Roundup of the latest news and developments from the global insurance market with stories from Lloyd’s, Sompo, Suncorp and more.
Lloyd's of London moving EU business to Brussels
Lloyd’s have confirmed they will move their EU operation to Brussels after it emerged last week they would confirm the location of their EU office the same day the Prime Minister triggered Article 50. Lloyd's mentioned last year that it would lay out its post-EU referendum plans in early 2017 and promised to make an announcement before the end of March. The insurance market initially looked at a shortlist of five new locations, including Frankfurt, Paris and Dublin, which were eventually reduced to two, Luxembourg and Brussels. Lloyd's chairman John Nelson, an ardent Remain supporter, has warned in the past that the Brexit vote put London's status as an insurance leader at risk. He has also cautioned that, while his organisation might need to shift some of its business away from the UK, "it won't be Lloyd's losing out, it will be the UK". Lloyd's chief risk officer Sean McGovern said ahead of last June's referendum that exiting the EU would "create a level of uncertainty, for Lloyd’s, for the London market, as well as the UK and European economies, we have rarely experienced".
Sompo completes $6.3bn Endurance takeover
Japanese giant Sompo has completed its takeover of island-based insurance and reinsurance firm Endurance Specialty in a $6.3bn deal. Endurance will be integrated into Sompo Holdings through the creation of Sompo International, which will be based in Bermuda. Sompo International will have its own board, led by Endurance’s John Charman, as chairman and chief executive, reporting to the Sompo president and CEO Kengo Sakurada. Sakurada said, “The closing of our acquisition of Endurance marks the beginning of an exciting new chapter in Sompo’s story. The integration of Endurance within Sompo International will significantly enhance Sompo’s presence in international markets and provides the group with greater opportunities to deepen and expand its geographic footprint by offering global diversification via its new and innovative structure. Clients will benefit from our increased scale, expanded product offering and a common underwriting platform. Our employees will also be presented with new opportunities to use and develop their skills within a much larger, stronger business. I would like to welcome John Charman and the Endurance team to the Sompo family. John will be heading Sompo International, creating our exciting new global commercial insurance and reinsurance platform. I look forward to working closely with him as we embark on the next phase of our exciting growth.”
Suncorp says it is well-protected against impact of Cyclone Debbie
In a statement to the market, Suncorp confirmed its remaining reinsurance protection program would be enough to guard against the financial hit from the storm as thousands of Queenslanders are forced to evacuate their homes. The insurer said, “Suncorp’s reinsurance protection program means it is well protected against the financial impact of Cyclone Debbie. Claims costs from the cyclone are expected to be fully covered by a combination of Suncorp’s main catastrophe program and the additional natural hazard aggregate protection that was purchased for the 2017 financial year.” Suncorp’s main catastrophe program delivers cover from A$250 million to A$6.9 billion. Meanwhile, its earlier purchase of additional natural hazard aggregate protection cover offers an extra A$300m as soon as natural hazard events larger than A$5m top a level of A$460m for the year. The insurer has recently hit the A$460m mark, meaning Cyclone Debbie will require it to begin tapping into the additional cover. Suncorp said it was “well prepared” for the event, with teams ready to be sent out to assess damage and a stronger call centre team to manage a likely uptick in claim calls. Suncorp also announced it is seeking to raise A$250 million through a capital notes offer.
JLT Re ready to reduce facultative energy team
JLT is preparing to reduce its facultative energy team having put a number of the team into consultation. It has been reported that the team will reduce from 12 members to 5. The team has to look at cost cutting having been exposed to losses in business and pressures in the market as a whole. Jeremy Colletta is presently the head of the unit which places both upstream and downstream energy. Pressures in the market have been caused by a reduced demand for oil, compressing global prices; this has led to a reduction in the top line by more than 50%. A JLT spokesperson said, “JLT Re has a very strong and growing facultative offering comprising some 35+ people. Given the environment in the energy facultative space we have made some changes to ensure that we are focused on the needs and requirements of our clients and markets." It is also reported that JLT will work with the team to find roles for those who have been made redundant.
Willis Re to reduce headcount as part of efficiency drive
As part of wider efficiency measurers it has been reported that Willis Re Specialty will reduce its headcount by about 10 people. This particular action is believed to support a wider drive to free up some capital to invest in data and analytics. Reinsurers have seen margins fall from the mid 30’s to the mid 20’s since 2012 as falling rates, due to increasing competition, took hold of the market. Simultaneously there has been increasing investment going into analytics as companies look to reinvent themselves as data-driven risk consultants, not transactional brokers. More traditional, relationship driven markets, such as marine, aviation and terrorism have remained relatively secure but pressure is starting to show in these lines of business. Willis Re went through an earlier round of cost cutting in early 2015 as it looked to address these challenges.
Andy Trundle is seeking business for Starr backed MGA
Andy Trundle has established a managing general agent (MGA) with the backing of Starr and is currently looking to add capacity to the operation. The new MGA, called Morefar, has an initial 2.5% lead line pledged by Star but Trundle is looking for more business to commit to a 15% line. This is thought to be more than $300mn. The reason Trundle is looking to generate such a large line is because AIG have confirmed they will not follow its old employee. It is believed that if Trundle was to take a lead on a slip he would have to replace the capacity AIG would withdraw from any agreement. Trundle is looking to secure paper at or close to the bottom of the pricing cycle with evidence now emerging of modest rate increases on some of the larger airline accounts that have handed losses to the market.
ProSight appoints bank to sell its Lloyd’s operation
ProSight has given a bank the task of selling its Lloyd’s operation having stepped away with finding a buyer through an auction. GS Capital Partners and TPG Capital, the private equity owner of ProSight, launched a bidding process at the start of the year but failed to obtain the valuation they were looking for and as such have decided to keep some interest in the company. Joe Beneducci, CEO of ProSight, has appointed GC Securities to sell its managing agency and syndicate 1110. Reports have said that ProSight have received a number of offers through the bidding process but all were below the minimum the board had set for a sale. The sale is part of a wider strategy for the company to focus on profitable lines in the US having gone through another year of losses in London and Europe. The change in sale tack tick comes after Argenta was sold to Hannover Re for £142.5mn.
Hiscox head of marine and energy leaves
Hiscox's head of marine and energy, Simon Williams, has left the company, according to a spokesperson. The Bermuda-based insurer didn’t provide any further comment regarding his replacement. Marine and energy line of business represented 5% of Hiscox’s total group controlled income of £2.67bn in 2016. Hiscox’s marine and energy business is one of the most challenged divisions, the company said in the annual report, adding that it continues to deliver “excellent” profits. The marine and energy liability and hull accounts were broadly flat in 2016, with some reductions in the upstream energy book. Due to rate reductions, a lack of new business and the continuing depression in oil prices, Hiscox is actively managing its business in these lines. The cargo team hired in 2016 is bringing Hiscox new opportunities, the company said, adding that it plans to “cautiously” grow the business in 2017.
