Round-up of the weekly news and developments from the global insurance market with stories from Towergate, Aon, Lloyd's and more.
Farm partnership between Axa and Towergate extended
AIUA, a division of Towergate, has revealed its capacity deal with Axa has been extended, a deal thought to be in the region of £45m. Towergate said that Axa has given A-rated paper for AIUA products for five years and the cooperation has been penned for another five years with Axa now the MGA's main capacity provider. The deal, which incorporates agricultural motor and farm combined products, takes effect this month. AIUA managing director Andrew Bell said, "I'm delighted to extend our partnership with Axa. This will provide our brokers with improved underwriting flexibility and new products, backed by secure A-rated capacity." Jon Walker, managing director of commercial intermediary at AXA said, "This is a significant deal and I am delighted that we can support brokers by providing protection to more of the UK's farms and agricultural businesses."
Aon unveils Brexit tool
Aon has unveiled its Brexit Navigator, a three stage process aiming to help organisations quantify Brexit risk exposures and redesign risk management and risk financing structures. Aon revealed that Brexit Navigator is complimented by an interactive tool that presents scenario-based insights for goods, capital, services and people, in order to help assess the impact of Brexit. The solution is available to organisations globally that have business interests in the UK. The three steps start with “baseline” which evaluates how Brexit-ready an organisation is, then “balance” realigns the risk management and insurance programme to adapt to the new organisational risk tolerance and appetite. Finally, “horizon” tests the changes introduced to an organisation's programme. Grant Foster, managing director UK of Aon Global Risk Consulting, commented, "Extensive conversations with clients from different sectors and geographies over the past four months have given us a unique perspective on companies' Brexit concerns. These insights, combined with our deep and extensive expertise in risk advisory and solutions, have enabled us to develop Brexit Navigator."
Richard Pryce of QBE appointed to Lloyd's Franchise Board
Lloyd’s have revealed that Richard Pryce, CEO for QBE European Operations, has been appointed by the Council of Lloyd’s as a non-executive director of the Franchise Board, the body which is responsible for the day-to-day running of the Lloyd’s market. Pryce takes up his role as a market connected non-executive director this month, replacing Nicholas Furlonge, who has retired from his role on the Board after nine years of service. Lloyd’s Chairman John Nelson said, “Richard has unrivalled experience of the market both here in the UK and globally. He will bring an informed view that will help challenge the board and Lloyd’s to ensure we are continuing to support the market in the best way possible.” Pryce said of the opportunity, “This is an exciting time to be joining the Lloyd’s Franchise Board. There is no shortage of major issues approaching and the role of the Board will be critical in ensuring the market can navigate them successfully and thrive.”
Bill O'Farrell and Arch set to unveil a new $500mn Bermudian run-off vehicle
Bill O’Farrell, the former Chubb chief reinsurance officer, and Arch are reportedly set to launch a $500mn Bermudian run-off vehicle with Kelso & Co believed to be a big backer in the project. Over $500mn has been raised for the new start up, reportedly called Premia Re, with Arch holding a large minority share of operations. Arch are said to be involved as a strategic partner and will provide quota share support to the vehicle. O’Farrell will be CEO of the holding company and president of US operations. The role of CFO is to be taken by Scott Maries the former Enstar and JP Morgan executive. It is understood that a conscious decision was taken to end the amount of capital raised at $500mn due to potential pressures put on the company if it were to hold a larger amount.
January renewals see further concessions as the market continues to soften
The latest January renewals saw further price drops in many markets and locations with reinsurers readying themselves for a drop in results in the next few years. Despite the price reductions there are hopes by some that this could be the end of the reductions as they were slower than a year ago. The property cat market was split geographically with the American market seeing the smallest reductions at 2.5% to 5%. Europe, as an average, saw reductions of 2.5% to 7.5% and Asia witnessed some double digit reductions in China and Korea.
Biba reveals product recall offering with CFC
The British Insurance Brokers' Association (Biba) have revealed a product recall scheme through Biba member CFC Underwriting. The scheme is applicable for businesses in a wide range of industries and offers two policies for specific sectors. There is one for manufacturers and distributors of non-food consumer products and automotive parts and a second for food, drink and personal hygiene manufacturers. Benefits for members are an increased provision for pre-incident consultancy work of 3.5% of gross premium; the standard offering is 2.5%. The scheme is designed to assist with crisis management and business continuity. The product also provides marketing and training support, and CFC will offer sub-limits for ‘retailers' expenses' extension to Biba members' clients to cover fines and penalties. Mike Hallam, Biba's head of technical services said, "A product recall can be a worrying prospect for any business, with the potential for not just financial loss, but significant damage to their brand and reputation. We are pleased to offer this product to members with enhanced benefits and the support that they need to sell this complex product."
$245m in fourth-quarter catastrophe losses for XL Catlin
XL Group has published its preliminary net loss estimate in the fourth quarter of 2016 of approximately $245M relating to natural catastrophes. Losses contributing to this estimate include nearly $130M in net losses from Hurricane Matthew split evenly between Insurance and Reinsurance and approximately $75M in net losses from the recent earthquake activity in New Zealand, with approximately 75% of these losses in the Reinsurance segment. The rest of the catastrophe losses during the quarter impacted the Insurance segment and were the result of a number of smaller events in the fourth quarter and previous quarters of 2016.
Analysis suggests that the reinsurance sector is no longer covering its cost of equity
Analysis of the reinsurance sector over 2016 has found that the sector has seen prices drop to a point that it is no longer covering its cost of equity. January renewals saw prices drop more than expected in some business areas with analysts suggesting that the market may not be soft enough for a response. The findings said that over the past few years the market conditions have seen return on equity in the market fall and it’s now at a point that reinsurers are no longer earning sufficient underwriting returns to cover reinsurers cost-of-capital.
