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George Stobbart

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The Lloyd’s Market Association (LMA) has announced the four successful candidates in this year’s election for membership of the organisation’s Board.

The four are:

– Andrew Brooks, Ascot Underwriting Limited

– Charles Franks, R. J. Kiln & Company Limited

– Andrew Kendrick, ACE Underwriting Agencies Limited

– Michael Watson, Canopius Managing Agents Limited

All four will serve a term of three years.

LMA’s underwriting committees have additionally selected four underwriters who will also sit on the board as nominated members until the next AGM and they are:

– Steve Eccles, Travelers Syndicate Management Limited

– Dominick Hoare, Munich Re Underwriting Limited

– Rob Littlemore, Catlin Underwriting Agencies Ltd

– Colin Sprott, XL London Market Limited

Offering his congratulations to the successful candidates, David Gittings, the LMA’s Chief Executive, said: “I am extremely pleased with the level of interest in this year’s elections which have been the most hotly contested in the Association’s 11 year history.  I am delighted that 11 of the 12 largest Managing Agencies are now represented on the LMA Board.  I would like to thank all of the candidates who stood for election.”

Elections take place each year when one third of the elected members stand down.  Eight candidates stood for four elected vacancies. Voting closed on Friday 18 May.

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Friends Life has launched a new microsite connecting advisers to information on the services that Protect+ customers can utilise from worldwide medical specialists, Best Doctors. The microsite provides further detail on the additional services that Friends Life has made available for those customers diagnosed with a serious medical condition.

Best Doctors was founded in 1989 by doctors from the renowned Harvard University School of Medicine and has established a unique worldwide database of 50,000 leading medical specialists in over 400 different disciplines, who can provide expert advice and recommendations to members facing serious medical conditions.

Friends Life has worked in partnership with Best Doctors since November 2011 to provide customers with additional medical support and advice. The new website, available at www.friendslife.co.uk/bestdoctors, provides information for advisers on:

– The advice and help available to their customers from Best Doctors

– Information on how the service works

– Facts and figures to show the impact it has

– Real-life case studies.

Commenting on the launch, Steve Casey, Head of Intermediary Propositions at Friends Life, said:

“Best Doctors can provide valuable reassurance for people diagnosed with a serious illness, helping with the many questions and concerns that they will have. This is a valuable addition to our Protect+ product range, which includes critical illness, income protection and all of our term assurance products, and underlines our commitment to providing customers with the best services to assist them in difficult times.”

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The Financial Services Authority (FSA) will require all banks, building societies and credit unions to prominently display posters and stickers in branches and on websites explaining which deposit guarantee scheme applies to their customers’ deposits. These rules will take effect from 31 August this year.

If customers are using the UK branch of a foreign bank from the European Economic Area, (EEA), the posters will have to set out that those customers are not covered by the UK’s Financial Services Compensation Scheme (FSCS). In this case they would have to specify which national scheme will provide protection.

Andrew Bailey, FSA director of UK banks and building societies:

“Customers need to feel confident about their money and to do this they need to know what the compensation limits are and which scheme would provide cover in the event of a bank, building society or credit union failure.

“Too many people assume that because their branch is located on a local high street in the UK, they are covered by the FSCS. This is not true for UK branches of EEA banks where the home country’s deposit guarantee scheme applies.

“Banks, building societies and credit unions will have to display these compensation stickers or posters in the branch window along with a sticker at the cashier’s window or desk and a further poster in a prominent position inside.”

The following wording has been prescribed by the FSA

UK and non-EEA banks (including EEA subsidiaries):

– For deposit takers with a single brand/ trading name

Your eligible deposits with [insert name of firm] are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK’s deposit protection scheme. Any deposits you hold above the £85,000 limit are not covered.

– For deposit takers with multiple brands/ trading names :

Your eligible deposits with [insert name of firm] are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK’s deposit protection scheme. This limit is applied to the total of any deposits you have with the following: [insert names of brands as appropriate]. Any total deposits you hold above the £85,000 limit between these brands are not covered.

– Optional wording for Credit Unions with a single brand/ trading name

“Your eligible deposits are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK’s deposit protection scheme. Any deposits you hold above the £85,000 limit are not covered.

UK branches of EEA banks

– Single brand/ trading name banks

“Your eligible deposits with [insert name of firm] are protected up to a total of 100,000 euro by [insert name of compensation scheme] the [insert home state of scheme] deposit protection scheme and are not protected by the UK Financial Services Compensation Scheme. Any deposits you hold above the 100,000 euro limit are not covered.

– Multiple brands/ trading names Banks:

“Your eligible deposits with [insert name of firm] are protected up to a total of 100,000 euro by [insert name of compensation scheme] the [insert home state of scheme] deposit protection scheme and are not protected by the UK Financial Services Compensation Scheme. This limit is applied to the total of any deposits you have with the following: [insert names of brands as appropriate]. Any total deposits above the 100,000 euro limit are not covered.

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A report from Deloitte, the business advisory firm, highlights an increase in the number of insurers which plan to re-price and reorganise their product mix in response to the introduction of Solvency II regulations. 

The latest edition of the annual Deloitte Solvency II survey, conducted by the Economist Intelligence Unit, found that:

– 36% of general insurers plan to re-price products in the run-up to Solvency II – significantly up from 19% last year

– Life companies are more likely to change their product mix – 26% of life companies say they will do so compared to 8% for non-life companies

– There has been a big fall in the number of insurers which plan to restructure their business. Less than a quarter (23%) say they will re-organise their business – down from 47% last year.

Rick Lester, lead Solvency II partner at Deloitte, said: “This year’s survey has identified interesting developments in insurers’ approaches to Solvency II and many have reviewed the way it will be implemented. In past surveys insurers have talked of the need to restructure and reorganise their business; now they are analysing the risks they run and reviewing the amount of capital they need to write these risks, and adjusting their pricing and product mix accordingly.

“By adjusting their product mix, insurers are able to optimise the diversification of the different risks in their portfolios. This may lead some companies to consider acquiring books of business while others may withdraw from some parts of the market. We’re also seeing increasing use of reinsurance and hedging mechanisms across the industry to lay off more capital-intensive risks.”

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XL Group insurance operations has announced that it is now accepting Collateral Trusts in lieu of Letters of Credit (LOCs) used as collateral for corporate deductible and captive insurance programmes in the UK.

Letters of Credit (the traditional method of providing collateral for corporate deductible and captive insurance programmes) are often expensive to maintain, cumbersome to administer, and are treated as contingent liabilities on the customer’s balance sheet. XL Group recognises the need of many of our clients to seek alternatives to LOCs and are now allowing for the Collateral Trust to be used in their place.  Placing cash in a bankruptcy-proof Trust is now a fully acceptable form of collateral to XL Group and can be used in place of an LOC for our existing clients.

Wells Fargo Bank has been chosen as XL Group’s preferred provider of this service.

The Trust is quick to establish and relatively inexpensive to maintain.  Further, it does not need to be renewed each year.  Additionally, it may be possible for the assets in the Trust to remain on the balance sheet of the depositor.  By replacing LOCs in this way, use of the Trust may be able to help free up otherwise encumbered credit lines.

James Martin, Client and Distribution Leader, XL Group said, “We are delighted to be working with Wells Fargo to offer this additional service to our customers.  In today’s economic climate, LOCs are proving more costly to businesses both in management fees and as they tie up otherwise useful capital.  Offering the Collateral Trust solution to our clients provides a valuable alternative.”

Robert Quinn, Senior Vice President, Collateral Trust Services, Wells Fargo Bank commented, “Offering an alternative to insurance related LOCs that will save money, unencumber credit lines, and reduce workload clearly demonstrates XL Group’s commitment to their clients.  Wells Fargo is pleased to serve as the preferred trustee.”

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According to catastrophe modeling firm AIR Worldwide, Hurricane Bud, the first Category 3 hurricane on record to form in the eastern Pacific so early, is poised to make landfall as a weakening Category 1 hurricane in Mexico’s Jalisco state sometime tonight. Landfall is expected to be somewhere between the port city of Manzanillo in Colima state in the south and the resort city of Puerto Vallarta in the north. The coastline where Bud is expected to cross over to land is rugged and relatively unpopulated, but dotted with popular beach resorts.

As of the National Hurricane Center’s (NHC) 11:00 am (PDT) Advisory today, Hurricane Bud was about 75 miles west of Manzanillo (population 110,000) in Colima state, and about 105 miles south of Cabo Corrientes, the southernmost point of Bahia de Banderas, where Puerto Vallarta (population 255,000) is situated. The NHC said that Bud has weakened since its wind speeds peaked at 115 miles per hour last night (Thursday) and that its maximum sustained winds currently are 100 miles per hour with higher gusts—a weak Category 1 hurricane on the Saffir-Simpson wind scale.

“If Hurricane Bud is still a hurricane when it makes landfall tonight, it will be only the second time in history that that an eastern Pacific hurricane will have struck Mexico so early as the month of May,” said Dr. Tim Doggett, principal scientist at AIR Worldwide. “The other May landfall was Hurricane Agatha on May 24, 1971—which struck the same stretch of coast that Bud is approaching. Last year, Hurricane Jova also made landfall in this region, and in 1959 an unnamed hurricane also made landfall here. However, the 1959 hurricane—which made landfall as a Category 5 storm—destroyed 40 percent of all homes in Manzanillo, and throughout the area of its impact it killed at least 1,000 people directly and perhaps twice that number, largely through flooding. It remains one of Mexico’s worst natural disasters of the last half-century.”

“Hurricane Bud is moving toward the north at about seven mph, but this forward speed is expected to slow today as the storm approaches Mexico’s coast. A hurricane warning is in effect from Manzanillo northwestward to Cabo Corrientes, while a tropical storm warning is in effect from Punta San Telmo westward to east of Manzanillo. Aircraft reconnaissance information gathered this afternoon indicates that Bud may already have weakened substantially. It is expected to continue to weaken as it approaches the coastline, but it could still reach the coast at or near hurricane strength with winds of 75 mph or more.”

According to AIR, damage in Hurricane Bud’s immediate path at landfall is not expected to be severe if current forecasts of the hurricane’s gradual weakening prove true. Minor damage to non-engineered buildings may occur, particularly to roofs, while windows and the cladding on engineered structures could suffer minimal damage by impacts from debris. Most insured residential structures on Mexico’s west coast are made of confined masonry, which performs better than plain masonry under lateral wind loads because of its use of bond beams and columns.

Dr. Doggett continued, “Commercial properties tend to be constructed of confined masonry or reinforced concrete. At present, however, a single national building code for structural design does not exist in Mexico. The enactment and adoption of building codes are subject to the actions of separate government departments in each of the more than 2,400 municipalities. At the same time, a large percentage of the residential housing built in Mexico every year—perhaps as high as 50%—is constructed without building permits, and thus may be more prone to being damaged.”

According to AIR, at Hurricane Bud’s expected wind speeds, some trees likely will be downed or have branches broken, blocking roadways or damaging homes and automobiles. More particularly, especially because of the storm’s slow forward speed once it makes landfall, Bud is expected to bring total rainfall accumulations of six to ten inches over the coastal states of Michoacan, Colima, Jalisco, and Nayarit. The heaviest rainfall—as much as 15 inches in isolated areas—can affect the region’s mountainous areas, creating a risk of life-threatening flash-floods and mudslides. Also, a dangerous storm surge is expected to produce significant coastal flooding near and to the east of where Bud’s center makes landfall. Near the coast the surge will be accompanied by large and damaging waves. Already, swells generated by the hurricane are affecting portions of Mexico’s southern and southwestern coasts, likely producing life-threatening surf and rip-current conditions.

At present, according to the National Hurricane Center, Hurricane Bud’s cloud pattern “has basically become an amorphous blob of convection” and the storm is continuing to weaken. As Bud approaches the coastline of Mexico, the NHC forecast expects it to decay rapidly. Its outer winds will begin to interact with the high terrain even before it reaches land, which in turn will act to decouple the storm’s mid-level circulation from its surface circulation. Bud is then forecast to become a remnant low and then to dissipate over the next days while drifting slowly southwestward away from the coast.

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The Association of Medical Insurance Intermediaries (AMII) has announced the programme for AMII 2012, its first Private Healthcare Summit on Tuesday, 3 July at the Royal College of Physicians, London.

The day is designed to be fully inclusive for all who operate in the PMI sector, bringing intermediaries, insurers and providers together for a programme of top-level debate.  Four keynote addresses will include a session from broadcaster and TV medical correspondent, Fergus Walsh, and a presentation entitled ‘can the private sector rescue the NHS?’ from the Rt Hon Stephen Dorrell MP, chair of the Health Select Committee.

In addition, Tim Kelsey, the UK Government’s Executive Director of Transparency & Open Data will examine how data transparency can transform 21st century healthcare, and Dr Ali Parsa, Chief Executive of Circle Partnership will discuss the future of hospital provision and his own company’s innovative approach. (see notes to editors for full programme).

There will also be a panel debate, chaired by Fergus Walsh, which will include representation from the insurers, intermediaries and hospital groups discussing the very topical issue of how to resuscitate PMI.

Running alongside AMII 2012 will be separate international healthcare sessions hosted by The Association of International Medical Insurance Providers (AIMIP) for those delegates interested in knowing more about international private medical insurance (PMI).

Wayne Pontin, AMII’s Chairman said, “We have an incredibly strong line up of speakers for AMII 2012 and the associated sessions on international PMI, and I would strongly urge anybody connected with our industry to make the time and attend. We are covering a number of very important topics and there will also be plenty of opportunity to network especially in the attendant exhibition area”

Further information about the event is available at www.campaignpartners.co.uk/amii

AMII 2012 will conclude with a Grand Finale Garden Party including champagne and strawberries in the College’s medicinal garden.

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The Law Society’s call for the Solicitors Regulation Authority to extend a scheme that provides solicitors’ professional indemnity insurance (PII) post -six year run-off cover has been heeded.

The SRA Board approved proposals made by the Society to introduce rules to extend the scheme, which was established by the Society back in 2000.

However, the Society’s call for a cap on the cost to the profession of the extension was ignored.

The SRA has decided to extend the scheme, which is managed by the Solicitors Indemnity Fund (SIF) and funded collectively by the entire profession, for another three years until 2020 after the Law Society warned that an extension was necessary to give security to recently retired and retiring solicitors.

However, the Society’s proposal to cap the profession’s total liability at £10 million and introduce individual limits was not adopted.

Law Society chief executive Desmond Hudson said: “Extending the run-off cover is a welcome step by the SRA and one which reflects what the Law Society had been calling for. If approved by the LSB, the extension will give retiring solicitors peace of mind and give firms considering leaving private practice and solicitors contemplating retirement greater certainty over the future, and provides valuable protection for retired solicitors, the wider profession and the public.

“The Society argued that this cover should be limited  by a cap. There is a risk to the profession in a form of a possible future levy if there are insufficient reserves to meet claims which under this plan are unlimited.

“The Law Society sought to ensure that the profession was not unduly exposed and suggested a cap that would limit cover only in the event of abnormally high level of claims within the three year period. This concern was not addressed by the Board, which raises questions about the decision-making process.”

Also part of the rule changes which are to be submitted  for consideration by the LSB is a reversal of the SRA’s  plans that would have extended the scope of insurance cover to non-authorised SRA firms.

Desmond Hudson said: “This is an improvement and is consistent with the intention expressed in the SRA’s 2011 Policy Statement, however, it still does not address our overarching concerns about the adequacy of the SRA’s consultation process since  whether this is an appropriate role to be placed on the Compensation Fund is of fundamental importance. Given the importance of this matter  we have raised our concerns formally with the LSB.”

The Society will be undertaking further work to consider the impact on Group reserves and the risk to the profession if the provision of this cover and how it is to be funded is to be managed in the same way  beyond 2020.

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BCIS launches the new commercial rebuilding calculator to allow organisations within the insurance industry to determine if a building is correctly insured or ‘at risk’ from under or over insurance. A ‘pay as you go’ service with no annual fee, RiskCheck will benefit insurers, brokers, risk surveyors and loss adjusters when assessing cover, quoting and placing risks.

Currently the only way to check if a commercial property is ‘at risk’ of over or underinsurance, is to commission an on-site survey but a full rebuilding cost assessment of a commercial building can be expensive. Many property owners are reluctant to commit to this expense without evidence to suggest they are ‘at risk’, particularly if they have a portfolio of commercial properties.

RiskCheck is a web based solution making it quick and easy to access and takes just a matter of minutes to complete and gain a PDF report. The results are presented in a “traffic light” format to show the level of risk. RiskCheck includes costs for external works, professional fees, demolition and inflation.

The data powering the solution incorporates costs from over 17,500 actual building projects and BCIS’ residential rebuilding cost models are already accepted as standard by surveyors and insurance loss adjusters.

Andrew Thompson, BCIS Director, explains: Our residential rebuilding cost services, launched in 2008, have delivered real value to the industry and it was a natural progression for us to apply our expertise to the commercial property sector, where we could see the industry was very exposed.

Under insurance of commercial properties is an age old issue for the industry.

RiskCheck provides a significant step towards solving the problem and ensuring that the right level of cover is in place and the appropriate premiums collected.”

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HSBC Commercial Bank has appointed Mark Harris as Head of Corporate for the Midlands. Mark joins from HSBC in the North West, where he was Deputy Head of Corporate, and is responsible for supporting businesses in the region with a turnover in excess of £30 million.

Mark has 32 years’ experience with HSBC and has held a number of roles within commercial and corporate banking in the Midlands, at HSBC’s Canary Wharf headquarters and across the wider UK.

Mark will be supported in his new role by Midlands Deputy Head of Corporate Banking Dan Wright and leads a team of Relationship Managers dedicated to supporting businesses in all sectors with the full service capability offered by HSBC’s Midlands Corporate offices in the West and East Midlands.

Mark said he has been impressed by the quality and diversity of businesses in the region, but has urged Midlands-based corporates to seize the opportunities offered by international trade. He says: “My aim is to promote HSBC as the bank of choice for business and to drive our international business offering, whilst continuing to successfully service our domestic customers.

“At HSBC, we forecast that UK international trade will grow by approximately 60% over the next 15 years and businesses in the Midlands are well-placed to drive that growth. The Midlands boasts a high concentration of forward-thinking, dynamic companies across a range of sectors that are looking for ways to grow their business. International trade offers them that opening and I’d urge businesses in the region to grasp that opportunity.”

He adds: “HSBC offers a truly global service. Our Relationship Managers in the Midlands can pick up the phone and talk to their colleagues in China, Brazil, India or any of the other countries where we have a commercial presence. These are tangible relationships and offer a true benefit to our business customers trading, or aspiring to trade, internationally.”

Mark added that he looks forward to meeting the business and professional services community from across the region over the coming months. “I am not the sort of person who sits behind a desk all day; I want to be meeting our current customers, potential customers and the professional services community from across the East and the West of the region. We are open for business and we have a huge desire to help corporates from across the Midlands.”

Mark is married and has four children. He enjoys restoring Italian scooters, football (supports Leeds United), travel and spending time with his family.

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The Private Equity investment company sector was hit hard by the credit crunch, with the average discount widening out to 51% at the end of 2008. 

Whilst this has affected the Private Equity sector’s previously strong longer-term performance figures, over the shorter-term the sector has bounced back and is up 62% over the last three years to 30 April 2012 compared to 43% for the wider investment company sector.

Tim Spence, Finance Director, Graphite Capital Management LLP demonstrates that the listed Private Equity sector has come a long way since then, and balance sheets are in general much more robust.  He would not expect to see such a severe reaction in the event of further financial crises.  But with the average discount for the Private Equity sector at 24% at the end of April 2012 – more than half the level at the end of 2008 – have discount opportunists missed the boat?  And what is the outlook for the sector?  The Association of Investment Companies (AIC) today hosted a press roundtable lunch on the prospects for private equity with JZ Capital Partners and Graphite Enterprise Trust PLC, and have also collated other manager views.

Managers see scope for further discount narrowing, and are finding a steady stream of opportunities amidst the downturn, particularly in Europe.  Interestingly, Hamish Mair, Manager, F&C Private Equity Investment Trust believes that there is a need now, more than ever, for the skills that private equity managers have in order to work with investee companies.

Do discount opportunities still exist?

Jock Green-Armytage of JZ Capital Partners said: “Investors certainly haven’t missed the boat – they can still buy high quality assets at a discount of up to 40%. It’s certainly worth remembering that those who invested in listed private equity when they were trading at even greater discounts in 2008-2009 have made significant returns – we could be in a similar position today.  Despite the challenging economic climate, investors are showing signs of returning to listed private equity. This is due to the sector’s renewed focus on enhancing shareholder value and the opportunity to access this unique area of the market at a discount. In addition, we are starting to see an increased level of M&A which is providing better exits and improved valuations. The outlook is positive.”

Tim Spence, Finance Director, Graphite Capital Management LLP said: “Discounts of 60% or more, which were briefly available in late 2008 and early 2009, will probably not be seen again for a long time.  Investment company discounts, particularly in the Private Equity sector, are cyclical.  Looking back over the last 20 years, companies have traded at premiums, then discounts and back and forth again as investor sentiment has changed.  The current discounts of around 30% remain higher than long term averages of between 10% and 20% and we believe at this level pricing is attractive.”

Hamish Mair, Manager, F&C Private Equity echoes this: “Looking at the long term historical standards, we see scope for a further narrowing of discounts in the Private Equity investment company sector. Pronounced buying opportunities still remain; asset performance has generally been good, and valuations can be verified by the price at which companies are sold, but the share price performance has failed to fully reflect this.  It took courage to invest in the Private Equity sector in 2009, and those who did were well rewarded. We believe there remains an excellent opportunity for those investing now for the medium and longer term. Investors have definitely not missed the boat.”

Does recession still equal buying opportunities?

Far from being deterred by the global financial crisis many private equity managers are finding opportunities. Nic Humphries CEO, HgCapital Trust said: “It is true that periods of economic recession usually coincide with more attractive buying periods and better long-run returns – that’s why HgCapital sold over 65% of our investments in the period 2005-2007 and then re-invested heavily in 2009 and 2010. We don’t think the current double-dip will produce exceptional value opportunities, but we do think that it will mean that good growth companies looking for patient equity capital to back them over the medium to long term will be acquired or take on-board new investors at reasonable prices.”

Tim Spence, Finance Director, Graphite Capital Management LLP added: “This downturn has been interesting in that there has been far less company distress than perhaps we expected, in particular because interest rates have remained very low.  While banks have taken control of some underperforming companies, they have not yet started in earnest to sell these stakes.  Both of these factors could change, which would create more opportunities, although we think low interest rates will probably prevail for some time.

“So we, like other private equity managers, have been focusing on businesses which have performed well through the downturn because they have a service or product for which demand has grown despite the economic cycle.  At Graphite we have identified and invested in a number of such companies since the beginning of the downturn.”

Hamish Mair, Manager, F&C Private Equity said: “In the aftermath of a recession or stock market crash, private equity funds are usually able to buy well, and this remains the case; it’s a buyer’s market. This cyclical opportunity will continue to exist for the next two or three years. We are also finding opportunities across Europe, and further afield, where the use of private equity to finance the growth of smaller and medium-sized companies is growing. The mid-market of Europe presents a longer term secular buying opportunity and this is being enhanced by the stage we’re at in the economic cycle.”

Jock Green-Armytage of JZ Capital Partners said: “The current economic climate is providing the industry with plenty of fruitful investment opportunities and at JZCP we’ve been applying our value orientated investment approach beyond our core US micro-cap market. Distressed prices in Europe – particularly Spain – and the exceptionally positive demographics across Latin America have provided us with interesting opportunities.

“Furthermore, our track record of investing in credit and the current dislocation in the real estate market has also led us to some quality investment opportunities in secondary mortgage loans. These assets have the potential to provide a high yield and capital appreciation, so fit nicely within our risk reward profile.”

Outlook for the sector

Interestingly, Hamish Mair, Manager, F&C Private Equity believes the private equity skills are more crucial than ever: “There is a need now, more than ever, for the skill sets private equity managers have in working with investee companies. In particular, we are seeing a definite shift in the emphasis from financial engineering to operational management input, which will be beneficial for investors in private equity industry. This, along with the current background of gradual economic recovery from a cyclical low, is providing buying opportunities for skilled private equity investors.”

Nic Humphries CEO, HgCapital Trust believes that the Private Equity sector will continue to polarise, as it has done over the last 3-4 years since the 2008/9 recession.  Nic Humphries said: “Those firms that can use their knowledge and expertise to find fundamental growth despite the economy (HgCapital uses 10 – 15 years of deep sector expertise to do this) will continue to do well, whereas those firms stuck with an old-fashioned private equity model of buying slow growth companies, applying gearing and perhaps cutting costs will struggle to generate real value and will then further struggle to exit such highly indebted and margin maximised ‘zombie companies’.”

Tim Spence, Finance Director, Graphite Capital Management LLP said: “In a low growth world, with apparently significant downside risks from the Eurozone crisis, investors are rightly asking themselves what a leveraged equity play such as private equity has to offer.  The evidence of the past few years is perhaps counter-intuitive: the performance of private equity portfolios has been surprisingly robust through the downturn.  Graphite Enterprise’s portfolio illustrates this: in the year to December 2011, the largest 30 companies grew EBITDA by 14% on average. This compares very favourably with the aggregate of the FTSE 250 for the same period, for which EBITDA did not grow at all.

“What this tells us is that the private equity model has been working: the structural benefits such as alignment of interests, incredibly detailed pre-investment due diligence and controlling interests have resulted in stronger performance.  So in our view the outlook for private equity is good – the sector is not reliant on GDP growth or leverage to produce strong returns.”

Annabel Brodie-Smith, Communications Director, Association of Investment Companies (AIC) said: “It has been a turbulent few years for the Private Equity investment company sector, but it is worth remembering that with the potential for higher risk also comes the potential for high reward. For investors prepared to take a long term view, the private equity investment company sector gives investors the opportunity to access this unique sector for the price of a share.  Active management does not come more active than the Private Equity sector who often take positions on the Boards of investee companies, and provide strategic direction as well as funding.  From mid-market, through to the larger management buy outs, from fund of funds through to direct investment in companies, there is a great diversity in the sector.”

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Dr Ros Altmann, Saga Director General said: “The IMF has rightly called on the UK to introduce a programme to boost growth and jobs. But it wrongly suggests that more QE would achieve this. In fact, by continuing to buy gilts, the Bank of England would more likely damage growth than boost it. 

“Economists seem to be living in an academic parallel universe that is ignoring reality. Quantitative Easing has not created jobs so far and, by damaging UK pensions as a whole, it is not necessarily a boost to growth in our aging population.  Fiscal policy has run out of room and monetary policy has also failed, we need new thinking.

“QE has been a disaster for anyone recently or soon-to-be retired, except those who have final salary-type pensions.  It has also been a disaster for employers running defined benefit pension schemes , as employers are picking up the extra costs of pensions that have resulted from QE gilt-buying.  Bank of England gilt purchases have driven down gilt yields, with each 1% point fall adding around 20% to pension liabilities.  Since 2008, 15-year yields have fallen by 2½ percentage points, so liabilities have risen by 50% – while assets have certainly not risen by anything like that amount. Therefore, QE has caused final salary scheme deficits to rise sharply, forcing firms to invest in their pension funds, not their businesses, which weakens growth – and indeed some companies have been forced into insolvency due to their pension deficits, thereby destroying jobs.

“UK pensions are also unusually dependent on gilt yields, since most people retiring with defined contribution pensions (personal pensions, stakeholder pensions and other non-final salary-type schemes) buy annuities to secure their pension income.  Lower gilt yields mean lower annuity rates. Anyone who bought an annuity in recent years at artificially depressed rates resulting from QE will be permanently poorer for the rest of their lives. Nearly half a million people every year are buying an annuity, which is a one-off irreversible purchase, so already QE has permanently impoverished over a million pensioners for the rest of their lives.  This harms long-term growth, as well as short-term confidence and, even worse, most people buy an annuity without any inflation protection, so they will gradually become poorer each year.

“In theory, creating billions of pounds to buy Government bonds is supposed to boost growth and create jobs.  In practice, this is not what is happening.  The Bank of England and IMF believe that buying gilts boosts the economy and increases asset prices, but in the world of financial reality, sellers of gilts are not switching their money to other assets in the UK.  They may be buying overseas bonds, overseas equities, commodities or financial derivatives.  None of this will directly stimulate the UK economy – but it does help bank trading profits.  QE also relies on banks to transmit the newly created money to other parts of the economy that could create growth, but this is just not happening – and clearly cannot be relied on.

“It is time to consider whether we need to accept that QE has failed or, at the very least, has no more mileage from such low levels of gilt yields. Buying gilts does not directly stimulate the economy.

“Yes, the IMF is right that we need to boost infrastructure spending and help lend to smaller companies to create jobs.  But that will not be achieved by QE gilt-purchases.

“If the Bank creates more new money, it should be used to underpin large construction projects funded by pension investors, or to underwrite losses on loans to small firms that would directly create jobs.

The IMF and Bank of England are risking repeating the crisis of 2008 by dangerously distorting the gilt market.  Not only does this risk creating a new financial  bubble that seems great in the short-run but could be disastrous when it burst, it also undermines our pension system and has side-effects that actually damage growth – both short-term and long-term.

Academic models are not working in the real world.  With our aging population and pension system that is underpinned by gilt yields, the medicine is doing more harm than good. If we want to create jobs, we must take a new approach.  Fiscal policy is constrained by past spending, but there are billions of pounds in pension funds that could be harnessed to boost growth.  We don’t need to create new money to monetise the budget deficit, we can’t rely on the banks to revive lending and construction.  We need to create new money to directly help the economy. The sooner the Bank faces up to this reality, the better.

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The Insurance Fraud Bureau (IFB) has recruited Andrew Buck to oversee the launch of the industry’s ground-breaking Insurance Fraud Register (IFR).

Buck, a former Claims Fraud Manager at Aviva, will help roll-out the UK’s first register of known fraudsters to customers across the industry, whilst managing the integrity of data loaded on to the IFR.

The IFB has been tasked by the insurance industry to develop the software platform for the IFR, which will help insurers to identify fraudsters at the point of purchase.

A 22-year career at Aviva saw Buck deliver a 60 per cent increase in financial fraud savings during his time as Claims Fraud Manager. A fraud detection specialist, Buck was also Aviva’s Commercial Fraud Prevention Manager between 2003 and 2007.

Buck’s appointment follows the IFB’s recent intake of four new recruits including fraud intelligence researchers and operations coordinators, who work alongside UK police forces to secure arrests and convictions against insurance fraudsters.

Phil Bird, Director of the IFB, said: “The IFB’s growth is another important step-change in the evolution of our industry’s fight against fraud. Spearheading that collective fight, the IFB will deliver the IFR’s software platform and Andrew will play a key role in helping industry partners to adopt that new system.

“Alongside the roll-out of the IFR, the IFB is also developing new data-sharing and analytical tools to help insurers identify fraud at the point of application. Our recruitment drive will also enable us to triple the number of police operations supported over the coming years, maximising opportunities to disrupt the criminal gangs targeting our industry.”

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Saga Homecare is partnering with the Alzheimer’s Society for national Dementia Awareness Week (20- 26 May) in its ongoing campaign to improve the quality of life for older people in Britain. One in five people will develop some form of dementia in their lives and this costs our economy over £23 billion each year, posing a huge challenge for us all. 

New research, commissioned by Alzheimer’s Society and Saga Homecare, reveals that nearly two thirds (66%) of those aged 55 and over are worried about dementia. However, a lack of understanding of the condition is evident as one in five (19%) think there is nothing you can do to reduce your risk of developing the condition.

Throughout Dementia Awareness WeekTM Saga is urging people to find out more about dementia.   Early diagnosis and treatment are key to reducing symptoms and learning how to live with the condition.  Saga Homecare will be hosting fundraising and awareness events across the country this week (in partnership with the Alzheimer’s Society) as well as helping its customer base and the 1.6 million readers of the Saga Magazine to better understand the condition.

Saga is dedicated to improving the lives of those dealing with dementia. Last year, for example, it provided 1,000 people with dementia with travel insurance to enable them to take a much-valued family holiday. Saga has also pledged to provide specialist training to over 16,000 carers to help them better identify the early signs of dementia and provide care for more complex needs associated with the condition.

Ros Altmann, Director-General of Saga comments, “As the largest provider of care in the UK, Saga has extensive first-hand experience of providing ongoing support to people with dementia and their families.  In April, the Prime Minister committed to improving the lives of those suffering with dementia and their carers in his Dementia Challenge. We have been working with and advising the Government on this policy and the importance of preventative and early treatments.

“It is clear that many people are worried about this condition but they shouldn’t think there is nothing they can do. We want to help people understand dementia better so that they can get preparations in place for them and their family. There are preventative steps we can all take such as leading a healthy lifestyle, eating the right foods and keeping our minds and bodies active but it is also vital to spot the early signs of dementia to seek diagnosis and treatments.

“We’re committed to helping the lives of people living with dementia and their families – from providing specialist care to people in their homes to helping people take a well deserved and much needed holiday. This Dementia Awareness Week, we also hope to encourage understanding and early diagnoses which can make all the difference to improving or slowing down the symptoms and improving the so many people’s quality of life.”

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The Association of Medical Insurance Intermediaries (AMII) has announced three sub committees working directly to the main Executive Committee.

The new sub committees are as follows:

– Provider Membership – Wayne Pontin, Stuart Scullion, Sue Smith and Mike Izzard

– Employee Benefits and Larger Intermediary Membership – Wayne Pontin, Liz Naulls and Mike Izzard

– Standards & Relationships – Wayne Pontin, Lindsey Joseph, Stuart Scullion and Brian Walters

Wayne Pontin, AMII’s Chairman said, “These are the foundation blocks to AMII raising standards and becoming the reference organisation for the healthcare insurance industry. The sub committees are designed to increase awareness and improve our visibility whilst at the same time ensuring we have a sound financial footing and are truly representative of all distribution channels across all sectors of health insurance.

“Our mission statement and association objectives will be issued after a complete review of the existing constitution and following a census approval via the membership. AMII is changing and is leading the way in a market landscape which is also changing with the advent of NHS Reforms; Provider Consolidation and given a backdrop of the recent OFT referral of the private healthcare market services to the Competition Committee. We will seek to encourage transparency and growth and will lobby for improvement both politically and via the regulator of the future

“AMII has established a superb relationship with the Chartered Insurance Institute through its very close liaison over examinations and qualifications. We will build on that further and will look to work more closely with the Association of British Insurers (ABI), Association of International Medical Insurance Providers (AIMIP), Financial Ombudsman Service (FOS), Group Risk Development Group (GRiD) and British Insurance Brokers Association (BIBA).

“Our events programme also play an important role for the Association and the upcoming AMII 2012 will be our first private healthcare summit, and will give advisers looking at the PMI market an excellent opportunity to meet and network with specialists in this field.”

AMII 2012 is being held on Tuesday, 3 July at the Royal College of Physicians, in London’s Regent’s Park. Keynote speakers will be The Rt. Hon. Stephen Dorrell, MP and Chair of the Health Select Committee and broadcaster and TV medical correspondent, Fergus Walsh.

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The Lloyd’s insurance market’s planned expansion into emerging markets is a net positive, even though writing insurance outside of established markets carries additional risks, Fitch Ratings says.

Fitch expects the economic development of emerging market economies to boost demand for insurance and reinsurance. Lloyd’s already writes 25% of its business outside of Europe and North America, with the growth of insurance premiums outpacing that of developed markets.

The syndicated nature of Lloyd’s should work to its advantage in tapping new markets. The structure of the Lloyd’s market assists it in sourcing new capital and underwriting large complex risks, compared with an individual company. Adding to this flexibility is the presence of special purpose syndicates, which allow individuals to invest capital to support underwriting on a limited time basis.

Nevertheless, last year’s Asia-Pacific catastrophes – including locations traditionally viewed as non-peak – highlights the risks of writing insurance in less well-understood markets. These incidents led to significantly higher underwriting losses than reinsurance companies had forecast, due partly to the limited historical loss and exposure data compared with the US and western Europe. This shortcoming has been compounded by the insurance industry’s increasing reliance on catastrophe models to assess the risk contained within their portfolios.

Asia-Pacific was a major contributor to catastrophes losses jumping to 24.8 percentage points of the sector’s 2011 calendar-year combined ratio from 11.7pp in 2010. Yet the region remains a relatively small proportion of reinsurance companies’ business.

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The International Programs Group (IPG), a highly reputed third party administrator (TPA), servicing the Lloyd’s market in Canada is pleased to announce the opening of its first international office in London, IPG UK.

This move signals the company’s commitment to servicing the London market and IPG’s plan for strategic growth on an international scale. IPG forms part of the SCM group of companies which in UK includes the International loss adjusting business Claimspro International.

 “With a physical presence in London we are in a better position to support our clients throughout the UK and internationally”, shares Patrick Scott, IPG’s Senior Vice President.

IPG UK will operate from Claimspro International’s existing London base and will be led by senior TPA and Client Account Manager Daniel Brown and Adjuster Coordinator Katie McLaughlan. Both were previously responsible for Claimspro International’s TPA service and have been working in the London market for more than a decade.

IPG is well known for its broad range of expertise and state-of-the-art data management systems. “We’ve recognized that clients value our data management and reporting systems, and will continue to provide those services to our clients here in London” confirms Blue Schindler, IPG’s Vice President of Operations. IPG’s clients will continue receiving the company’s valuable third-party administration services, now with additional support and services in the London market and internationally.

All existing client contracts will continue to be supported by IPG UK.

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British insurer Aviva on Thursday said it planned a strategic review of all its businesses and to strengthen its capital base after the recent resignation of its chief executive officer.

Aviva CEO Andrew Moss last week sensationally quit Britain’s second biggest insurer after Prudential — the latest victim of spreading shareholder revolts over pay for top managers viewed as underperforming. Aviva’s incoming chairman John McFarlane who is tasked with helping to find a new chief executive on Thursday set out a number of priorities for the group.

The first he said was “a strategic review of all our businesses to ensure we are focused on the right segments; that we put in place plans to advance the performance and position of our businesses strategically, and exit sensibly those that are not part of our future.”

McFarlane added that Aviva planned to “build the capital base”, improve the group’s margins and to have “frank and open communication with shareholders”.

Aviva added on Thursday that sales of long-term savings policies dropped 5.0 per cent to £7.47 billion (9.33 billion euros, $11.86 billion) in the first quarter compared with one year earlier.

London, May 17, 2012 (AFP)

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The British Insurance Brokers’ Association (BIBA) has appointed Deloittes to conduct a strategic review, and has warned brokers about political pressure in Europe for mandatory disclosure.  

Addressing members at BIBA 2012, Eric Galbraith, BIBA Chief Executive also called for insurers to support unconditional risk transfer and revealed that BIBA has appointed consultants and lawyers to find a solution to the unfair structure of the Financial Services Compensation Scheme (FSCS).

Opening the conference, Galbraith said that BIBA must continue to adapt and improve in order to be a leading UK trade association in the 21st Century and that a strategic review follows the IIB merger and a full membership survey.

He said that although 95% of members are satisfied with BIBA, that his challenge is to move the 42% of satisfied members to join those 54% who are very or extremely satisfied.

Galbraith then warned brokers about pressure on remuneration transparency saying “European political interference in the remuneration system could be a by product of the over zealous application of investment type rules into the general insurance sector.”

The warning comes despite UK support from Treasury, the Financial Services Authority and BIBA for disclosure upon request, and an encouraging cost benefit analysis from the European Commission.

Turning to UK regulation, Galbraith called on insurers to work with BIBA to develop a market agreement on unconditional risk transfer to address changes to client money rules and a growing focus from the regulator on premium handling.

Galbraith also called on the FSA to get its review of the unfair FSCS funding model underway and announced that BIBA has appointed consultants and lawyers to help with its representation. Whilst acknowledging that there is no easy FSCS solution, Galbraith said that all options need to be considered.

Galbraith welcomed IIB members into the BIBA family and said a special thank you to Barbara Bradshaw, former IIB Chief Executive, for helping to make the merger between the two organisations a successful and smooth transition.

BIBA’s conference and exhibition is being held in Manchester Central on 16 and 17 May and is free to all BIBA members.

A copy of the full address can be downloaded here.

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Broker only commercial underwriting specialist Evolution Underwriting has entered into an exclusive underwriting and distribution partnership with the Beazley Group.

Under the terms of the deal Evolution has been appointed to manage and develop Beazley’s professional indemnity portfolio for UK SME’s through independent regional brokers across the UK.

The arrangement will go live during the third quarter of 2012 and will allow Evolution’s select panel of brokers to access Beazley’s professional indemnity products via Evolution’s platform.

Commenting on the deal Colin Masson, underwriter at Beazley said: “We are genuinely excited about this new partnership. Beazley has a wealth of specialty underwriting expertise and outstanding financial security. Evolution offers us the opportunity to deploy our PI product range to a wide range of independent brokers and give them the benefit of our approach. The technology and service offering that Evolution brings to the table complement our underwriting appetite and desire to grow our regional PI presence perfectly.”

Paul Upton, CEO of Evolution added: “It’s a huge boost for Evolution to be appointed to manage Beazley’s regional PI push through our independent broker panel. Our brokers are already used to the exclusivity, service, efficiency and flexibility of our model. To be able to expand our product range with such a respected name backing our PI product is great news. We are already talking to our brokers about helping them win and retain new business.”

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