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Premium Credit announced that it has been awarded a three-year contract, via a competitive tender process, by the Financial Conduct Authority (FCA) to provide the official solution for FCA authorised firms, including insurance brokers, financial advisers, insurers, banks and other regulated businesses to spread the costs of their regulatory fees across monthly instalments.  This contract begins in 2013, and runs through until 2016.

The tender was won after a rigorous process that included presenting to the FCA’s predecessor, the FSA and seven trade bodies covering UK banks, insurers, insurance brokers, professional advisors and small businesses.  The changes associated with the move from FSA to FCA mean that this finance is now available for the regulated fees and levies invoiced by the FCA, Money Advice Service, Financial Ombudsman Service (FOS), Financial Services Compensation Scheme (FSCS) and Prudential Regulation Authority (PRA).

Roger Brown, Head of New Markets for Premium Credit, commented on the appointment: “Premium Credit has demonstrated a history of excellent service to the FSA, and we have used their feedback over the years to develop our product offering for regulated businesses.  This will also shortly lead to a number of new developments including online digital application and signature.”

“Businesses regulated by the new FCA will face steep rises in regulatory fees going forward:

  • Financial Advisers:  Fee increase of 13%
  • Fund Managers:  Fee increase of 15.7%
  • Mortgage Brokers and Home Finance Providers:  Fee increase of 11.7%
  • General Insurance Brokers: Fee increase of 14.6%

“Premium Credit can provide whatever funding is needed to assist these businesses in preserving working capital by spreading these increased fees over the license period. This service has never been more relevant than today when SME’s in particular face extreme challenges in securing financing from banks in these tough economic times. Our service provides an unsecured solution, straightforward applications process, and quick approval times.”

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Kuwait has publicly declared its intent to decrease its dependency on foreign workers – reducing the expat population by 1 million over the next 10 years. As part of this policy, the Government will take steps aimed at preventing new expats arriving and also make Kuwait less attractive to those already in the country. For example, expats are currently only allowed access to medical care in the afternoons, unless it is an emergency.

Doug Rice, director of international services for Jelf Employee Benefits said: “Both Kuwait and Oman are developing mid- to long-term plans to transfer roles to native rather than migrant workers. With this in mind it is imperative that whilst companies and their risk management departments are aware of this impact on resource management, there is even more need to seek out professional independent advice to manage international employee benefits.

“Local and international healthcare plans for example, require a best-fit test for countries where there is such a changing dynamic. Advice should always be sought by companies seeking to take advantage of international growth regions for the protection of both the employer and employee.”

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RFIB Holdings, the parent company of international Lloyd’s insurance and reinsurance broker RFIB Group, announces the appointment of Mark Winlow as a non executive director of RFIB Holdings. In addition it is planned that Mr Winlow will become Chairman of its regulated subsidiary RFIB Group Ltd. Both appointments are subject to FCA approval.

Until recently Mark Winlow was a Partner and Head of General Insurance at KPMG Insurance and is currently non executive Chairman of Ageas Insurance Limited and non executive director of Ageas UK Limited, Ageas Protect Limited and Groupama Limited.

Robin Hodgson, Chairman of RFIB Holdings Limited, said: “We are delighted that Mark has agreed to join the board of RFIB Holdings and become Chairman of the regulated broking subsidiary. His industry experience and business knowledge will be of undoubted benefit to the Group.”

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The Kuwaiti government’s efforts to balance its economy’s revenue sources through the development of non-oil sectors, along with more stringent regulation of the insurance market, will have beneficial consequences for the nation’s insurers, according to new research released by Timetric.

Despite this, there are sill significant challenges in the Kuwaiti insurance sector that must be overcome through other means.

A move away from oil

Kuwait possesses the sixth largest oil reserves in the world, which form the backbone of its economy. However, in an attempt to secure stable economic growth in the future, the government has recognised the need to diversify its revenue sources through the development of non-oil sectors. By 2035, it hopes Kuwait will stand as a major financial hub and trade centre. To this end, it has enacted the Development Plan (2010-2014), which has put more than 130 infrastructure projects in the pipeline, at a cost of KWD35.9 billion (US$130 billion).

This comprehensive effort to bolster its infrastructure, combined with its significant oil revenues and steadily increasing population, is contributing to the healthy growth of Kuwait’s insurance industry.

Expected consolidation to improve profitability

Another significant factor in the Kuwaiti insurance industry’s future prospects is the 2011 ruling by the Ministry of Commerce and Industry – the regulator of the Kuwaiti insurance industry – that raised the minium capital requirement for insurers and reinsurance companies. These steep rises are predicted to precipitate the exit of some of the smaller players from the market, and a rise in mergers and acquisitions as local and regional companies seek to become market leaders. This is expected to mitigate pricing pressures and improve the profitability of the industry.

Lack of diversification

Despite forecast growth, the Kuwaiti insurance market is not without problems. In terms of earnings, the Kuwaiti insurance industry is largely skewed towards the non-life segment, with cultural and religious sentiment proving a difficult barrier to overcome in the development of the life segment. Furthermore, the majority of Kuwaiti insurance companies’ operations are concentrated in the domestic market, with no major geographical diversification. These problems must be overcome if the insurance sector is to maximise its potential in Kuwait.

Dependency on reinsurance

In Kuwait, insurance companies cede a larger percentage of their gross written premium to reinsurers than other companies in the international market. This high dependency on reinsurance not only poses a challenge in terms of bottom line growth, but also exposes companies to counterparty risk.

The majority of Kuwaiti insurance companies’ operations are concentrated in the domestic market, with no major geographical diversification

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Government initiatives to invest in infrastructure are set to restore economic growth in El Salvador, which will prove beneficial for the country’s insurance industry. Furthermore, despite the highly competitive insurance environment in El Salvador, the low level of penetration provides excellent opportunity for growth.

Infrastructure Supports Insurance

As a result of its close trading relationship with the US, El Salvador’s economy was significantly damaged by the global recession. Whilst its economy has recorded modest growth since 2010, the government is seeking to stimulate a more rapid recovery through investment in infrastructure. These infrastructural improvements will have beneficial consequences for the country’s insurance industry, and include:

– Development of Cuscatlán International Airport through a public-private partnership.

– A wind farm project in the municipality of Metapán, Santa Ana.

– Development of the country’s coastal region to drive growth in the tourism sector.

Additionally, the Partnership for Growth initiative – signed by El Salvador and the US government to promote sustained economic growth in El Salvador – is set to boost the country’s insurance sector.

Growth In A Competitive Marketplace

The Salvadoran insurance industry is highly competitive, with 21 active insurance companies operating at the end of 2012 – of which the top 10 accounted for 89% of the total gross written premiums. Despite this however, insurance penetration in El Salvador is lower than any other Central American country; this, combined with the increasing awareness of insurance products among the population, renders the Salvadoran insurance industry ripe for growth.

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A report just released by the U.S. Government Accountability Office (GAO), “401(k) Plans: Labor and IRS Could Improve the Rollover Process for Participants,” showed that the current 401(k) rollover system is complex, confusing, lacks consistency and favors moving money into individual retirement accounts (IRAs). Aon Hewitt agrees with the GAO’s findings and recommendations and urges companies to help workers reach their retirement savings goals by encouraging them to keep retirement dollars in the employer-provided retirement system. According to Aon Hewitt, employees who roll plan balances into retail accounts without fully understanding their options significantly increase their risk of not meeting their financial needs in retirement.

“The GAO’s report brings to light very real problems with the current rollover system,” said Alison Borland, vice president Retirement Solutions and Strategies at Aon Hewitt. “Keeping retirement dollars in the employer-provided system is paramount to helping workers ensure that they are adequately prepared for retirement, and we have long been concerned about the difficult process workers face when trying to roll one employer 401(k) plan into another. Aon Hewitt believes the GAO recommendations for improving the rollover process would go a long way to ensure that workers’ best-interest and financial security is a top priority for employers and plan providers.”

According to Aon Hewitt, many workers do not intuitively understand the advantages of keeping retirement savings dollars in the employer-provided system and do not have a trusted source of clear, understandable, unbiased education about their options. Consequently, it is crucial for employers to educate and communicate with employees about the benefit of participating in a qualified plan—and to ensure the information being provided to employees by third parties with whom they have a relationship is fair, unbiased and in the best interest of plan participants.

Employees who choose to roll retirement money into an IRA risk losing key features from within the employer-provided system, which can significantly impact long-term savings goals.

These benefits include:

– Enhanced purchasing power—Because larger defined contribution (DC) plans have hundreds or thousands of participants and assets of tens of millions of dollars or more, enhanced purchasing power allows them to offer  institutional class investment products to employees at a lower cost for similar products than an individual would purchase on their own in an IRA.

– Access to unbiased tools and resources—These tools often include education, modeling tools, online advice, managed accounts, lifetime income solutions and access to experienced phone representatives. Like the investments, these are usually offered a much lower cost than what is available to individuals outside of the employer system. In addition, employees who also have a defined benefit (DB) plan with their employer benefit from integrated modeling tools that allow them to better manage their retirement savings.

– Employer expertise—By participating in a qualified plan, workers benefit from the fiduciary oversight and expertise of the plan sponsor and often outside experts in areas such as selecting investment options and reviewing plan design alternatives.

To encourage employees to keep their retirement savings in the employer-provided system, Aon Hewitt encourages employers to take the following steps:

Ask the right questions. When employers provide access to participants by any third parties, it is crucial that they understand the information and guidance that will be provided. Ask the provider to quantify the revenue generated from the different options available at retirement or termination in order to see if there are any business conflicts. Ask about the compensation and goals of the individuals who will be interacting with participants. Ask about the disclosures that will be provided regarding fees. Review agreements to determine what marketing messages can and will be sent directly to participants, and ensure that there is the appropriate level of comfort with those messages. Providers endorsed by the plan sponsor receive a heightened level of trust from workers, so it is important to make sure that trust is well placed.

Educate and communicate. Make sure employees have access to the right information about their options, and that they receive it at the right time. This means not only at the time of retirement or termination, but well in advance to help with planning. Use multiple channels, so that employees have options across self-service vehicles, such as online information, phone, or in-person support.

Make it easier for participants to roll over money into qualified retirement plans. The current process for rolling plan balances from one employer-provided plan to another can be complex and confusing, requiring a significant amount of paperwork and time by the employee. Employers and providers need to work together to make the process easier for participants.

“Most plan sponsors are indifferent when it comes to whether they want former employees to keep money in the plan or exit. Making it simple to roll dollars to other plans is not high on the priority list,” added Borland. “Providers do not have an incentive to make it easy for money to leave them—they are losing a revenue source. We need to turn that attitude around and work together to act in the best interest of workers.”

To simplify the process Aon Hewitt suggests plan sponsors and providers work together to make the process less arduous for employees. For example, periodically, and at an employee’s termination, employees could be provided with resource materials or an educational campaign explaining the benefits of employer-provided plans, with clear and simple instructions on how to roll one plan into another. Plan sponsors could post this information on provider web sites along with phone numbers and web links for help.

Maintain an attractive investment line-up. One of the main reasons that IRA providers encourage rollovers out of an employer plan is because of lack of breadth of available investments compared to an IRA. Plan sponsors can help employees make the most of their retirement dollars by offering low-cost institutional core investment options, complemented by a self-directed brokerage (SDBA) option that provides access to the broad universe of mutual fund alternatives.

Offer an attractive retirement income option for those nearing retirement. Aon Hewitt’s research shows that 29 percent of plans currently provide employees with some form of retirement income solution, either inside, or outside the plan. Including easy and flexible monthly payments, income planning and investment help and/or annuity options would give employees nearing retirement an added incentive to stay within the employer-provided system.

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Parabis Scotland is expanding within six months of set up with the recruitment of an experienced defendant insurance law team and the opening of an office in Edinburgh.

Parabis Scotland opened last November offering claimant and defendant insurance law services from a new office in Glasgow.  The firm has now attracted an experienced team from Brodies LLP, who will be based in Edinburgh and will trade under the Plexus Law brand – the defendant insurance law arm of Parabis Scotland.

Laurie Traynor is joining as a partner with associates Stuart Mackie, Julie Fisher, Sarah Crewes and Solicitor Advocate James Peden.

“From the start the demands of our clients have driven activities,” said Tony O’Malley, who heads up Parabis Scotland. “We’ve been delighted by how well our first move in Scotland has been received by clients.  They have wanted us to grow our defendant insurance law capabilities and that is exactly what we’re doing.”

In contrast to English competitors who have merged with or acquired Scottish firms, Parabis has decided to grow more steadily but aspirationally, keeping tight control of cost management.

“This move demonstrates our commitment to becoming a serious force in the defendant insurance law market in Scotland. By growing organically and attracting experienced teams, we can manage our costs better, which is what clients demand in the current market, while also delivering high levels of expertise and service,” said O’Malley.

Tim Oliver, Senior Partner of Plexus Law, said: “This is the first stage in creating a multi-disciplinary insurance practice in Scotland. Glasgow has been a great move for us. With this latest move we will have the demand, capability and reach to service general loss cases and more diverse defendant work in Scotland.

“The quality of the team we’ve attracted, and around which we are building our Edinburgh office, illustrates how serious we are about being here and how keen our insurance clients are to be able to work with us on both sides of the border. It’s great news.”

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Catastrophe modeling firm AIR Worldwide (AIR) announced the availability of Public Risk Services, a new consulting service to support the needs of public sector institutions and stakeholders charged with managing catastrophe risk. John W. Rollins, FCAS, MAAA, vice president at AIR Worldwide, will head the new service group.

 “Many public groups, including insurance commissioners, wind and earthquake pools, model evaluation commissions, federal insurance programs, prudential and solvency regulators, and quasi-governmental organizations, are increasingly concerned with the micro and macro impact of disasters,” said Rollins. “Some are increasingly bearing the risk on behalf of taxpayers. By offering a dedicated service to these important organizations, we’re fully committed to better serving the public sector as it manages catastrophe risk.”

AIR is establishing Public Risk Services to serve three distinct roles:

– Ambassadorial — a dedicated liaison to stakeholders in the public sector, keeping them abreast of AIR’s research, software, and consulting activities

– Educational — focus on educating public institutions on the role and value of catastrophe models, including AIR products and services

– Center of Excellence — a knowledge nexus regarding the role, structure, and risk-sharing frameworks of public risk pools

A respected leader in the insurance industry, Rollins brings more than 20 years of experience as a property/casualty actuary in a variety of environments, including personal and commercial lines insurance companies and global and regional consulting firms. In a previous tenure, he developed and led significant wind loss analysis and mitigation projects for the Mississippi Insurance Commissioner and the Florida Division of Emergency Management. Rollins has also provided leadership during the process for the acceptance of AIR’s new models by the Florida Commission on Hurricane Loss Projection Methodology and testified before several state legislatures regarding catastrophe modeling issues of interest to the public. He also serves on the Board of Governors of the world’s largest public insurance pool, Florida’s Citizens Property Insurance Corporation, appointed by Florida Governor Rick Scott.

“I couldn’t be happier to lead a team of catastrophe risk professionals and to help the public sector get the full benefit of AIR’s scientific knowledge and unmatched perspective on disaster risk issues and public policy,” continued Rollins. “I believe the viewpoint I’ve gained over recent years in the Florida insurance market and regulatory environment will translate to exciting new opportunities for AIR to serve those charged with the public trust across the United States and worldwide.”

“We’re pleased to launch a new service dedicated to serving the diverse needs of the public sector because disasters touch all segments of the economy,” said Ming Lee, president and CEO at AIR Worldwide. “Our Public Risk Services group is an integral part of our overall mission to help society better understand and manage catastrophe risk.”

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A study by AXA among small business owners reveals that insurance fraud is a real issue with one in three admitting they have inflated, or would inflate a claim while one in ten would bend the truth when applying for a policy.

Research carried out among hundreds of small British businesses suggests that while the majority are honest, the numbers exaggerating or even fabricating, claims could run to tens of thousands a year with the average claim value being raised by around 17%, or approximately £640.

When asked what they would consider “acceptable” when making a claim, around one in ten small business owners said it was okay to inflate the value of goods stolen and a similar number would lie about having locked up and alarmed their premises. More seriously, around a fifth would consider it acceptable to fake a whiplash claim or a minor accident at work in order to make a claim. Tradesmen and retailers top the list of sectors where people have exaggerated claims.

Furthermore, the research revealed that small business owners would be 25% more likely to make a fraudulent claim on their business insurance than their personal insurance.

Matthew Reed, Managing Director, Commercial Intermediary said: “Some people seem to think insurance fraud is a victimless crime but it’s not. Honest customers end up footing the bill through higher premiums as insurers are forced to pass on the additional costs of inflated claims. Brokers are the ones that have to pass this message on to their clients which is never an easy one, particularly during a recession. They know better than most that the last thing their small business clients need are added costs.”

As well as exaggerating claims, some business owners admitted that they would be prepared to tell a few untruths when it came to applying for insurance:

–       one in ten said they would deliberately under-value their business to get a lower premium

–       a similar number would not mention they used their car for business and simply buy personal cover, again to keep premiums down

–       around 5% would not mention previous convictions and 3% would omit to mention previous claims.

Matthew Reed concludes:  “Our industry has developed increasingly sophisticated processes to stop fraudsters but insurers do need the support of brokers to help educate the minority of small business owners who commit these frauds, whether intentionally or not, that getting caught could mean the end of their livelihood. If a broker does identify any client trying to inflate a claim for example, we would urge them try to persuade their client that it is in their long-term interest to do otherwise. After all, they not only run the risk of having any claim turned down, but also, in serious instances, risk criminal proceedings and problems getting any insurance in the future.”

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Swiss Re’s latest sigma study reveals that natural catastrophes and man-made disasters in 2012 caused economic losses of USD 186 billion with approximately 14 000 lives lost. Large scale weather events in the US pushed the total insured claims for the year to USD 77 billion, which is the third most expensive year on record. This amount is still significantly lower than 2011, when record earthquakes and flooding in Asia Pacific caused historic insured losses of over USD 126 billion, the highest ever recorded. 

Weather-related events in the US dominate 2012

2012 was dominated by large, weather-related losses in the US. Nine of the ten most expensive insured loss events happened in the US in 2012. See Table 1 The high insurance penetration in North America meant that  USD 65 billion, over half of the USD 119 billion in economic losses in the region, were covered by insurance.

Kurt Karl, Swiss Re’s Chief Economist, says: “The severe weather-related events in the US provided a reminder of the value of insurance and the vital role it plays in helping individuals, communities and businesses to recover from the devastating effects of catastrophes. However, large parts of the globe that are prone to weather extremes were not able to rely on financial relief due to low insurance penetration.”

Hurricane Sandy was the most expensive event for the year both in terms of economic and insured losses. The Hurricane caused an estimated total of USD 70 billion in economic losses, making it the second most damaging hurricane on record after Hurricane Katrina in 2005. Insured losses were approximately USD 35 billion, out of which USD 20 to 25 billion were covered by the private insurance market.

The remaining insured losses were incurred by the National Flood Insurance Program. Losses stemmed from the largest ever wind span recorded for a North Atlantic hurricane, and from the ensuing massive storm surge that caused damaging flooding in a densely populated area on the East Coast of the US. It also led to the worst power outage caused by a natural catastrophe in the history of the US. Hurricane Sandy also struck the Caribbean and stretched as far north as Canada, thereby adding to the loss of lives and property.

Matthias Weber, Swiss Re’s Group Chief Underwriting Officer, says: “Sandy challenged the industry with its combination of record wind field and storm surge. The possibility that such events could increase in frequency and strike densely populated regions such as the northeast US means that extreme storm-surges need to be more thoroughly understood.”

A simulation exercise presented in the sigma study shows how an increase of sea levels of 10 inches (0.25 metres) by 2050 will almost double the probability of extreme flood losses occurring. For the industry, this means that a USD 20 billion insured loss event, now expected once in 250 years, would be expected once in 140 years.

Highest ever recorded agricultural loss
Record heat and extremely dry weather conditions in the US led to one of the worst droughts in recent decades, affecting more than half of the country. Severe crop failures in the US Corn Belt resulted in insured agricultural losses of USD 11 billion, including pay-outs from the federal Multi-Peril Crop Insurance (MPCI) assistance program. This makes the 2012 drought the highest ever recorded loss in agriculture insurance. The record drought in the bread basket of the US highlighted the economic importance of insurance, supporting the economic survival of thousands of farmers.

Largest ever insured earthquake losses in Italy
A rare and relatively weak series of earthquake shocks in the north of Italy caused insured losses in excess of USD 1.6 billion, the highest ever recorded in the country. The total economic loss for these earthquakes was USD 16 billion. Balz Grollimund, Swiss Re’s Head of earthquake risk, says: “Although substantial, insured claims were only a fraction of the total cost of the event. Italy, a country with multiple seismic sources, has one of the lowest earthquake insurance penetration rates among industrialised countries with high exposure to earthquake risk.”

Insured Losses Sigma Study 2013

Insured Losses Sigma Study 2013

 

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Aon released a joint study with the Partnership for New York City, the city’s leading business group, that outlines steps New York must take to sustain a diverse talent pipeline and bolster long-term competitiveness.

 
Key recommendations include:

– Establishing a Chief Talent Officer to oversee the city’s talent agenda

– Recruiting highly-skilled graduate students, entrepreneurs and existing professionals in technology and financial services to work in New York

– Creating an agency to build and reinforce partnerships between industry and academia to ensure residents are trained for the jobs of tomorrow

– Appealing to the workplace preferences of millennial generation workers

– Supporting the growth potential of the life sciences industry

“Aon is committed to helping New York maintain its preeminent status as a global leader in commerce, finance and innovation,” said Kristi Savacool, chief executive officer of Aon Hewitt, the firm’s global human resources solutions business, who presented the study findings at a Partnership for New York City event today. “While Mayor Bloomberg has done a superb job of fostering economic growth and innovation, public and private sector stakeholders must seize the opportunity to keep New York City ahead of the curve as a magnet for businesses and talent for years to come.”

The Partnership for New York City and Aon collaborated on the study in an effort to make sure that New York City continues to have a talent supply that matches the needs of its employers. Aon benchmarked New York against other global cities across key drivers of economic vitality, with a particular focus on the financial and technology sectors—two industries that are particularly important to maintaining New York’s talent pipeline.

“New York City’s depth and diversity of talent is our competitive edge,” said Kathryn Wylde, President & CEO of the Partnership for New York City. “In this report, Aon has identified actions that employers and the city can take to keep talent flowing to New York and ensure that we remain an economic powerhouse and center of innovation.”

“New York City is home to the world’s most talented workforce, and that makes New York City a great place to do business,” said Mayor Michael R. Bloomberg. “In order to compete in the 21st Century, we must continue to attract the talent of tomorrow – the creative innovators, daring entrepreneurs and top students that will add value to our economy.”

The study finds that only Singapore is currently competitive with New York when it comes to attracting talent in these industries. This is consistent with results from Aon Hewitt’s global People Risk Index, released yesterday, which measures the risks that organizations face with recruitment, employment and relocation in 131 cities worldwide. According to the Index, New York City was ranked the lowest risk city in the world to recruit talent.

However, in the Aon-Partnership for New York City report, stakeholder interviews and data analysis reveal that as technological innovation increasingly dominates the economy, there could be a growing mismatch between employer needs and available talent in New York, putting the city at risk for losing its ranking and historical competitive advantage.

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Government initiatives in Puerto Rico have seen its insurance industry grow by a CAGR of 5.8% between 2007 and 2011, despite its contracting economy.

A high rate of insurance penetration however – standing at 11.3% in 2012, compared to the global average of 6.8% – means opportunities for further foreign investment, and therefore the sustained growth of the insurance market in Puerto Rico, are limited.

Insurance unaffected by negative economic growth thanks to government initiatives

The Puerto Rican economy contracted between 2007 and 2011, with GDP at constant prices falling at annual rates of -1.9%, -2.3%, -2.1% and -2.2%. This has been primarily attributed to a decline in exports, the global financial crisis, falling investment in construction, and a significant decline in government spending. However, its insurance industry weathered this storm admirably, posting a CAGR of 5.8% during the same period. This is in part a consequence of the government’s healthcare reforms, the implementation of a Medicare program, and compulsory third-party motor insurance.

New legislation attracts global investors

A key factor in the Puerto Rican insurance industry’s continued growth is legislation enacted in 2011 as part of a collaboration between the government and the office of the Commissioner of Insurance. This placed a 4% flat tax rate on all overseas insurers starting business in Puerto Rico in the 2012 tax year, and will be given for 15 years, with an additional option to renew the contract for two more 15-year terms. This initiative boosted investors’ confidence, and sparked significant interest in the Puerto Rican insurance market from overseas insurers in 2012.

A gateway to the Latin American and US insurance industries

A further contributing factor to Puerto Rico’s recently expanded insurance sector is its proximity to both Latin America and the US, rendering it an attractive proposition for global insurers to underwrite policies directly from these areas.

High levels of insurance penetration discourage new entrants

Despite its significant recent growth, the high levels of insurance penetration in Puerto Rico damage its investment potential for new market entrants. In 2012, Puerto Rico’s insurance penetration was the highest in Latin America, standing at 11.3%: significantly higher than Costa Rica’s 1.9%, Guatemala’s 1.3%, the Dominican Republic’s 1.2%, and even the world average of 6.8%. Consequently, opportunities are comparatively few, and insurers considering ventures into Puerto Rico are instead likely to opt for other countries in the region with lower penetration levels. As such, despite healthy growth between 2007 and 2011, the growth forecast of the Puerto Rican insurance market to 2017 is limited.

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Aon Risk Solutions is pleased to announce that Elliott Jones, managing director of the firm’s Chicago service center, has been appointed president of the National African American Insurance Association Chicago Chapter.

Jones most recently served as vice president for NAAIA Chicago for several years. He quickly earned recognition as a collaborative and effective leader, whose efforts built and strengthened the organization’s partnerships with its sponsors. Jones was also relied upon as a strong advocate for initiatives that furthered the message of diversity in the insurance industry.

“Aon would like to congratulate Elliott on his new leadership role within the NAAIA. His accomplishments are a testament to his passion for the profession as well as Aon’s continued dedication to ensuring that diversity is valued throughout the industry,” said Joe Propati, chief operating officer for Aon Risk Solutions U.S. Retail. “No doubt the exceptional leadership skills Elliott developed at Aon will be an asset to the chapter and its continued success.”

Jones will serve as president through 2013. He was also named Who’s Who in Black Chicago in 2006 and 2007.

“For many years, Elliott has been an outstanding partner and supporter of NAAIA,” said Margaret Redd, immediate past president of NAAIA Chicago. “He has made significant contributions as vice president, and I have no doubt that he will continue to draw upon his expertise, experience and commitment to move the organization forward.”

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New research suggests the insurance industry in the Central African Republic (CAR) is set to grow at a CAGR of 10.7% between 2012 and 2017, making it an attractive proposition for foreign investment. Stable economic development, the continued expansion of the mining industry, and a host of modernising infrastructure projects is contributing to significant growth in the CAR’s insurance sector.

Despite the substantial obstacles yet to be overcome – primarily a lack of public awareness regarding insurance products, and the low life expectancy that limits demand – the insurance market’s projected growth remains healthy. The industry’s small market size, with insurance penetration standing at only 0.36% in 2012 – in comparison to the global average of 6.8% – provides new market entrants willing to tackle these challenges with substantial positive growth potential.

Key market insights include:

Stable economic development to support insurance industry expansion

The performance of a nation’s insurance industry is closely correlated with its economic growth; thus, the stable economic development of the CAR spurred an increased demand for insurance from 2008-2012: a trend that is set to continue. This is in no small part thanks to the nation’s burgeoning mining industry, and a range of infrastructure investment, including the laying of fibre-optic cable, the modernisation of transport routes, and improvement of energy capacity.

Low rates of insurance penetration to attract new business

Despite the CAR’s rising insurance penetration rates, total penetration in 2012 remains low – at 0.36% – compared to the global average of 6.8% Thus, the CAR represents an excellent opportunity for new market entrants to experience substantial positive growth.

Low life expectancy and lack of public awareness limit the demand for insurance

World Bank statistics show the CAR as having one of the lowest life expectancy rates in Africa, at only 48.3 years in 2011. This limits the demand for health, pension and life insurance coverage – a factor that is compounded by a lack of public awareness with regards to insurance products. Addressing this latter concern should be a high priority of insurers in the CAR.

High combined ratio in life insurance segment

A combined ratio of more than 100% reflects underwriting losses. The life insurance segment recorded a high combined ratio from 2008-2012, reaching a peak of 249.8% in 2009. A substantial improvement in the quality of underwriting must therefore take place to curb these losses.

Timetric’s report, ‘The Insurance Industry in Central African Republic, Key Trends and Opportunities to 2017’ is available at: https://timetric.com/research/report/IS0249MR/

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Fitch Ratings has placed Assicurazioni Generali SpA’s (Generali) senior and subordinated notes on Rating Watch Negative (RWN). At the same time, the agency has affirmed Generali and its core subsidiaries’ Insurer Financial Strength (IFS) ratings at ‘A-‘ and Long-term Issuer Default Ratings (IDR) at ‘BBB+’. The Outlooks are Negative. A full list of rating actions is at the end of this release.

The rating actions are in response to three distinct and separate events – Fitch’s downgrade of Italy’s sovereign ratings on 13 March, Generali’s publication of 2012 financial statements, and Generali’s recent announcement of plans to modify its holding company structure. The affirmations reflect that the further decline in Italy’s creditworthiness is not sufficient to warrant further negative ratings actions on Generali, especially in light of certain improvements in Generali’s balance sheet as reported in FY12. The RWN on the debt ratings is related to neither the sovereign action nor any issues in the 2012 financials, but is exclusively linked to the proposed holding company restructuring.

KEY RATING DRIVERS The affirmation of the IFS ratings and IDR follows Fitch’s downgrade of Italy to IDR ‘BBB+’ from ‘A-‘ (see “Fitch Downgrades Italy to ‘BBB+’; Outlook Negative”) and the publication of Generali’s consolidated 2012 financials.

The affirmation reflects Generali’s stronger balance sheet in 2012 compared with 2011, with group shareholders’ funds at EUR22.6bn (2011: EUR18.1bn) and Solvency I ratio at 150% (2011: 117%). Combined with de-risking actions undertaken by Generali (in particular the sharp reduction of cross-border exposure to peripheral government debt – including Italian debt), Fitch believes this allows Generali to better withstand potential credit and other losses.

Generali’s IDR is now at the same level as the Republic of Italy’s IDR at ‘BBB+’. However, Generali’s IFS rating at ‘A-‘ is higher, under the assumption that recovery prospects of policyholders given default remain “good” as defined under Fitch’s insurance rating criteria. Generali’s operations are well diversified geographically. Around two-thirds of business is produced in countries with a higher rating than Italy (notably, Germany; ‘AAA/Stable’ and France; ‘AAA’/Negative). Nevertheless, Generali’s ratings remain constrained by the sovereign rating of Italy given the group’s significant holdings of Italian sovereign debt.

The RWN placed on Generali’s senior and subordinated debt reflects Fitch’s expectation that Generali’s proposed group restructuring will moderately weaken the credit quality of Generali’s debt. Generali plans to reorganise its Italian operation through the creation of a downstream operating company, Assicurazioni Generali Italia. Generali is expected to complete a portfolio transfer of the bulk of its existing insurance operations to the new entity. Fitch believes that after the transfer, Generali will take on more of the characteristics of a holding company, even though it will continue to conduct some insurance business (initially, mainly intra-group reinsurance).

Typically, unsecured senior debt issued by an insurance operating company, in which liquid assets are maintained at many multiples of outstanding debt balances, is rated at one notch lower than the IFS rating of the issuer. This has been the notching approach historically employed for Generali, as it was considered by Fitch to be an operating company. In contrast, unsecured senior debt issued by a pure holding company is typically notched down by three notches from the IFS rating, reflecting both higher default risk and lower recovery prospects in a default.

Following the proposed restructuring, Fitch would view Generali as incrementally having fewer characteristics of an operating company and more of a holding company, than in the past. Accordingly, if the reorganisation is completed in line with Fitch’s understanding, the agency’s notching approach will be updated. Fitch would expect to downgrade the debt ratings by one notch, which would establish the unsecured senior debt at two levels below the IFS. This falls between standard notching for a pure operating company and a pure holding company.

Assicurazioni Generali SpA’s IFS rating is not affected by the Italian reorganisation as the company will underwrite the group’s internal reinsurance business and may expand to write direct corporate business in the future. As such, its IFS rating continues to be aligned with the implied IFS rating of the group as a whole.

RATING SENSITIVITES The RWN will be resolved when the new Italian legal structure comes into effect later this year. At that time, Fitch expects to downgrade the debt ratings by one notch.

Separately, all of Generali’s ratings are likely to be downgraded if Italy is further downgraded.

Other key rating triggers for a downgrade of Generali and its core subsidiaries’ ratings include: –Consolidated FLR not falling below 35% over the next 12-18 months. –Consolidated Solvency I ratio falling below 120% with an expectation that it will not recover within a short period of time.

Key rating triggers for an upgrade of Generali and its core subsidiaries’ ratings include: –Strengthening the group’s capital base to the extent that Generali is able to withstand credit and other losses given a scenario of severe distress. This could be achieved with a consolidated Solvency I consistently above 150% or if the eurozone debt crisis stabilises and Italy’s rating is upgraded to the ‘A’ category.

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Enrollment results indicate that when given more choice and control, employees become more engaged and invested in selecting their health benefits. This is according to a new analysis from Aon Hewitt, the global human resources business of Aon.

During the 2013 annual enrollment period last fall, more than 100,000 U.S. employees successfully enrolled in health benefits through Aon Hewitt’s Corporate Health Exchange, the only fully insured, multi-carrier corporate health exchange available to large national employers today. According to Aon Hewitt’s post-enrollment analysis, almost 80 percent of enrollees felt confident they chose the health plan that offered the best value for them and their family, and almost all (93 percent) liked being able to choose among multiple carriers.

“When given more options, employees become empowered to make individual choices based on value, provider network, price and health status,” said Ken Sperling, Aon Hewitt’s national health exchange strategy leader. “Employees like having control over such an important decision and appreciate not being limited to a pre-determined plan and insurance company.”

Aon Hewitt’s Corporate Health Exchange consolidates purchasing power while providing best-in-market health insurance options for employees. Through its strong relationships with insurance providers, Aon Hewitt’s Corporate Health Exchange offered a wide range of health, dental and vision benefits options from multiple national and regional carriers during the 2013 enrollment period, including UnitedHealthcare, Kaiser Permanente, HealthNet, Health Care Service Corporation (operating Blue Cross Plans in IL, NM, OK and TX) and Florida Blue, Florida’s Blue Cross and Blue Shield Plan.

“Aon Hewitt’s corporate exchange allowed us to move away from a one-size fits all approach to providing health benefits,” said Danielle Kirgan, senior vice president of Total Rewards and Shared Services at Darden Restaurants, one of the companies participating in Aon Hewitt’s corporate health care exchange in 2013. “This year, we were able to offer a broader array of health care choices than we have in the past, giving our employees the flexibility to choose the level of coverage that best meets their needs at a price they could afford.”

During enrollment, employees could quickly and easily sort and filter benefits options by price, carrier and/or plan type using Aon Hewitt’s proprietary exchange portal. Participating insurance providers highlight the unique features and capabilities of their plans to help employees differentiate between coverage options and optimize their choices. Aon Hewitt’s benefits experts and advisors—including its industry-leading Advocacy Support team—provided expertise, answers to questions and guidance throughout the enrollment process.

Enrollment by Plan Type

According to Aon Hewitt’s post-enrollment analysis, two-thirds of employees who participated in the corporate exchange said they now had a good understanding of how they share the cost of medical insurance with their employer. When choosing a coverage level, most employees said they based their choice on the desire to choose a plan that offered coverage similar to their current plan and price.

Aon Hewitt’s enrollment data shows that 39 percent of employees enrolled in a consumer-driven health plan (CDHP), up from 12 percent in 2012. Conversely, the number of employees who enrolled in a PPO-type plan decreased from 70 percent in 2012 to 47 percent in 2013. However, while a significant number of employees migrated toward consumer-driven health plans, Aon Hewitt’s data revealed that when given the choice, a fair number of employees chose to increase their coverage. For 2013, 32 percent of employees chose a plan similar in type to their current coverage (e.g., PPO to PPO), while 26 percent of employees chose richer coverage. Forty-two percent of employees chose to reduce their regular payroll contributions and select a less rich form of coverage.

According to Sperling, “The election patterns we observed prove that a well-designed exchange does not just drive employees to less comprehensive coverage. Employees who want richer coverage are free to purchase it—and they do. Health care is personal, and people have different needs. This model lets employees decide which plan and which insurance company is best for them, and they are free to modify that choice on an annual basis.”

“We believe this new approach to medical coverage better meets the needs of our diverse workforce and provides our company with increased efficiencies in our health care offerings,” said Dean Carter, chief human resources officer of Sears Holdings, another company participating in the exchange. “The competitive marketplace created by the corporate exchange model brings increased flexibility to group health coverage for our associates, giving participants a chance to choose both the level of coverage and the insurance company that best meets their needs. As a company committed to providing our associates with a comprehensive set of benefits, being able to have a positive impact on quality and costs through the exchange has been a win-win for Sears Holdings.”

2013 Enrollment by Plan Type 

  2012 2013
PPO 70% 47%
HMO 18% 14%
CDHP 12% 39%

Increased Use of Decision-Support Tools

Use of Aon Hewitt’s online decision support tools, including health plan comparisons, cost estimators and customized portal and guidance solutions, was significantly higher for employees who enrolled in their benefits through a corporate exchange model compared to the 10 million employees who completed a “traditional” enrollment with Aon Hewitt. Specifically:

– 68 percent of exchange enrollees used a health plan comparison tool compared with just 48 percent of employees in Aon Hewitt’s normative database

– 57 percent used the provider search tool, compared to only 14 percent usage in traditional plan enrollment

“Our health care exchange is structured in a way that enables employers to continue offering group health care coverage but gives employees a wider range of plan choices,” said Sperling. “It uses a fully insured model to create competition at a consumer level, and whenever markets are competitive, consumers benefit. This is not about shifting cost to employees; it’s about reducing the top line cost of health care. We have created a solution for employers and employees that reverses the rate and volatility of escalating health care costs. Employers can then redirect these cost savings to enhancing company-wide programs to increase employee health, well-being and engagement.”

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Last year was the worst for IT services contract activity since 2002, according to research from Ovum. Performance in the three months to the end of December 2012 fell well below the levels seen in the same period of 2011, ensuring that annual IT services contract activity fell to its lowest level for 10 years, both in terms of total contract value (TCV) and deal volume.

In Ovum’s latest analysis of the IT services market the TCV of deals announced in the fourth quarter of 2012 was $20.8bn, down 34 percent on the same period of the previous year. The number of deals fell 17 percent in the same period and there was a notable lack of megadeals (contracts valued at $1bn or more). While the level of activity in 4Q12 represented a slight improvement on the previous three months of the year, with TCV up 10% from the third quarter of 2012, annual TCV was down on the previous 12 months across both the public and private sector, with the private sector enduring its worst year since 1998 in TCV terms.

“The ongoing economic uncertainty afflicting key markets for IT services such as the US and Europe was a major factor behind the weak performance of the industry in 2012,” says Ed Thomas, Senior Analyst in the Ovum IT Services team. “Our research suggests that many enterprises remain wary of committing to major projects, with issues such as the Eurozone crisis having a particularly significant impact. In addition, public sector activity has reduced as many governments come under pressure to cut public spending in the face of high debt levels, leading to a general reluctance to get involved in large-scale IT services deals.”

The reluctance among enterprises can be seen across vertical markets, with the sharpest fall in the services sector, where the number of deals announced fell by 50%. In healthcare and financial services, contract volumes were down 39% and 18% respectively. The only industries in which contract activity was up on the previous year were telecommunications and technology.

Regionally, Europe was the leading market for private sector contract activity in 2012, with 45% of annual TCV. However, TCV generated by European enterprises actually declined sharply during the year, falling 31% to $16.7bn. Private sector TCV in North America, having slumped dramatically in 2011, rebounded somewhat in 2012, finishing the year up 48% at $10.5bn.

“The last quarter of 2012 saw some notable awards from North American firms such as Procter & Gamble. However, it is too early to tell whether or not this represents a significant shift in approach by enterprises in the region, which have been wary of committing to major projects in recent years due to the economic turmoil.” concludes Thomas.

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The performance of Keychoice members has once more been recognised by Ageas with the introduction of enhanced terms and rating concessions on their commercial vehicle products and Keychoice’s BEDS household scheme.  This move builds on a similar decision in early 2012 when Ageas introduced a rating concession for the first time on the Keychoice Bedroom household scheme in recognition of the overall record of the membership base.

This further enhancement reflects the strong characteristics of the Keychoice account.  Commenting on the decision, Mark Cliff, managing director of Ageas Insurance, said: “Much has been made of the value of networks recently, but the performance of our Keychoice book shows that a real partnership can deliver tangible benefits to all parties.

“Keychoice provides access to a significant percentage of the intermediated channel and these brokers have a consistent record of writing good quality, profitable business.”

Jonathan Davey, managing director of Keychoice added: “This is great news for our members and builds on our one stop shop proposition focused on delivering competitive, quality products to brokers, allowing them to remain competitive in what is still a very difficult market.

“Ageas’s decision is testament to the fact that by working closely with members and insurers, networks really can deliver value to all concerned.”

The enhancements to the Keychoice household scheme are available immediately, with the commercial vehicle enhancements following on 1 April.

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    A landmark agreement between the Insurance Fraud Bureau (IFB) and the Association of Chief Police Officers (ACPO) will see intelligence on organised criminal gangs shared between the insurance industry and the police.

    A formal intelligence sharing agreement was signed on Friday by the IFB’s Head of Intelligence, Stephen Dalton, and the Chief Constable of Durham Constabulary, Michael Barton, on behalf of ACPO.

    Since its creation in 2006, the IFB has forged close working relationships with police forces across the UK, which has led to over 700 arrests in the last six years. Working alongside the police, the IFB is currently coordinating 49 live operations into organised fraud, valued in excess of £66 million.

    With access to police intelligence, the IFB will now be able to accurately identify organised criminal gangs who are engaged in cross-industry insurance fraud and work with the Police to develop operations to disrupt their activity.

    Chief Constable Michael Barton, Durham Constabulary, said: “The sharing and use of information and intelligence is the key to dismantling criminal networks which have a huge impact on people’s lives. This important agreement should provide a vital new tool for police forces to prevent and reduce this type of criminal behaviour.”

    Stephen Dalton, Head of Intelligence at the IFB, said:  “Past IFB investigations have identified insurance fraud as a lucrative source of revenue for criminal gangs, used to fund other forms of serious crime including drug dealing, illegal firearm supply, people trafficking and money laundering. IFB operations therefore provide police forces with a valuable platform from which to make arrests, gather evidence and disrupt organised criminal networks.

    “Today’s landmark agreement demonstrates the long-term strategic commitment from both the IFB and the police, at its most senior level, to share intelligence. It also provides a vital source of new intelligence for the IFB, allowing us to focus investigations on known criminal networks targeting our industry.”

    The IFB currently holds 24 intelligence sharing agreements with police, regulators and public sector law enforcement agencies across the UK.

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      The Transport Committee is today calling for evidence on reducing the number and costs of whiplash claims, following up its recent inquiries into the cost of motor insurance.

      Fourth Report of Session 2010–11

      Twelfth Report of Session 2010–12

      The Chair of the Committee, Louise Ellman MP, has said: “It is vitally important for policymakers to understand the reasons for the very high cost of motor insurance, especially for young drivers, and to take steps to bring that cost down. Whiplash claims undoubtedly play a part in driving up the cost of motor insurance, but access to justice for injured people must be preserved. We want to hear the arguments on these points and will publish a report in the summer about the best way forward on this difficult issue.”

      The Committee intends to hear oral evidence later in the year on the Ministry of Justice consultation paper on this issue, Reducing the number and costs of Whiplash Claims. In particular, it would like to receive written evidence on the following points:

      – Whether the Government is correct in describing Great Britain as the “whiplash capital of the world”

      –  Whether it is correct to say that the costs of whiplash claims add £90 to the average premium and, if so, what proportion of this additional cost is due to “exaggerated, misrepresented or fabricated” claims

      – Whether the proposals put forward by the Government, in relation to medical evidence of whiplash and incentives to challenge fraudulent or exaggerated claims, are likely to reduce motor insurance premiums and, if so, to what extent

      – The likely impact of the proposals on access to justice for claimants who are genuinely injured

      – Whether there are other steps which the Government should be taking to reduce the cost of motor insurance.

      We would be grateful to receive written submissions by Monday 15 April. Submissions should clearly indicate whether or not they have been written specifically for the Committee. The Committee would be content to receive material prepared in response to the Ministry of Justice consultation but the Committee normally only publishes submissions prepared specifically in response to its own calls for evidence.

      Information on submitting evidence to a Select Committee is available online in the House of Commons Guide to Witnesses.

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