Round-up of the weekly news and developments from the global insurance market with stories from EY, Neon, Chubb and more.
(Re)insurers face £3.5bn Ogden hit: EY
(Re)insurers are expected to absorb an overall £3.5bn hit from the recent Ogden rate change, according to estimates from EY.
In February, the Lord Chancellor decided to change the Ogden discount rate by 3.25 points from 2.5 percent to -0.75 percent, forcing carriers to bolster reserves and consequently impacting their profitability.
The professional services firm said that around £2.4bn of losses have already been publicly disclosed by insurers and reinsurers since the decision was made, which it used along with its own calculations to produce the higher £3.5bn loss estimate.
According to EY analysis, the Ogden rate cut caused an 8.8 percentage point deterioration in the 2016 net underwriting performance for the UK motor insurance market, with the sector reporting a net combined ratio (NCR) of 109.0 percent.
Excluding the Ogden impact, the firm highlighted that the 2016 NCR have been 100.2 percent, roughly in line with the 100.5 percent result recorded in 2015.
EY predicted a further 3.1 point rise in the market NCR in 2017 to 103.3 percent (excluding the Ogden impact) versus 2016, as UK motor insurers are pressured by reserve strengthening and ongoing Ogden costs.
However, the firm expects the sector’s NCR to revert back to 100.2 percent in 2018 if the promised whiplash reforms and a review of Ogden methodology materialise.
“The impact of the Ogden rate change to the motor insurance industry has been considerable at around £3.5bn. While a reduction was certainly on the cards, virtually no-one anticipated the extent of the drop,” commented Tony Sault, UK general insurance market lead at EY.
“The general election result last week may have created additional uncertainty and insurers will be hoping that the Ogden consultation and reform of whiplash claims will remain priorities for the new Lord Chancellor and the Government,” he added.
Sault said that both consumers and insurers are being impacted by the effects of the Ogden rate change.
Combined with high repair cost inflation and the rise in insurance premium tax to 12 percent, EY predicted that average motor premiums could see a further 9 percent rise in 2017 to £503 from the already record highs of £462 recorded at the end of Q1 2017.
“For Ogden alone, the higher compensation now due for serious injuries means insurers will have to pay out around 9% more in future claims. This will translate into a £28 increase to the average cost of a comprehensive policy,” explained Sault.
“Further effects will be felt next year when annual reinsurance cover for large claims come up for renewal,” he added.
Carnegie-Brown starts as Lloyd’s chairman
Bruce Carnegie-Brown officially began his tenure as Lloyd’s chairman last week (14 June), succeeding John Nelson following his retirement.
In conjunction with starting his new role at Lloyd’s, the Moneysupermarket Group chairman stepped down from his position as non-executive director at JLT last week, having joined the broker’s board in May 2016.
Carnegie-Brown was confirmed as the Lloyd’s chairman by the Lloyd’s Council in February 2017, beating other shortlisted candidates to the role which were reported to have included XL Catlin deputy executive chairman Stephen Catlin and former trade minister Lord Davies.
In a statement on his first day as chairman, Carnegie-Brown said: “I am very excited to get started. In the months since my appointment was announced, I have been meeting with people in the Lloyd's market to hear from them about the challenges they face and what we as a Corporation can do.”
“It is also clear that there is a lot to be positive about. The excellence and expertise that exist in this market mean that, alongside the challenges, we also have many opportunities which I look forward to helping to develop in the months and years to come.”
In addition to his role as Moneysupermarket Group chairman, Carnegie-Brown has also been vice chairman of Banco Santander since February 2015.
He was chief executive for Marsh UK and Europe between 2003 and 2006, after which he ran 3i Group plc's quoted private equity division for a couple years.
During his career, he has also served as non-executive chairman at Aon UK from 2012 to 2015 and was senior independent non-executive director at Catlin 2010 and 2014.
He has previously spent 18 years working for JP Morgan across several senior roles and has also acted as a senior independent director at Close Brothers Group.
Neon acquires Sapphire MGA
Neon has agreed to acquire Guernsey-based MGA Sapphire Underwriters in a bid to grow its international presence, the Lloyd’s carrier announced last week.
Sapphire, which is being bought from Heritage Group, is a Lloyd’s coverholder providing directors’ and officers’, professional indemnity and cyber coverage to UK and local offshore brokers and clients.
The terms of the transaction were not disclosed.
Following completion of the deal, the carrier said that the business will operate under the Neon Sapphire brand and continue to have underwriting capacity provided by a range of Lloyd’s syndicates, including Neon.
Sapphire was founded in 2013 with support from Neon to support offshore clients who needed London market underwriting skills alongside a local presence and is led by CEO Nigel Brand.
Commenting on the announcement, Neon group chief executive Martin Reith said: “I am thrilled that we have agreed to acquire Sapphire. Its disciplined approach to underwriting will provide us with valuable local presence for the offshore market. Neon continues to focus on profitable growth and this acquisition reflects that strategy.”
Neon was rebranded from Marketform last June following the completion of a strategic review of the business.
Ed makes five hires in professional and exec risks push
Wholesale and speciality broker Ed has expanded its professional and executive risks offering with a quintet of new appointments.
Paul Richards, who joins from Willis Towers Watson, will lead the professional and executive risks team as managing director.
Richards was most recently led sales development as an executive director of Willis' financial lines division and has also led the financial institutions team at the broker’s FINEX unit.
He will be joined by three others from Willis Towers Watson.
James Baird joins as a director, having served as executive director of Willis Towers Watson’s FINEX division. He was most recently responsible for leading the broker's specialist wealth and asset manager and offshore financial services team within the FINEX division.
He is accompanied by Willis FINEX divisional directors Neal Hughes and James Faith, who have been appointed as divisional director and producer/broker respectively.
The new hires are rounded out by former BMS director professional and financial services director Rupert Alabaster, who joins as divisional director. In his previous role at BMS, Alabaster led a team focusing on delegated authority business for specialty lines and will focus on growing market share in this sector within his new position at Ed.
The team will work alongside Ed's existing professional risk offering, which is led by director Mark Lowndes who has been with the company since 2004.
Richards said that the team will grow its cyber capabilities as well as develop its partnerships with other independent retail brokers and Brokerslink members to create opportunities and solutions for their clients.
“These appointments exemplify the scale of our ambitions at Ed. In every line of business we want to bring together the market’s leading talent to complement our existing expertise,” remarked Ed Speciality CEO Chris Bonard.
AIG and Standard Chartered complete Blockchain pilot
AIG and Standard Chartered have successfully piloted the first multinational, “smart contract” based insurance policy using blockchain technology in partnership with IBM.
Blockchain is a type of distributed ledger or decentralized database that keeps records of digital transactions.
The pilot saw a multinational controlled master policy written in London and involving local policies in the US, Kenya and Singapore converted into a "smart contract" using the open-source Hyperledger Fabric protocol that was built by IBM, providing real-time shared views of documents and data.
AIG said that the blockchain solution creates a new level of trust and transparency in the underwriting process of complex multinational coverage, helping to reduce fraud and errors.
The pilot gave participants greater visibility of underwriting coverage and premium payments and also enabled them to be automatically notified about payment events. It also showed that third parties in the network, such as brokers, auditors and other stakeholders, could also be included, giving them a customized view of policy and payment data and documentation.
The aim of the test was to demonstrate the potential for blockchain to reduce friction and increase trust in one of the most complex areas of commercial insurance, multinational risk transfer.
“Our pilot proves blockchain has a powerful role to play in the future of insurance,” remarked AIG commercial CEO Rob Schimek.
“Any technology, including blockchain, that can increase trust and transparency for an industry whose pillars are built on that, should be fully explored,” he added.
Marie Wieck, general manager of IBM Blockchain said that there is a “tremendous opportunity” to transform the insurance industry through the application of advancing blockchain technology.
“By creatively leveraging smart contracts to help address tough regulatory requirements across different markets, we are seeing the enormous impact blockchain can have to improve efficiency and open up new business models,” she said.
Butler to lead Chubb NA insurance division
Chubb has named Gerard Butler as division president for its North American insurance field operations, the carrier announced earlier this week.
Butler succeeds Harold Morrison who will retire at the end of the year following a 33-year career in the insurance industry.
In his new position, Butler will oversee Chubb’s 48 field offices across the US and Canada and will be responsible for executing Chubb's strategy for North America locally by managing relationships with agents and brokers.
He will report to John Lupica, Chubb Group's vice chairman and president of large accounts and specialty insurance for North America.
Prior to his promotion, Butler most recently served as chief operating officer of North America field operations. Before the Ace-Chubb deal, he was executive vice president and US field territory operations manager for Chubb.
"Jerry's strong field management expertise, industry knowledge, and extensive leadership experience make him an ideal fit for this role," remarked Lupica.
"I look forward to working with him as he takes on this strategically pivotal role in helping to continue meeting the multifaceted needs of our agent and broker partners,” he concluded.
Butler will be replaced by Jeffrey Updyke, current chief operating officer for North American field operations.
Retiring Morrison joined Chubb in 1984 and has held a number of leadership positions during his time with the carrier. Prior to the Ace acquisition, he served as chief global field officer and chief administrative officer.
Until his retirement at year-end, Chubb said that Morrison will work with its overseas general insurance division to provide strategic direction for the development of underwriting and distribution structures and processes as it expands into the commercial middle market segment in Asia, Latin America and Europe.
Pool Re names Cheetham as Head of Distribution
UK government-backed terrorism mutual Pool Re has appointed Howard Cheetham as head of distribution.
In his new role, Cheetham will be responsible for increasing the uptake of terrorism insurance across the UK, particularly among SMEs.
He will report to Pool Re chief underwriting officer Steve Coates.
Cheetham has held several executive positions within the (re)insurance industry, including CEO of Flagstone Re’s UK and global business.
He began his career with Sedgwick Group, later joining Leslie and Godwin in 1986 as managing director and chairman of services.
Following Leslie and Godwin’s acquisition by Aon, Cheetham was appointed as managing director of Aon Re Japan. In 2006, In addition to his new role at Pool Re, Cheetham is also chairman of EC3 Insurance Brokers.
“Terrorism insurance penetration among SMEs and outside of major urban centres remains markedly low. A key pillar in Pool Re’s strategy is to ensure that every business in the UK is aware of and has access to terrorism cover. As part of our modernisation proposals we launched our SME proposition which offers a 40% discount for insureds with less than £2m material damage sum insured,” remarked Coates.
“Howard’s appointment represents the next stage of our strategy. He is recognised and respected across our market and is the ideal candidate to work with our stakeholders to realise our goal of increasing the uptake of terrorism insurance, particularly among SMEs,” he continued.
Scor enters US medical reinsurance market
Scor has entered the US medical reinsurance market through its international life and health subsidiary, Scor Global Life.
The French reinsurer will initially offer reinsurance coverage for health maintenance organisations (HMO) and insurers. Subject to regulatory approval, Scor will also offer provider excess and employer stop loss insurance.
The business will be underwritten by General Security National Insurance Company (GSNIC), a wholly owned Scor affiliate.
The newly assembled team is overseen by Kelly Munger, who is also responsible for leading the company’s US group health reinsurance initiative.
“Kelly Munger was our first executive hire,” remarked Scor Global Life Americas CEO JC Brueckner.
“She leads our group reinsurance business unit and has done a superb job assembling a team of experienced professionals who understand the changes occurring in the market and who will work with brokers to develop customized solutions for their clients,” he added.
Scor's medical reinsurance operation is based in Minneapolis.
Commenting on the announcement, Scor Global Life CEO Paolo De Martin said: "This is a large market with significant demand for risk management solutions and expertise.”
"We made a comprehensive study of its potential and we believe we can effectively and successfully support the needs of existing and emerging market participants."