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EC News (11th May 2017)

  • Publish Date: Posted about 7 years ago
  • Author:by Alan Jarque

Round-up of the weekly news and developments from the global insurance market with stories from Hiscox, Towergate, AIG and more. 

Hiscox has chosen Luxembourg as its EU base 

Hiscox has announced that Luxembourg will be the home of its European subsidiary following Britain's decision to leave the EU. The two potential destinations were either Luxembourg or Malta. 

Luxembourg was picked because of its "pro-business position, strong financial services experience and well-respected regulator, as well as being close to many major markets". 

All future retail business in Europe, a target growth area for Hiscox, will go through the new EU subsidiary. Hiscox presently employs 350 people across seven EU countries outside of the UK with such operations continuing to “operate without interruption". 

A new team of 10 people will be bought in to oversee core functions such as compliance, risk and internal audit. There will be no underwriting function at Hiscox's new EU base. 

The company’s retail gross written premiums increased 18.6%, on a constant currency basis, to £375.4m. Bronek Masojada, Hiscox chief executive said, “We have had a strong start to the year thanks to our long-term investment in Hiscox retail, particularly in the small business sector". 

US operations were the stand out performer and largest retail market. Gross written premiums grew 54.7% to £132.2m, up 33.5% once the impact of foreign exchange was stripped out. Hiscox Lloyd's of London figures dropped 8.6% on a constant currency basis. But gross written premiums were propped by foreign exchange movements, up 0.4% to £157.7m. 

Nevertheless, Masojada concluded the London Market "continues to face challenging conditions".

Towergate and three other firms to be merged into £500mn super group

Towergate is to be merged into a £500mn super group of UK insurance companies creating £2.8bn of gross written premiums. 

Towergate, which has 4,000 staff across the UK, will be combined with three other firms by its owners HPS Investment Partners and Madison Dearborn Partners. It will continue to trade independently under the same name following the merger. 

The new business will combine with van insurance broker Autonet, private medical insurance broker Chase Templeton and general insurer Ryan Direct Group. 

Towergate boss David Ross will become chief executive of the enlarged group, with Towergate chairman John Tiner taking the same job at the new company. A name for the new company will be announced by the autumn. 

It will have an annual income of £500mn and employ more than 5,000 people. Its owners have also added international wholesale insurance broker Price Forbes to the group. Its chief executive Mike Donegan will become executive director of the new parent company. 

Tiner said, “Today’s announcement demonstrates the tremendous confidence our major shareholders have in the businesses we are bringing together and the opportunities for further expansion. I am very much looking forward to working with HPS, MDP, David and Mike and the board in creating the UK’s leading diversified insurance platform and intermediary with global reach.”

AIG lead on $600mn cyber policy bought by JP Morgan Chase

The world’s largest cyber insurance policy was placed by Willis Towers Watson on behalf of JP Morgan Chase and sees AIG become the lead underwriter. 

It has been reported that JP Morgan has a retention of $50mn, the largest in the market. AIG has a $25mn layer and is thought to have charged $1mn in premiums. If AIG is one of the carriers to have written a portion of the excess placements it would be further exposed to any cyber breach at JP Morgan Chase. Willis has revealed that it compiled a $600mn tower written by 40 markets issuing 60 policies. 

The underwriters and clients have not been named due to the caution in the market about revealing this type of cover. The reason for the anonymity is that many fear that they could be identified as targets by hackers. 

JP Morgan is a company familiar with large scare cyber-attacks with the personal information of more than 80 million customers being stolen in 2014. Cyber cover is expected to jump dramatically in the next few years with some predicting it could be worth $14bn by 2022.

Property Re and Alesco win back lucrative energy account

Alesco and Property Re have reclaimed the profitable energy account of PDysa, the Venezuelan state-owned oil company. PDysa chose to put the business up for tender after only one year. 

JLT and Jing Tai were the previous owners of the account and the loss of business comes after JLT lost the Nigerian National Petroleum Company programme to Marsh. 

The PDysa account is a particularly profitable account for brokers with revenues hitting $20mn before Cooper Gay (now Ed) lost the account in 2013. 

Reports have said that revenues from the account have fallen since then but it still remains a lucrative account to own. PDysa is known for changing brokers, often at last minute, with Cooper Gay being removed despite the broker already receiving commitments from insurers on the account.

AmTrust puts its MGA network on sale

AmTrust is seeking a 51% sale in its MGA network and warranty administration business to a private equity buyer. AmTrust has taken the decision to sell its majority stake with a hope of generating more than $1bn in cash. 

Rumours have circulated that AmTrust would look to exit the MGA network after its final quarter results in 2016. Ron Pipoly, CFO of AmTrust, has confirmed that they would be looking to sell the MGA this year. 

Pipoly has told the market that they might look to buy back shares with the cash raised from the sale.

Emmanuel Macron bought cover to protect against a first round disaster scenario

The newly elected French president bought a financial indemnity policy from Allianz to protect against a first round disaster scenario where he failed to get more that 5% of votes. 

Documents from Macron's En Marche party show that Macron acquired a guaranty limit of EUR8mn to pay back the campaigns outgoings if he didn’t get the minimum number of votes needed in the first round. 

Candidates are not liable for campaign expenses if they get more than 5% of the vote. Macron is personally named as the insured on the policy with the bank loans being paid to him directly rather than En Marche. 

Allianz charged Macron EUR232,593 for the cover which expired on the 23rd April. Macron ended up winning 24% of the first round votes before getting a 66.1% majority in the head to head with Le Pen.

Starr Companies hires Danielle Wilson and Robert McTaggart

Starr Companies announced the appointment of Danielle Wilson as head of management liability and Robert McTaggart as head of professional indemnity. 

Wilson and McTaggart will be located in London and will serve the European marketplace. Colin Buchanan, head of casualty said, “These individuals bring a wealth of knowledge and experience and will report to Liz Ilott, chief underwriting officer financial lines, who joined in August last year to spearhead our expansion plans”. 

Wilson brings ten years of insurance experience specialising in financial lines for private and commercial companies.

London’s ownership of global reinsurance premiums has fallen once more

London’s portion of global reinsurance premiums has shrunk once more with growing competition and protectionist trade policies the main reasons for the decline. 

A report commissioned by the London Market Group (LMG) showed that London’s total ownership of global premiums were 12.3% in 2015 down from 13.4% in 2013 and 15% in 2010. 

The report did also highlight that London remained a world leading commercial insurance market within the UK insurance industry growing its market share in the traditional markets of specialty. 

Areas identified as growing their global shares of premiums were Zurich, Bermuda and Singapore. During the period 2013 to 2015 the report found that there had been a growth in emerging market reinsurers and Bermuda as centres for alternative reinsurance capital. Singapore saw its global premium share increase 6.9% over the two year period. 

The report concluded that the globalisation of carriers and the willingness of some London underwriters to walk away from risks they saw as having too low margin were reasons for the fall of London’s share.

Aon has reported a $103mn charge due to workforce reductions

Aon has confirmed a $103mn charge relating to workforce reductions in the first quarter. Total restructuring costs came to $144mn in the first quarter. It is also thought that a further charge of $104mn is expected from further workforce reductions. 

These changes are part of a wider change programme across the business. Aon has confirmed that it will look to invest $900mn over the next three years in promoting one operating model across the streamlined group. 

Aon said that over the course of the restructure it is expecting total charges to amount to $750mn, comprising of $143mn in IT rationalisation, $173mn is consolidation charges and $159mn in other costs. Savings from the restructures are expected to total $400mn annually by 2019.