policy analysis issued Tuesday by the libertarian Cato Institute. The analysis “suggests that the program should sunset as scheduled in 2014, thus ending this form of corporate welfare,” Cato officials said. The paper argues that, “If there was some ambiguity about the program’s need before, there is none now.” The analysis continued, “Terrorism risk is not more severe than other insurable risks such as natural catastrophes, and a federal backstop stakes public money to protect the insurance industry, and subsidize the terrorism risk insurance premiums for commercial policyholders.
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“The private market is capable of underwriting this risk,” the paper concluded. Gordon responded by saying the Cato assertions are “simply false." “Terrorism risk is not like natural catastrophes because it does not fall within the definition of an insurable risk,” Gordon said. The two risks are “not comparable at all,” he said, noting that there is strong capacity for reinsurance for natural catastrophes, but none for terrorism.
NARAB II Bill Passes in the House 10 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/10/narab-ii-bill-passes-in-the-house The House today overwhelmingly passed legislation that would provide a mechanism for establishing true nonresident licensing reciprocity for insurance agents. The measure was approved by the House by a 397-6 vote. It was reported out by the Senate Banking Committee in June and is now awaiting floor action. Industry officials privately believe that, despite the current gridlock in Congress, the program, called the National Association of Registered Agents and Brokers, has a very good chance of being enacted by this Congress. NARAB, as envisioned by the legislation, would create a non-profit, independent board that would allow multistate licensing for insurance producers. Under HR 1155, the “National Association of Registered Agents and Brokers Reform Act of 2013," insurance agents will be able to apply for NARAB membership and become licensed to sell insurance in multiple states, but states will maintain their full authority in regulating the business of insurance. States would retain their regulatory jurisdiction over consumer protection, market conduct and unfair trade practices, and would retain their rights over licensing, supervision, disciplining and the setting of licensing fees for insurance producers, according to Ken Crerar, president and CEO of the Council of Insurance Agents and Brokers. The bill was introduced by House Insurance Subcommittee Chairman Randy Neugebauer, R-Texas, and Rep. David Scott, D-Ga., in March with 42 original cosponsors. The bill currently boasts the support of 86 bipartisan sponsors. The bill did not need action by a House committee because it has already passed the House in two prior Congresses by voice vote, according to Joel Wood, CIAB senior vice president of government affairs. The Senate bill is S 534, the National Association of Registered Agents and Brokers Reform Act of 2013. It was introduced in the Senate in March by Sen. John Tester, D-Mont., and Sen. Mike Johanns, R-Neb. It has 24 co-sponsors.
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“NARAB II is vitally important for tens of thousands of Big ‘I’ members who operate on a multi-state basis,” said Robert A. Rusbuldt, president and CEO of the Independent Insurance Agents and Brokers of America. Charles E. Symington, IIABA senior vice president for external and government affairs, said, “We hope the Senate will take up this legislation in the near future and we look forward to working with Senate leadership to move the bill to the Senate floor as soon as possible.” Crerar added that, “This bipartisan approach to broker licensing cuts through regulatory red tape, helps consumers and helps businesses operating in multiple jurisdictions. It is supported by every stakeholder group, including the National Association of Insurance Commissioners, and is on a path to final passage.” Adding the voice of carriers, Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies said, “By streamlining the licensing process for agents and brokers across state lines, this legislation will increase competition to the benefit of those in the marketplace for coverage, while still maintaining the state’s authority to regulate the marketplace and protect consumers.” MORE INDUSTRY REACTION The Property Casualty Insurers Association of America says it has been a strong supporter of NARAB II. "NARAB II is commonsense legislation and it would create a streamlined agent and broker licensing system that strengthens the competitive insurance market while maintaining important consumer protections. It sets precedent for state-based uniform national reform as it allows agents and brokers to more efficiently operate on a multi-state basis,” concludes Nat Wienecke, PCI’s senior vice president of federal government relations, in a statement. The National Association of Professional Insurance Agents, which endorsed NARAB II, says it "favors innovations that streamline agent and broker licensing, so long as they do nothing to undermine the principle of state-based regulation of insurance." Supervisory authority over NARAB II should never be granted to the Federal Insurance Office. That would constitute both a breach of the statutory prohibition against the FIO acting as a regulator of insurance and an assault on the principle of state-based regulation of insurance," PIA says in a statement.
Allstate Has Upper Hand on Geico: CEO 10 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/10/allstate-has-upper-hand-on-geico-ceo Allstate CEO Thomas J. Wilson says the insurer has boxed in auto insurance competitor Geico by using two brands to offer products using direct and agency channels.
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Wilson (pictured) says Allstate’s buy of Esurance gave the Northbrook, Ill.-based insurer a leg up on Geico, which has lately turned to agencies to bolster sales. “We’ve been there, done that—tried to do it under the same brand,” says Wilson during a Barclay’s investor conference in New York on Sept. 9. “It didn’t work for us. Maybe it will work for them (Geico).” Wilson says the insurer used to compete with Geico in the direct business market under the Allstate brand but it wasn’t gaining market share. With Esurance, Wilson says Allstate now has two avenues to reach customers and the “natural limit of growth in *Geico’s+ segment is coming out.” “So we kind of box them in,” he continues. Wilson says Esurance saw a 36 percent increase in policies to 1.2 policies-in-force during the first half of the year, and its net written premium increased 31 percent after eclipsing $1 billion in NWP in 2012. The unit’s combined ratio remains elevated due to investments in growth, such as ad spending. Wilson gave some insight into Allstate’s other business. He thought about getting out of the homeowners insurance business following the destructive 2005 hurricane season but chose not to because customers prefer to bundle coverage. Therefore, getting out of homeowners would negatively affect Allstate’s auto business. Allstate instead looked to use reinsurance more effectively, raise rates, improve underwriting and exit some high-risk markets. “The net result of what we did has been to reduce the size of the business, lower our risk and substantially improve results,” Wilson tells investors. Allstate over the last two years took controversial steps with its agency force—encouraging larger agencies and changing performance standards and compensation. Wilson says agencies are “bigger and more profitable” and they are “investing in their business and growing again.”
Willis: Smaller Companies Staying Silent on Cyber Risk 06 September, 2013 |Property Casualty 360 http://www.propertycasualty360.com/2013/09/06/willis-smaller-companies-staying-silent-oncyber-r Large companies are more robustly embracing cyber risk disclosure than smaller corporations, shows a Willis study of data culled from U.S. public company filings in response to a U.S. Securities and Exchange Commission call for e-exposure reporting.
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The Willis-authored report found that in 2013, 22 percent of Fortune 501-1000 companies stayed silent of cyber risk, compared to 12 percent of Fortune 500 companies. According to Willis, the reason behind the divide may be that smaller companies see themselves as likely to be overlooked by hackers, or they may lack the time to thoroughly identify their cyber exposures. “This is concerning because the view that firms may see themselves as less likely targets of an attack runs contrary to our experience, and in fact, many of these firms are sitting at the center of the bulls eye,” says Ann Longmore, executive vice president of FINEX, Willis North America and a co-author of the report. Smaller successful companies aren’t oblivious to this modern danger: 37 percent of Fortune 5011000 companies say a cyber attack would adversely impact their business, compared to 30 percent of Fortune 500 companies. Also, more Fortune 501-1000 companies than their larger peers say cyber risks pose “significant” liabilities to their business. Mostly, all the companies converged on their top exposures. Sixty-eight percent of Fortune 500 and 61 percent of F501-1000 companies named loss of privacy or confidential data as an cyber exposure; 52 percent of Fortune 500 and 48 percent of F501-1000 companies put reputational risk at their attention, and 49 percent of both sizes of corporations agreed on malicious acts as a cyber liability. However, cyber terrorism was only selected by 21 percent of Fortune 500 companies and by 15 percent of F501-1000 companies as a top exposure, which Willis says is “lower than we expected”, given the government’s attention to them, and their potential adverse effects on the U.S. economy. “Action taken at the U.S. federal level clearly shows that cyber-security disclosure is high on the federal agenda and will continue to pose a unique challenge for public companies,” said Chris Keegan, senior vice president, National Resource E&O and e-risk, Willis North America and report coauthor. “Government authorities may require companies to step out of their comfort zone for disclosure in order to bolster IT security for the entire U.S., opening up greater liability to directors and officers in the process,” he said. The industries more likely to protect against cyber breach with firewalls, intrusion detection and encryption are the technology, healthcare, professional and financial institution sectors—which includes insurance companies, Willis notes. Financial funds services are the Fortune 1000 corporations disclosing the greatest level of insurance bought for cyber risks (33 percent), followed by utilities (15 percent) and the banking sector and conglomerates (14 percent). Only 1 percent of either Fortune 500 or Fortune 1000 companies reported any actual cyber breaches in their disclosure forms.
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