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EC News (16th March 2017)

  • Publish Date: Posted about 7 years ago

Round-up of the latest news and developments from the global insurance market with stories regarding the Chinese market, Munich Re, AIG and more. 

Mainland Chinese market accounts for 47% of global insurance growth in 2016

China accounted for nearly half of last year’s growth in total global premium income, according to Allianz Research. Out of the €150bn or so in additional premiums chalked up worldwide last year, almost €70bn is attributable to China. Initial projections by Allianz suggest that total global premium income rose to a new record high of €3,650bn last year. In a year-on-year comparison, the nominal increase, after adjustments to reflect foreign currency translation effects, comes to an estimated 4.4%. Without China, the insurance world would have achieved growth of only 2.7%. The "China effect" was particularly pronounced in the life insurance business, excluding the Chinese contribution more than halve the rate of global growth from a respectable 4.7% to 2.3%. This is due, for one thing, to the rapid development in China itself. 2016 saw the Chinese life insurance market report the highest rate of growth seen since 2008, at over 30%. Secondly, this Chinese dominance can be attributed to the slump in the life insurance markets elsewhere. In Western Europe, premium income is expected to have dropped by 1.2% overall in 2016, the first negative trend seen since 2012. The markets also contracted in parts of Eastern Europe and Australia last year.


Insurer Munich Re expects lower profit in 2017
German reinsurer Munich Re expects a lower profit in 2017 as prices remain weak and it invests in technology. The world's largest reinsurer said it expects net income between €2bn and €2.4bn this year, compared with €2.6bn in 2016. Reinsurance prices have been falling for several years due to increasing competition in the sector and a lack of natural catastrophes in developed markets, which typically push up demand. Chief Executive Nikolaus von Bomhard said, "We haven't seen the bottom yet. We believe that we will have reached the bottom soon." Insurers and reinsurers have also been looking at ways to streamline their business in areas such as automation of claims processing. They fear disruption in the industry from a new breed of insurtech companies or from technology and social media giants such as Amazon or Facebook. Munich Re and others such as AXA and Aviva are investing in start-up insurtech companies. Changes in technology will require Munich Re to set up partnerships that would previously not have been considered. RBC analysts described the profit guidance as highly conservative, reiterating their buy rating on the stock. The company also said it would buy back up to €1bn of its own shares by April 2018, following similar buyback arrangements in 2015 and 2016. The buyback of up to 11 million shares would be equivalent to 3.5% of its share capital based on the current price, Munich Re said.

AIG is lead insurer on a cyber claim valued at up to $100mn

A systems failure at Southwest Airlines has resulted in a cyber claim of up to $100mn of which AIG is the lead insurer. 2,300 flights were cancelled over the space of five days due to an issue with a router at the airline which caused a systems outage. AIG is understood to be the lead on the cover with the excess being placed in the US and London. Early reports suggest the claim will sit between $60mn and $100mn. Last year the airline said that the failure would lead to a fall in revenue for Q3 and estimated the impact would be around $82mn. Some are predicting that the loss will be at the higher end of the estimate, if this proves to be the case insures in London could be affected. London insurers involved in the excess include Novae, Brit and Principai. It has been reported that Southwest Airlines could claim on their cyber policy as the wording of the policy agreed by AIG did not say that an outage had to be caused by a cyber-attack. Insurers have suggested that this claim might impact future airline policies with the extent of disruption caused by a single router failure.


Mike McGavick confirms he will not take the top AIG job

Mike McGavick, CEO of XL Catlin, has said he will not take up the top position at AIG following the resignation of Peter Hancock last week. McGavick joins Greg Chase, Aon CEO, in senior figures who have ruled themselves out of the job. McGavick confirmed to employees that he would remain part of his current company and that staff shouldn’t read into any media speculation that he had been shortlisted. The internal e-mail read, "While such speculation may be viewed as flattering, I thought I would write and make a couple of things clear. I have not been contacted by AIG, and have no knowledge of whether they have an interest in me or not. They will, I am sure, have plenty of excellent candidates to choose from. But I will not be one of them." McGavick is widely credited with being the person who turned the fortunes of XL Catlin around after the financial crisis. He went on to say he was not only committed to the future of XL Catlin but that he was thoroughly enjoying his time leading the company.


Lark Insurance explore sale with the appointment of a banking advisory

Lark Insurance is exploring a potential sale and has brought Fenchurch Advisory to assess potential options. Investor memorandums are believed to have been sent out with a price tag of between £60mn-£70mn. Hiscox own 25% of Lark with the management team owning the remainder following a buyout from Groupama in 2012. The Hiscox backed broker offers commercial, household, employee benefits and musical instument services on top of its flagship private clients business. In 2015 the company generated revenues of £23.3mn of which £5.2mn was pre-tax profit. Graham and Stephen Lark run the business and with Graham being so close to retirement it is believed this is the motivation for a sale. It has been reported that the company will be keen to keep its independence in any buyout. Since 2012 the company’s finances have remained largely consistent with a small but sustained growth over the period.


Gordon Newman joins Bishopsgate

Bishopsgate have hired Gordon Newman as executive chairman and will take up the role at the start of July. Newman previously served at Ed as their CEO until last year having joined the company when his start up, Newman, Martin & Buchan, was aquired by Ed. Newman was previously managing director of Seascope Insurance and an executive director of Willis Faber and Bland Welch. Bishopsgate is the rebranded London market entity of Towergate which was rebranded in November to complement the insurers move to 55 Bishopsgate. Towergate CEO David Ross hailed the appointment of Newman as hugely significant. Bishopsgate is led by managing director Neil Pearce, who joined last August and was most recently at Windsor Insurance Brokers.


Chris Elliot steps down as Tysers CEO

Chris Elliot has stepped down as Tysers CEO, leaving the company with immediate effect citing personal reasons. It is understood that Christopher Spratt will take up the role as CEO in the interim. Tysers was founded in 1820 and is the largest staff-owned broker in the London market. It has been speculated for a number of years that the company would be sold, with rumours intensifying at the news of Elliot’s resignation. Tysers confirmed that a search for a successor was already underway with an official announcement due to be made by senior management soon. Elliott has been CEO of Tysers since 2007, having become a partner in the business in 1994. He has a 10% ownership stake in HBH and led the management buyout in 2007


Travelers acquires Simply Business for £400m

Travelers has aquired Simply Business, a UK-based online insurer for £400m, more than three times the price the company was sold for less than 12 months ago. The deal comes as incumbent insurers are scrambling to secure a spot in the digital world, investing in start-ups and more established online insurers. Simply Business, which was founded in 2005, sells insurance to small businesses such as builders, hairdressers and thousands of other trades. The company’s annual premiums come in at around £93m and it has grown by 20% a year. Last April the company was sold to Aquiline Capital Partners, a private equity group, for £120m. Travelers, the large US insurance group, bought it from Aquiline, paying 50 times Simply Business’s 2016 earnings before interest, tax, depreciation and amortisation of £8m. Alan Schnitzer, chief executive of Travelers said, “Simply Business is a profitable and growing technology company with impressive strategic digital capabilities, leading digital commerce talent and proven small-business insurance expertise.”


QBE launches live web chat facility for brokers

QBE will launch a webchat facility due to be online in three weeks. The West Midland team launched a pilot with live chat on its minibus product with five brokers, Rightsure, Bayliss and Cooke, Morton and Michel, Bluefin and Jelf, as it tries to further enhance its e-trade proposition. Dave Greaves, QBE head of SME said, "Assuming the pilot continues the way it has done we will roll it out to the rest of our minibus brokers and following that we will roll it out with all of our SME commercial products." It has been reported that the chat service would go live in two to three weeks with one product being pushed to 500 brokers. Following the successful role out of this it is then planned that the Stafford team will roll the chat service out across eight other commercial products to 500 brokers in phases. Brokers who log on to Acturis to obtain a minibus insurance quote have the option to click on the 'chat' button to have a real-time on-screen conversation with underwriters that make decisions. Greaves said, "QBE is a broker only insurer and what we want to do with our brokers is allow them to communicate with us in any way that they want to whether that be face-to-face, telephone or indeed clicking on a chat button."