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Shock cuts hit healthcare in Spain’s richest region

International

Oct 2, 2011

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Spain’s crisis spending has cut a bit deeper with its richest region, Catalonia, suspending payments this past week to care homes and mental clinics because the money ran out.

The regional government insisted it was a temporary cash-flow measure, but health workers complained it will hurt the most vulnerable members of society over the coming months.

“These measures affect care centres for the elderly, the disabled, drug addicts and mental health patients,” said Toni Codina, director of a federation of welfare providers in Catalonia.

“We don’t understand how the Catalan government, at a time of funding difficulties, can have concentrated these measures on one of the most vulnerable sectors in Catalan society.”

The regional government insisted it was a temporary measure and all arrears would be paid by the end of the year. The latest measures “are part of a shock strategy” adopted because the regional government will not be able to pay the budgets of certain health clinics for two months, health spokeswoman Susagna Caseras told AFP.

Francesco Homs, the spokesman for the ruling Catalan nationalist party CiU, told national radio: “It is a question of cash flow. I would not count it as one of the cuts.”

Catalonia is on track to record a deficit double the regional limit — 1.3 per cent of gross domestic product — set by the national government this year, despite an austerity budget that aims to save a billion euros by shaving 10 per cent off health spending.

It had already begun closing hospitals in July, but these efforts did not impress foreign investors and the ratings agency Fitch downgraded Catalonia’s credit rating on September 14 to A-minus from A.

The region responded by adopting a law on Tuesday that will oblige it to keep its deficit down to 0.14 per cent of gross domestic product from 2018. The following day it said it would have to suspend payments to care centres.

“This announcement is a prelude to a rather painful few months for most regions as they scramble around to meet their increasingly challenging budget deficit target,” said Raj Badiani, an analyst at IHS Global Insight. Cutbacks are biting in regions across Spain.

In Madrid the regional government has asked teachers to work longer hours, prompting angry protests by staff who say this lowers the quality of teaching. The Navarra region has announced cuts in health and education that aim to save 190 million euros, and the Balearic Islands plan to cut 800 regional public sector jobs.

“Health care and social security pay-out delays seem to be a popular measure in Spanish regions, because they are partly financed by the federal government,” said Christian Schulz, an analyst at Berenberg bank.

However, investors are watching more carefully than ever to see how forcefully Catalonia, an independent-minded economic powerhouse which accounts for nearly 19 per cent of Spain’s overall economy, will act. “Catalonia may be one of the richest regions in Spain, but not the most responsible in fiscal terms. Catalonia actually needs to do more than many other regions in Spain,” Schulz told AFP.

With a big effort from the regions, the federal government is aiming for a six-per cent national deficit this year as it tries to calm debt concerns that have rattled the entire Eurozone. “All measures that help Spain meet the deficit target of six per cent (of GDP) for 2011 are helpful, because meeting the target will help the credibility of the country in the financial markets,” said Schulz.

Madrid, Oct 2, 2011 (AFP)

First graduate trio to pass new CILA Certificate

Communication

Sep 30, 2011

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Three graduate trainees from GAB Robins have become the first people to pass the new CILA Certificate (CILA Cert) qualification.

Niall Metcalfe, Ashley Marsland and James Grima are the first intake to join GAB Robins’s graduate programme which launched last year in collaboration with the Financial Skills Partnership.

A core element of the graduate programme focuses on developing technical knowledge and claims handling capability. This is achieved by combining work placements with relevant professional qualifications. The new CILA Cert provides graduates with a strong grounding in the key principles and their application in the claims industry.

All three graduates successfully completed the final examination and have had the results validated by CILA. They will receive their certificates from the CILA President at the Institute’s AGM meeting on 14th September.

Mike Odell, Head of Training and Development at GAB Robins said: “We are extremely proud of Niall’s, Ashley’s and James’s achievement, their commitment has been rewarded with a very worthy success in the new CILA Cert. The company makes a significant investment in identifying and developing new talent and this group’s success is further evidence of the impact of that approach.”

Odell continued: “The changes in the CILA qualification provide a progressive route through the CILA examinations creating an ideal pathway to encourage people into the Loss Adjusting profession.”

All three graduates are now continuing with their studies commencing with the ACILA examinations later this year.

Malcolm Hyde, Executive Director of CILA, said: “We would like to extend our warmest congratulations to the three graduates on their success. These graduates will no doubt be the first of many candidates from GAB Robins and other firms to complete the CILA Cert qualification as an important part of launching their career in the profession.”

“The new examinations, launched earlier this year, are a key part of our continuing commitment to developing professional excellence and improving accessibility to the profession. GAB Robins is a strong supporter of this drive and has helped in ensuring the successful delivery of the examination framework.”

The CILA Cert qualification comprises three examinations primarily focused upon the principles of insurance, policy cover and the application to the management of insurance claims.

Source : GAB Robin’s

Appointment : ECIC continues business expansion

Social

Sep 30, 2011

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Sharon Miller is ECIC’s new sales manager, and John Flaherty is regional business development executive for the Midlands, Wales and South-West England.

ECIC has promoted Sharon Miller to the role of sales manager and has recruited John Flaherty as a regional business development executive for the Midlands, Wales and South-West England.

The changes are in line with ECIC’s business growth, focusing on regional business relationships. They also reflect the company’s strategy of rewarding success and recruiting specific expertise in order to drive sales across its national network.

Sharon’s latest appointment follows her promotion in April to sales manager North at ECIC (Electrical Contractors’ Insurance Company), where she had responsibility across Scotland, Northern Ireland and the North of England. In her three years at ECIC, Sharon has risen from her initial role as a business development executive and has used her extensive experience in the Scottish insurance broker market, particularly in affinity related business.

John Flaherty was previously at the Birmingham office of NIG and before that was an account executive at Zurich. He has more than 20 years experience in the insurance market, in a variety of sales and underwriting roles, and enjoys strong business relationships throughout the Midlands.

Roger Brown, managing director of ECIC, said: “We are delighted with these new appointments which demonstrate the strength in depth that we have at ECIC.

“Sharon’s promotion is a natural progression as she has already had a significant contribution to business growth. I congratulate Sharon on her promotion and have every confidence that she will achieve similar success on a national level.

“John is another talented individual who has a proven track record across multiple business lines. It is an exciting time for ECIC and this latest change demonstrates that we have a high-calibre team to support our strategy.”

“We have seen excellent growth in sales across our business which supports our strategy to expand the proposition to new regions and invest in new team members. We are delighted to congratulate Sharon on her further promotion and welcome John to the team.

Source : ECIC

RMS : Paradex loss estimate for Typhoon Roke

International

Sep 30, 2011

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RMS issued a Paradex index value of JPY 107.4 billion for Typhoon Roke. The typhoon made landfall on the east coast of Japan on Wednesday, September 21.

The value is based on Paradex Japan Typhoon, an index that approximates modeled insured industry losses in Japan from wind only, and includes commercial, industrial, residential, and Zenkyoren¹ lines of business. The residential line is the largest driver of loss from this event. Additional sources of loss not directly captured by the RMS® Japan Typhoon Model or the Paradex index values include flood.

Paradex estimates are used to support the objective and transparent placement of catastrophe risk in the insurance linked securities market. Montana Re Ltd. Series 2010-1 uses Paradex Japan Typhoon as a trigger and there is no risk of default to this bond as a result of Typhoon Roke.

Observation data was collected from SYNOP, a network of weather stations via the Japan Meteorological Agency (JMA). The JMA reported maximum sustained winds from Roke of between 92 mph and 97 mph at landfall, which is the equivalent to a category 1/category 2 hurricane on the Saffir Simpson Hurricane Wind Scale. The highest recorded wind speed was recorded at the Omaezaki station, in Omaezaki-shi, Shizuoka, with a maximum peak gust of 100.9 mph.

Source : RMS

Bupa : official health insurance partner of UK sport

Communication

Sep 29, 2011

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UK Sport has today announced that Bupa is to be its Official Health Insurance Partner through to June 2013.

Having supported the highly successful Athlete Medical Scheme (AMS) for nine years, Bupa has formalised its relationship with UK Sport, becoming a commercial partner alongside BAE Systems, British Airways and Maxinutrition.

UK Sport’s AMS, delivered in partnership with the English Institute of Sport, provides over 1200 of the UK’s best athletes on the World Class Performance Programme with specialist medical treatment, when expertise outside of the day to day medical support is required. This varies from diagnostic tests and MRI scans to surgical procedures.

UK Sport Chief Executive, Liz Nicholl, said: “Providing world class medical support to our top athletes is of paramount importance. Early identification, treatment and recovery are all critical in allowing them to compete at the very highest level and prolong their careers.

“The Athlete Medical Scheme has given assurance to hundreds of athletes over the past decade and we are delighted our relationship with Bupa, supporting the world class medical care provided by the home country sports institutes, is set to continue into the future.”

Bupa Health and Wellbeing Managing Director, Natalie-Jane Macdonald, said: “We’re very proud of our record over the past nine years in providing Britain’s athletes with access to an even wider pool of medical expertise. Our partnership with UK Sport means we can continue to provide access to this essential support – ensuring that when our athletes do get injured they’re back competing at their very best as soon as possible.”

Olympic champion cyclist and AMS benefactor, Ed Clancy, said: “Injury and illness can threaten an athlete’s career if they’re not identified and dealt with quickly.

“I have been lucky over the years to have access to the very best treatment available through AMS, meaning I’ve been able to compete consistently on the world stage, and will hopefully continue to do so for many years to come.

“This is all thanks to UK Sport and Bupa for their continued support.”

Source : Bupa

Netherlands : four arrested in multinational fraud probe

International

Sep 29, 2011

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Four Dutch citizens have been arrested in a fraud probe on two continents into a company specialising in life insurance that took more than $200 million from investors, prosecutors said Wednesday.

During the last 24 hours, intelligence services and Dutch tax investigators and authorities in other countries had raided 27 locations in the Netherlands, Spain, Turkey, Dubai, Britain, Switzerland and the United States.

They seized real estate, cars and luxury watches, boats and a plane worth several million euros to “secure as much money as possible for investors” who had been defrauded, Dutch financial prosecutors said in a statement. The four suspects are linked to a company called Quality Investments and were arrested “on suspicion of being involved in a criminal organisation, forgery and fraud.”

Hundreds of investors placed more than 200 million dollars (146 million euros) in Swiss-based Quality Investments to buy financial products in the United States, including life insurance settlements, the statement said. Quality Investments was believed to have been giving misleading information to investors about returns to which they were entitled.

The four suspects aged between 38 and 49 were arrested in the Netherlands, the statement said. Two of them are also suspected of money laundering. The Hague, Sept 28, 2011 (AFP)

AIR Worldwide : Typhoon Nesat makes landfall in Philippines

Industry News

Sep 28, 2011

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Typhoon Nesat or locally known as “Pedring” has made landfall in the eastern Isabela and Aurora provinces on the Pacific coast of the Philippines at 18:21 GMT Monday, September 26. The maximum sustained winds of 120 mph (195 kilometers per hour), makes it a category 2 typhoon. Nesat came ashore exactly two years after Typhoon Ketsana, the most devastating typhoon for the Philippines in the 2009 Pacific typhoon season.

“Strong monsoonal flow from the south resulted in significant moisture and more than 400 mm of precipitation, as observed at a station in Gabaldon in a 24-hour period. Up to 100-200 mm of rainfall were also observed in many other locations near the landfall location,” said Dr. Peter Sousounis, principal scientist at AIR Worldwide. “Due to the heavy precipitation, with rates exceeding 30 mm/hour in places, many rivers (Pampanga, Agno, Bicol, and Cagayan) are still flooding. Nesat passed north of the capital of Manila, which received tropical-storm force wind gusts and 75-100 mm of rainfall.”

“Nesat formed east of Palau on September 21 from an area of convection with a weak low-level circulation center. Over the next several days, Nesat became better organized, under weak vertical wind shear and very warm sea-surface temperatures (29-30°C). Nesat was originally forecast to rapidly intensify into a super typhoon but a mass of dry air limited its development.”

According to the Japan Meteorological Agency’s (JMA) 12:00 UTC update, Nesat is currently a category 1 typhoon with sustained winds of 140 km/hr with gusts to 175 km/hr. The JMA puts Nesat 250 kilometers northwest of Manila, tracking westward at 30 km/h.

Landslides have been reported in mountainous areas while coastal areas have been hit by swells, storm surge and high waves. Water was released from four dams near the capital as they neared overflowing levels. The heavy rainfall has the potential to submerge important crops, namely rice and corn.

According to AIR, commercial properties are generally constructed of reinforced concrete and are expected to sustain some wind-borne debris damage to glazing and outer cladding at these wind speeds. Light metal commercial structures and signage will likely sustain moderate to significant damage. Although residential properties in the coastal regions of central Luzon are commonly constructed of masonry or reinforced concrete, poor construction practices and low-quality materials may lead to more significant damage, including the loss of roofs. However, a high proportion of residential losses are not expected to be insured.

Dr. Sousounis commented, “Typhoon Nesat is one of the strongest to hit the Philippines this year. Fortunately, however, the storm steered clear of metro Manila, where the highest concentration of insured properties is located. While damage is anticipated to some residential properties, a high proportion of residential losses are not expected to be insured. Overall the penetration of insurance in the Philippines is estimated at 15% across all lines of business.”

“Nesat has become better organized again after reemerging into the South China Sea and beginning to recover from its interaction with land,” continued Dr. Sousounis. “The storm is expected to continue moving towards the west and west northwest as it tracks along the southern periphery of the subtropical ridge. It is forecast to reintensify as it moves across the South China Sea with favorable atmospheric and oceanic conditions anticipated for the next several days.”

Nesat is expected to make a second landfall across northern Hainan, China or northern Vietnam on September 29 or September 30 as a category 1-2 typhoon.

AIR is continuing to monitor all developments in the Northwest Pacific and will provide updates as warranted by events. Given Nesat’s wind speeds in the metro Manila area of the Philippines and generally low take-up rates in the areas most heavily affected by the storm, AIR does not expected significant insured losses from Nesat in the Philippines.

Source : AIR Worldwide

Ecclesiastical : insurers ranked ‘average or below’ in terms of generosity

Communication

Sep 28, 2011

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A recent study found that British insurers are donating money to charities for altruistic reasons, yet their charitable partners are sceptical about their motives.

According to a new survey conducted by specialist charity insurer Ecclesiastical, 65% of charities and voluntary organisations, the overwhelming majority, believe that the primary motivation for financial services businesses to partner charities is to improve their corporate image. Only 1.4% of charities questioned said they believed financial services businesses were motivated by a genuine desire to make a positive difference.

The survey also asked charities to rank the insurance sector’s degree of generosity to charities compared with other industries. The majority of respondents (40%) said insurers were ‘average’ while the next largest group (23.2%) said insurers were ‘below average’.

The figures were revealed by Michael Tripp, Ecclesiastical’s Group Chief Executive, who was speaking at the British Insurance Summit this week in London. Mr Tripp said:

“This is certainly a healthy dose of reality for insurers and financial services businesses. While we are keen to emphasise our worthy reasons for partnering charities, it’s clear the charities themselves are far from convinced and are sceptical about our claims. We may genuinely want to give something back to society, but from the charities’ perspective, we’re often doing this to improve our image and customer perception. That’s a deeply worrying state of affairs.”

Asked which type of financial services businesses they blamed for the recession, charities named banks as the main culprits with building societies ranked second most culpable. Insurance companies attracted the least blame out of the financial services organisations.

The study also found that 95% of charities believe the recession is forcing charities to evolve rapidly in order to survive.

“Charities are changing – and so is the insurance sector’s relationship with them,” Mr Tripp told his audience. “The UK’s charities are engaged in a struggle for survival and, over the next five years, they’re going to evolve rapidly. The challenge for the insurance sector is for our relationship with them to evolve too.”

Mr Tripp described how new thinking in areas such as social enterprise and shared value was changing the charity and voluntary sector and argued that financial services businesses had to grasp these concepts and integrate them into their business models.

In his speech, Mr Tripp outlined how the recession, which was triggered by the behaviour of the financial services sector, was reducing funding for charities, thus leading to a wave of mergers, consolidations and closures. With the relationship between financial services businesses and their charitable partners already strained, the risk, he argued, is that a greater gulf will open up as the charities evolve rapidly in order to survive. 26% of charities are currently considering merging or consolidating with another charity, while 6% are considering downsizing or closure, he said.

Businesses also need to be prepared to donate more than just money, Mr Tripp explained. 47% of charities surveyed said they wanted financial services businesses to donate a mixture of money and volunteer time/skills while 36% said that professional advice and support was also valuable. Mr Tripp said: “What we need to do is move away from the old charity-and-donor relationship to something based on true partnership. That’s the kind of relationship that’s going to prevail and prosper in these difficult times.”

In a study conducted by Ecclesiastical last year, 53% of charities said that they felt financial services organisations had a moral duty to offer more donations and support following their role in sparking the economic recession.

Independent research company FWD surveyed 142 UK charities and voluntary organisations on behalf of Ecclesiastical during August 2011.

During August of 2011, research company FWD surveyed 142 UK charities and voluntary organisations on behalf of Ecclesiastical.

US threatens sanctions on China banks over Iran

International

Sep 28, 2011

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A top US envoy said Wednesday that Washington could penalise China’s four biggest state banks if they were found doing business with an Iranian insurance firm in violation of US nuclear sanctions.

David Cohen, US Treasury under secretary for terrorism and financial intelligence, was in China to discuss measures to prevent Iran from obtaining financing for its nuclear weapons programme and means to spread its hardware.

His China trip followed a stop in Hong Kong, where he met with representatives of the four banks — Bank of China, China Construction Bank, Industrial and Commercial Bank of China and the Agricultural Bank of China. Speaking to journalists Wednesday, Cohen said he told the banks that if they accepted payment from Moallem, an Iranian insurer, they could be cut off from the US financial system under a 2010 US law promoting tighter sanctions on Iran.

Moallem insures Irans national bulk container carrier, the Islamic Republic of Iran Shipping Lines (IRISL), a company with three subsidiaries, in violation of United Nations Security Council resolutions. Both Moallem and IRISL have been designated as violators of anti-nuclear proliferation rules set by the United States and the European Union. Many European countries no longer do business with IRISL and have closed their ports to its ships, but the vessels still make calls in Asia, Cohen said.

In January, the US Treasury identified several Hong Kong-based shipping companies as having strong links with IRISL. Cohen also met with 20 financial institutions, local port authorities and shipping companies in Hong Kong to encourage them not to deal with IRISL or Mohallem.

“Any foreign bank that receives payment from Moallem on behalf of a client, risks losing its ability to do business in the United States,” he said.

In two days of meetings in Beijing, Cohen met with officials from China’s Ministry of Finance, Ministry of Foreign Affairs and ruling Communist Party.

The United States and other world powers accuse Iran of seeking to acquire a nuclear weapons capacity under the guise of its civilian atomic work, a charge Tehran strongly denies. Iran is under five sets of UN Security Council sanctions, as well as US ones, over its nuclear programme.

Beijing, Sept 28, 2011 (AFP)

Friends Life : latest Workplace Savings Index shows reduction in women’s pension contribution

Market

Sep 27, 2011

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Women in most age groups have seen their pension contributions cut year on year according to a new Friends Life Workplace Savings Index.

The rolling 12 month average pension contribution for women under 30 decreased by £2 to £128 a month, women aged 30 to 45 saw a £1 decrease to £213 a month and women aged 60 or more experienced a £2 decrease to £193 a month. Only women in the 45 to 60 age group saw an increase in average pension contributions, but this increase was lower than for men of the same age. All in all the decrease in contributions for women combined with rising inflation equates to an approximate decrease of five per cent in real terms. On average women’s contributions are 38% lower than men’s at £200 a month compared to £324.

The first set of data to be released also revealed that men increased their contributions by £14 to £324 a month on average over the last 12 months, with men aged 45 to 60 making the largest average increase of £19, bringing average monthly contributions to £383. As a whole, the rolling 12 month average pension contribution (for both men and women) rose by £9 over the last year, which is less than £1 a month, bringing the average contribution to £276 a month. This means the average contribution is trending in line with inflation, however these levels will not be sufficient when faced with the current lack of pensions savings in the UK and an ageing UK demographic.

Commenting on the findings, Martin Palmer, head of corporate benefits marketing at Friends Life, said:

“It looks like good news that on the whole individuals have weathered the economic storm to date and have maintained pension contributions, but when you look at the impact on contributions by age and gender a more concerning picture emerges, where the average contributions made by women have decreased in value. This is particularly concerning given that average contributions are already too low. When you consider wider pension reforms and the increase in state pension age women seemingly have a tougher challenge ahead than their male counterparts. It is vitally important that all customers, and especially women, focus on the long term to make adequate preparations for their retirement.

“The quarter two Friends Life Workplace Savings Index shows that overall pension contributions have increased year on year, but the increase is trending only in line with inflation, meaning in real terms individuals are not saving any more than they were 12 months ago. When you look at women’s contributions in isolation the net effect is a much worse five per cent decrease. To beat the well documented UK pensions savings crisis customers will need to make larger increases year on year to ensure their savings can support them financially in retirement, something that will be tough in light of other financial pressures including rising fuel and utility prices. As a nation we’re good at saving pounds and pennies by hunting for bargains but we need to ensure that savings happen for the long term and not just day to day living.”

The quarter two Friends Life Workplace Savings Index also revealed:

– Risk levels for Friends Life corporate savings members decreased by 30 points in comparison to quarter one 2011, driven largely by customers in the ‘growth’ phase (more than 15 years to retirement). Friends Life customers on average experienced lower risk that the FTSE 100 index;

– Total returns were up 15% compared to quarter two 2010, slightly underperforming against the FTSE 100 but reflective of a lower average risk profile; those in the growth phase experienced highest gains due to high UK equity holdings;

Full details of the quarter two findings, including insight into all four areas of long term saving covered by the Friends Life Workplace savings Index (risk, returns, asset diversification and contribution levels) can be found in the attached report. The index is based on data from workplace pension schemes run by Friends Life. Anonymised customer data from over 700,000 of Friends Life’s pension customer accounts, is analysed by DCisions. Consumers are categorised in groups based on the length of time until they plan to retire and their age and gender to allow comparisons between consumer behaviour to be drawn.

Source : Friends Life

S&P : Congregational & General Insurance outlook to positive from stable, ‘BB+’ ratings affirmed

Industry News

Sep 26, 2011

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Congregational & General Insurance’s outlook revised by Standard & Poor’s to positive from stable. The long term counterparty credit and financial strength ratings have been affirmed at ‘BB+’.

Standard & Poor’s report :

The outlook revision reflects C&GI’s improved credit risk profile as a result of the sale of Integra Insurance Solutions Ltd., its managing general agency (MGA), to Hannover Rueckversicherung AG (Hannover Re). Following the sale, we now measure C&GI’s capital adequacy ratio as extremely strong, although its capital base remains small in absolute terms.

When we reviewed C&GI in February 2011, we expressed concerns regarding the company’s unproven strategy to accelerate its growth through its MGA, with a reliance on third-party capital. We considered the execution risk of this plan to be high; our concerns have turned out to be unfounded. To us, the sale of Integra’s majority stake, well ahead of the planned date, has demonstrated C&GI management’s ability to execute its strategy successfully. We expect the risk profile and capitalization to improve further during 2012, when the company will cease to underwrite household business. This line of business currently contributes about 68% of gross premium income.

In our opinion, the ratings continue to be supported by C&GI’s robust competitive position within its core, but very small, niche commercial property market. At the same time, C&GI’s weak overall competitive position and small capital base in absolute terms constrain the ratings.

The positive outlook reflects our expectation that C&GI will continue to deliver profitable performance throughout 2011 and 2012 financial years and execute its strategy by transitioning into managing and servicing MGAs. We also anticipate that C&GI will maintain at least a strong capital adequacy ratio over the rating horizon and its low financial risk tolerance will continue to demonstrate good and stable operating performance on its church account. We expect its average net combined ratio to be below 95% and its average return on revenue above 10%.

We could upgrade C&GI if we consider that the shareholders’ intend to maintain at least strong capital adequacy over the longer term and a clear longer-term strategy that supports its lowered credit risk profile going forward. The ratings could come under downward pressure if financial risk tolerance were to increase significantly or the company’s capital or operating performance were to materially deteriorate.

Source : Standard & Poor’s

S&P : Fondiaria-SAI and subsidiary Milano Assicurazioni outlook revised to negative from stable

Industry News

Sep 26, 2011

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Standard & Poor’s has revised the outlook of Italian Fondiaria-SAI and its core subsidiary Milano Assicurazioni to negative from stable. The financial strength and counterparty credit ratings on both companies have been affirmed to ‘BBB-‘.

Standard & Poor’s report :

The outlook revision reflects ongoing negative pressures on the group’s capitalization stemming from volatility in capital markets. We view the group as being more exposed than its peers to market risk through its equity portfolio which is heavily invested in the Italian financial sector and features, in our view, some degree of concentration risk. Uncertainties surrounding future operating conditions, what we regard as negative management and corporate strategy, and marginal financial flexibility represent major hurdles for the current ratings. The group’s strong competitive position in the Italian property/casualty (P/C) market and improving operating performance represent key positive rating factors in our view.

We see increasing risk to the group’s creditworthiness from ongoing turmoil in capital markets, as falling asset prices weigh on the group’s solvency position. With more than 22% of assets invested in equities and property at year-end 2010, we see Fondiaria-SAI as being particularly exposed to the current capital market downturn. Concentration risk arising from high single-name exposure to the Italian financial sector increases, in our view, such exposure.

Uncertainties surrounding future operating conditions weigh negatively on our current assessment of the group’s risk profile, as deteriorating economic and capital market conditions pose growing challenges to the management team, which is currently struggling with a turnaround of the business, a restructuring of its agency network, and meaningful operational changes. Although we regard favorably management’s intention to refocus on insurance-carrying and strengthening operating performance, we see substantial execution risks arising from the magnitude of the changes to be implemented in the current environment.

With gross premiums written of €12.9 billion in 2010, we view Fondiaria-SAI as continuing to benefit from a strong competitive position in the Italian market, which represents a major positive rating factor, in our view. Fondiaria-SAI’s competitive strength stems from its established positioning in the Italian P/C market, wide distribution capabilities, and well-recognized brands. Lesser diversification in non-motor relative to peers’ and comparatively high exposure to geographic areas with high claims experience continue to represent relative weaknesses in the group’s business profile, in our opinion. Life business adds to competitive position, although the significant percentage of premiums collected through one single nonproprietary channel–Banco Popolare branches–negatively affects Fondiaria-SAI’s position in the life market. We expect non-life premium generation to remain sluggish over the next two years, reflecting limited growth prospects for the Italian market as a whole and Fondiaria SAI’s increasing focus on risk selection. Conversely, we expect life premiums to fall by a high double-digit figure in 2011, as increasing competition from bank liquidity products, amid challenging operating conditions should constrain bank insurance business generation.

We view operating performance as adequate and improving, reflecting some early results of management’s actions and the recovery of the Italian P/C market. However, these are constrained by continuing negative pressures from volatility in capital markets. After posting a record-high loss of €929 million in 2010, earnings are now gradually recovering on the back of improving claims experience in P/C, tariff hikes, some restructuring of the agency network, and reorganization of claims settlement processes. This resulted in a net combined ratio improving to 101.9% and net losses contracting to €62 million in first-half 2011.

We expect noncore activities to continue weighing negatively on operating performance. As a result, we consider it unlikely that earnings will return to what we consider strong levels by year-end 2012. We expect Fondiaria-SAI to post a loss of about €150 million in 2011 and a modest profit of about €100 million in 2012. In non-life, we expect the net combined ratio at or below the 102% mark by year-end 2011 and below 100% in 2012. We expect life profitability to benefit from management’s emphasis on regular premium policies and efforts to increase life sales at agencies.

We believe that the group’s corporate governance, high risk tolerance, aggressive underwriting policy, and high dividend payouts (in 2009) have been weighing until recently on the ratings of Fondiaria-SAI and Milano Assicurazioni SpA. Although we understand that the group has been addressing these issues (in particular by not paying dividends in 2010), we believe it will take time before relevant changes are developed across the organization and start bearing fruit.

High capital and liquidity needs at Premafin HP SpA, the group’s holding company, in our view constrain Fondiaria-SAI’s financial flexibility. This is evidenced by the payment of a €68 million dividend in 2010, when Fondiaria-SAI’s capital position was particularly stretched. Although it is listed, we see the group as having only limited access to capital markets in the current environment.

Source : Standard & Poor’s

RSG : acquisition of Jubilee complete

Industry News

Sep 26, 2011

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Ryan Specialty Group has announced that the acquisition of specialist Lloyd’s insurer Jubilee Group is complete. Jubilee currently operates two active Syndicates at Lloyd’s, a managing agency and specialist underwriting distribution and insurance service businesses.

RSG also announced a number of new Board and key executive appointments. Max Taylor, a former Chairman of Lloyd’s of London and Deputy Chairman of Aon UK, has accepted the role as Non-Executive Chairman of Jubilee’s Board. Johnny Rowell, Managing Director of Ryan Specialty Europe Limited, joins the Board and has been appointed Chief Executive. Miles Wuller joins the board as Chief Financial Officer. Jonathan Matthews, previously Chief Risk Officer of Liberty Syndicate Management Limited, has joined the Board and been appointed Chief Operating Officer. Malcolm McCaig, formerly a big four audit partner, has joined the Board as an Independent Non-Executive Director.

Patrick G. Ryan, Chairman and CEO of RSG, said, “Completing the Jubilee acquisition represents a significant development in the marketplace, and we are pleased to be part of this major event. Lloyd’s and the London market are firmly established as global leaders in the specialty markets. We believe there is a real opportunity in the specialty markets and Jubilee’s existing platform focuses on specialty insurance – specialties that we know. This acquisition will allow us to introduce and support new products and programs in global markets in a meaningful way. Jubilee’s presence within Lloyd’s uniquely enhances the execution of our overall strategy of offering and delivering preeminent providers of specialty products and services to the insurers, brokers and agents we serve.”

Johnny Rowell notes, “The Jubilee platform provides an excellent foundation for developing a world class risk-bearing organization. We look forward to building on our long-standing ties in the Lloyd’s community to enhance market access to brokers and agents seeking specialty product offerings.”

Max Taylor adds, “I am delighted to have been asked to Chair the Board and to work with Pat Ryan again and the outstanding Jubilee team.”

Source : Ryan Specialty Group

ABI figures show income from life insurance still falling

Industry News

Sep 26, 2011

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The UK life insurance industry paid out $32 million in benefits each day in 2010, according to the Association of British insurers.

The payments were made across 30 million protection policies and included £6.2 billion paid out to policyholders claiming for disability and death, translating at £17 million per day.

Insures were not happy to report that their income dropped last year, with life premiums falling by 1 per cent and pension premiums dropping by 8 per. This fall in premiums is a continuation of a trend that has lasted some ten years, in which time they have fallen from £40 billion to £20 billion.

The survey also found that 76 per cent of all pensions and life insurance policies are sold through IFAs, while 11 per cent are still sold without advice and 13 per cent are made by advisors who do not represent the entire market.

The ABI took the opportunity of publishing its Key Facts 2011 document to reveal its top priorities at the moment. It said it is busy promoting the sharing of state protection risks with the private sector. It also said it was involved in supporting reform of long-term care.

S&P : Groupama ratings downgraded to ‘BBB’ from ‘BBB+’ with a negative outlook

Industry News

Sep 25, 2011

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Standard & Poor’s Ratings Services has lowered its long-term counterparty credit and insurer financial strength ratings on France-based composite insurer Groupama S.A. and its related subsidiaries to ‘BBB’ from ‘BBB+’, and removed them from CreditWatch with negative implications.

Standard & Poor’s latest report :

The ratings had been placed on CreditWatch on Sept. 13, 2011, reflecting S&P’s view that adverse and volatile capital markets may be weakening Groupama’s financial profile, in particular capital adequacy. The outlook is negative. Groupama’s junior subordinated debt ratings have also been lowered to ‘BB+’ from ‘BBB-‘.

At the same time, we lowered our long- and short-term counterparty credit ratings on Groupama Banque to ‘BBB-/A-3’ from ‘BBB/A-2’ and removed them from CreditWatch, where they were placed on Sept. 13, 2011, with negative implications. The outlook is negative.

The rating action reflects our belief that, despite management’s planned actions to improve Groupama’s financial profile, it is unlikely that its capital adequacy will be restored and maintained at levels commensurate with ‘BBB+’ ratings over the next two years.

We believe that the recent negative capital market developments have undermined Groupama’s already weak capital adequacy, according to Standard & Poor’s risk-based insurance capital model. In our view, Groupama’s credit risk has also increased because of the group’s sizable exposure to sovereign bonds, in particular those of Greece (CC/Negative/C) and Portugal (BBB-/Negative/A-3), which represented 7.8% and 3.3% of the group’s shareholder’s funds on June 30, 2011, after taxes and profit sharing.

We have assessed actions that management plans to take in the short term to restore capital adequacy that include asset hedging and reinsurance solutions. We believe these actions will have a material positive impact on capital adequacy and represent a positive development in the group’s financial risk tolerance. We also note that Groupama’s reported underwriting earnings for the first half of 2011, with a net combined ratio of 99.6% and new business margins of 0.7%, are well on track to meet our full-year expectations. That said, management’s actions and improving earnings in our view will likely not be enough to restore capital adequacy to levels commensurate with ‘BBB+’ ratings, according to Standard & Poor’s risk-based insurance capital model. We also believe that adverse and highly volatile capital markets continue to weigh on Groupama’s financial profile and exacerbate challenges in restoring its capitalization.

The negative outlook reflects continuing pressure on Groupama’s financial profile and our view of execution risk associated with management’s strategic actions to improve capital adequacy. We will continue to assess management’s actions, including effective implementation of the above-mentioned measures and potential additional measures that Groupama could take to improve capital adequacy.

Our expectations for Groupama’s underwriting earnings in 2011 remain unchanged: new business margins of 0.7%, an operating return on embedded value of about 5% in life business, and a net combined ratio of about 102% according to our computation and excluding major natural catastrophes in the property/casualty business.

We could lower the ratings if Groupama’s capitalization further deteriorates, especially if Groupama is not successful in implementing its actions to restore capital adequacy or if management reverted to its pre-existing financial risk tolerance. We might also revise the ratings if the company is obliged to further significantly write down investments, especially because of its exposure to lower-rated sovereigns, which could result in weaker earnings and lower life crediting rates on investment-type policies.

We could revise the outlook to stable chiefly if management successfully executes the actions it has planned and takes additional measures to substantially enhance capital adequacy and limit future volatility.

Source : Standard & Poor’s Press Release

Halifax : the North offers the best chance for young buyers to get on the housing ladder

Market

Sep 25, 2011

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New research from Halifax shows while the average age of a first-time buyer in the UK is 29, there is almost a decade’s difference between some areas of the country.

The youngest first-time buyers are in Selby in North Yorkshire where the average age is 25: nine years younger than one of the areas with the oldest first-time buyers, Harrow in London (34).

Other areas where the average age of a first-time buyer is significantly below the national average are Redcar and Cleveland in the North East, Barrow-in-Furness in Cumbria, Bolsover in Derbyshire and South Ribble in Lancashire. The average age in each of these areas is only 26 [See Table 1].

At a regional level, rather than at local district level, the differences are less stark. The youngest first-time buyers are in the North East, North West, Yorkshire and the Humber, Wales and Scotland all with an average age of 28; the oldest are in London (32) and the South East (31) [See Table 2].

The youngest first-time buyers in southern England are in Swale in Kent and South Gloucestershire with an average age of 27 in both areas. Several areas in Wales also have an average age of 27; Bridgend, Rhonda, Caerphilly and Port Talbot. The lowest average age of first-time buyers for any area in Scotland – Midlothian – is also 27.

Average house prices tend to be relatively low in areas with the youngest first-time buyers. For example, over half of the ten areas with the youngest first time buyers have an average house price 25% to 40% below the national average. South Gloucestershire is the only area in the top ten where the average house price paid by first-time buyers is above the national average of £135,100.

Typically, the areas with the youngest first-time buyers are also areas where housing affordability conditions are the most favourable. Seven of the ten local areas with the youngest buyers have an average house price to average earnings ratio for first time buyers below 4.0. With an average house price of £114,113, Selby has a price to average earnings¹ ratio of 2.9. In Barrow-in-Furness and Bolsover the ratio is 3.0.

Unsurprisingly, the areas with the oldest first time buyers are in the south east of England and are mostly in London. Harrow, Barnet, Ealing, Kingston upon Thames, and Three Rivers in Essex all have an average age of 34, the highest in the country. All these areas have an average house price paid by first-time buyers that is in excess of £224,000 (i.e. at least 66% higher than the national average) and an average price to average earnings ratio above 4.0. [See Table 3] The youngest buyers in the capital are in Hackney with an average age of 30.

The average age of a first time buyer has remained remarkably stable over time. In 1983, when Halifax records began, it was 28, just a year younger than today. An increasing number of FTBs, however, now require financial assistance to raise funds for a deposit. The CML² estimate that 84% of FTBs under 30 had help with their deposit in 2010 compared with only 38% in 2005. The typical age of those FTBs who did not receive assistance has increased significantly from 28 to 31 over the same period.

Nitesh Patel, housing economist at Halifax, commented:

“There are several areas in the country where the average age of first-time buyers is 3 to 4 years below the national average of 29. Most of these areas are in northern England where house prices are typically lower both in absolute terms and in relation to earnings, helping to limit the size of the deposit needed. In contrast, in London and many areas of the South East the time needed to save up for a deposit can be lengthy, resulting in first-time buyers who are typically several years older than in the rest of the country.”

Table 1 – Youngest First Time Buyers (June 2011)

Local Authority District	Region	Average Age	First-Time Buyer Average House Price £	House Price to Earnings Ratio June
Selby	Yorkshire and The Humber	25	114,113	2.9
Redcar and Cleveland	North East	26	102,049	3.8
Barrow-in-Furness	North West	26	87,322	3.0
Bolsover	East Midlands	26	80,679	3.0
South Ribble	North West	26	127,212	4.0
Hartlepool	North East	27	90,388	3.1
Swale	South East	27	132,801	4.2
Stockton-on-Tees	North East	27	99,142	3.4
South Gloucestershire	South West	27	151,078	4.7
Bridgend	Wales	27	102,136	3.6

Source: Halifax, 12 months to June

Table 2 – Average Age of First Time Buyers by Region – 1983 – 2011

Region	Average Age 1983	Average Age 1991	Average Age 2001	Average Age 2011
North East	27	27	29	28
North West	28	27	29	28
Yorkshire and The Humber	27	26	29	28
East Midlands	27	27	29	29
West Midlands	27	27	29	29
East of England	27	27	30	30
London	29	29	31	32
South East	28	28	30	30
South West	29	28	30	30
Northern Ireland	29	28	28	29
Scotland	29	28	29	28
Wales	27	27	29	28
UK	28	27	29	29

Source: Halifax, 12 months to June

Table 3: Oldest First Time Buyers (June 2011)

Local Authority District	Region	Average Age	First-Time Buyer Average House Price £	House Price to Earnings Ratio June
Harrow	London	34	262,634	6.5
Barnet	London	34	261,606	6.1
Ealing	London	34	251,584	6.4
Three Rivers	East of England	34	224,484	4.3
Kingston upon Thames	London	34	258,236	5.5
Brent	London	33	277,001	8.3
Hounslow	London	33	220,034	6.2
Barking and Dagenham	London	33	167,934	5.6
Merton	London	33	237,475	5.1
Greenwich	London	33	189,676	4.2

Source: Halifax, 12 months to June

Natural disasters result in massive losses for Lloyd’s

Financial News

Sep 22, 2011

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This year has been the second most expensive year ever for insurers due to an onslaught of natural disasters.

Lloyd’s of London’s 88 underwriting syndicates recorded a loss of £697 million during the first six months of the year. Earthquakes and tsunamis in Japan and New Zealand, among other locations, have been held largely to blame for the drop in profits.

The Japanese earthquake and subsequent tsunami has been the fourth largest event to impact the London-based market, with predicted claims of £1.2 billion. Meanwhile, the earthquake in New Zealand is expected to cause claims of £860 million and the floods in Australia are predicted to result in claims worth £200 million.

Chairman Lord Levene remarked that 2011 has been “one of the most challenging years on record for the insurance industry”. However, he added that the industry is prepared to handle the financial burden: “Lloyd’s ability to pay billions in claims to help these communities rebuild is unquestioned and the fact that we have managed to do so without any call on our central capital reserves is testament to the market’s exposure management.”

Esure : research shows Brits are house proud

Market

Sep 22, 2011

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A new study shows that house proud Brits are driven by the envy of properties featured in reality television programmes. Homeowners spend an average GBP 1,171 and eleven days per year to embellish their homes.

The study, by esure home insurance, found that Brits spend almost five hours per week improving their homes, amounting to more than a year and a half spent over the average lifetime. They spend £529 on non-functional decorations such as soft furnishings for their home to keep up with the latest domestic trends and a further £404 in a lifetime on items that they will never use for fear of running them – such as expensive designer crockery, silverware and bed linen.

Almost a third (32 per cent) of those polled state that the rise of television property programmes such as Grand Designs, The Home Show, Kirstie’s Homemade Home, Location, Location, Location and even MTV Cribs has inspired them to put even more effort into the appearance of their homes and influenced how they decorate.

Some 37 per cent of homeowners polled said that watching property TV programmes made them aspire to live in a better home while nearly one in seven (14 per cent) admitted that voyeuristic peeks inside celebrity homes made them covet more expensive, luxurious items such as designer fabrics, elaborate furnishings and even Jacuzzis.

Despite being motivated by a desire to show off their homes, ironically five per cent of Brits claim that they are so obsessed with keeping their residence spic-and-span that they no longer invite friends or relatives over – for fear that they might cause a spillage. Furthermore, almost one in ten (nine per cent) admit that they cannot enjoy themselves properly when entertaining guests because they are so worried about potential damage and spillages.

Meanwhile seven per cent confess to covering carpets and upholstery with protective sheets when entertaining to keep their home as pristine as possible. One in 20 (five per cent) say that they have banned red wine in their home and 15 per cent say that they have never held a party in their home, despite enjoying attending the house parties of others.

A fifth (20 per cent) of Brits polled said that they have overly house-proud friends and almost a quarter (23 per cent) admit they are too scared and anxious to touch or use something. Six per cent even admitted to turning down invites to friends’ perfect ‘show homes’ for fear of causing damage or spilling on light-coloured carpets. Eight per cent of Brits confess that they have broken an item or spilt something at a friends’ home at least once, but have not confessed to doing so.

Nikki Sellers, Head of home insurance at esure, comments: “The rise in popularity of television shows featuring showcase desirable homes has given rise to a new breed of homeowner driven to create a beautiful abode but almost too scared to enjoy it.

“While pleasing on the eye, a house that resembles a show home is not the most practical place to live. Accidents do happen so it’s important for homeowners to ensure that they have adequate home and contents insurance so that you are fully protected if anything unfortunate does happen.”

People living in London spend the most on their homes – £1,240 in an average year, whereas those living in the East of England spend over £250 less per year at £985.

When it comes to being influenced by TV property programmes, those living in London are the most affected, with 43 per cent admitting that shows such as Grand Designs and The Home Show have made them aspire to live in a better home. Meanwhile, less than a quarter (23 per cent) of those in Wales state that they are influenced by such programmes.

Source : Esure

ABI concerned about planning framework flood risk

Industry News

Sep 21, 2011

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The government’s proposed relaxation of the planning regulations could lead to more homes being built in flood risk areas, according to the Association of British Insurers.

The draft National Planning Policy Framework may remove requirements on planners to ensure homes are not built on land that carries significant flood risk. Currently, there are over 1,000 pages of planning regulations, which are to be replaced with a paired-down version with just 52 pages, if the changes go ahead.

Several other influential organisations are also calling for the Framework to be scrapped, including the National Trust, the National Campaign to Protect Rural England and the National Federation of Women’s Institutes.

The campaigners claim that the proposals could lead to growth at any cost. Jonathan Dimbleby, the journalist and broadcaster, used to be the president of the Campaign to Protect Rural England. He told the Daily Telegraph, “The word ‘business’ appears in the document about 300 times, while ‘countryside’ is mentioned four times. Once you have blighted the countryside, it’s done.”

Otto Thoresen, the ABI director general, told the newspaper, “Building developments in high flood risk areas will make flood insurance harder to access and, if available, more expensive.

“A property that cannot get insurance is likely to be uninhabitable and unsellable. This will put further pressure on Britain’s already high demand for housing, and hit the recovery of the house-building sector,” he added.

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