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Specialist claims teams from Aviva have been visiting customers affected by the recent riots to help get them back to normal as soon as possible.

Every customer, who has logged a claim, has been contacted and surveyors have been on site across the worst hit areas from Hackney to Manchester, Tottenham to Birmingham, to assess the damage caused by the riots earlier this week.

Emergency interim payments have been made and property has been secured where needed. If alternative accommodation is required for any homeowners, suitable properties will be found.

Some areas are still inaccessible because of the danger of buildings collapsing and police have also restricted travel in some places – claims teams in Manchester travelled by foot or bus so they could visit commercial customers there.

Aviva has also been working with the local authorities to arrange demolition of any dangerous structures so that high streets can return to normal and once buildings are deemed safe the re-building and repair work can begin.

Dominic Clayden, director of claims at Aviva, said its priority was to get customers back to normal as quickly as possible:

“This is obviously a distressing event for those affected by the events across the UK and our focus is to help our customers as best and fast as we possibly can.

“We have experts on the ground right now assessing the damage, we will be authorising interim payments where needed and organising repairs to buildings to get businesses back on their feet.

“Any damage caused by riots, civil commotion or malicious damage is covered as standard in commercial, household and motor policies, but we would urge anyone who hasn’t already been in touch with us to contact us, either directly or via their broker, as soon as possible.”

The majority of claims Aviva has seen are from its commercial and business customers.

If your business has been affected:

– Contact your broker and/or insurer as quickly as possible.

– We know your priority is to get your business up and running as quickly as possible and will do all we can to make this happen.

– The amount of time this will take depends on the level of damage your building has sustained.

– Minor damage to the fabric of the building will be re-instated on a ‘like for like’ basis, but it could potentially take a few weeks to repair.

– Where the damage is more severe and involves surveyors, architects, planning permission etc the process could be considerably longer.

Aviva Risk Management Solutions is the specialist division of Aviva dedicated to helping UK businesses manage their risks in an effective way.

It has put together the following tips and advice for businesses where the threat of riot exists:

Staff:

– Of paramount importance is the safety of your staff. Managers need to be vigilant and react quickly to protect their staff.

– Avoid unaccompanied working

– Avoid visiting potential problem areas

– Make use of two-way radio links and personal alarms

Property

– Ensure all security systems/alarms/security lighting/CCTV are on/functioning

– Ensure existing perimeter barriers are in good repair

– Ensure doors and door hardware are adequate and in good repair

– Ensure accessible windows are adequately secured and protected

– Keep removable grilles/shutters in position at all times

– Consider temporary boarding up of vulnerable access points and windows – particularly in high risk areas

– Waste and other unwanted combustible materials are a source of ignition so ensure this is kept to a minimum and safety stored.

– Ensure adequate fire fighting equipment is readily available and staff are trained in their use

– Remove portable objects from the open that could be used as a projectile, such as an advertising board or display stand

– If you have theft-attractive stock place this within a physically robust area that would require greater time and effort to penetrate than the shell of the building

– Remove attractive stock from display windows

Vehicles

– Remove and avoid parking vehicles overnight in high risk areas and on main thoroughfares or in close proximity to buildings

Source : Aviva Press Release

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Despite ongoing, rapid growth in the Sharia-compliant insurance markets, Standard & Poor’s Ratings Services recognizes that operational issues remain commonplace in the sector. This generated some heated discussion at the International Takaful Summit, held in London on July 12/13, 2011. Standard & Poor’s views such discussions within the takaful (Islamic insurance) and retakaful community as understandable given that it is still a relatively new business sector. Nevertheless, we expect it will continue to grow rapidly, relative to the conventional insurance market, and become increasingly meaningful in overall scale in its target domiciles.

Standard & Poor’s believes that while the essential Sharia-compliant operational model affords a further level of corporate governance, particularly so in those domiciles where corporate governance is poorly established, often the Sharia interpretation creates a more complex, and so inefficient, operational model compared with conventional insurance companies. And since conventional companies employ tried and tested systems, are typically long established, and have larger business volumes, they deliver better economies of scale that some takaful companies are struggling to achieve. We believe this is creating some difficulties for both takaful fund members and investors.

In December 2010, the IFSB (Islamic Financial Standards Board) published IFSB 11 “Standard on Solvency Requirements for Takaful (Islamic Insurance) Undertakings,” while AAOIFI (Auditing & Accounting Organisation for Islamic Financial Institutions) standards also cover the application and interpretation of Sharia law for the takaful sector. In a sector where
scholarly interpretation of religious texts is essential, but can differ widely, Standard & Poor’s welcomes the introduction of a more consistent framework for reporting and controlling takaful companies.

The variety of interpretations of Sharia law within the takaful sector, and its auditors, is causing material inconsistency in the published accounting information from the sector. As analysts using both published and, where appropriate, confidential information, Standard & Poor’s uses the financial statements as a reference point for its credit rating analysis. We note that the IFSB Standard 11 requires the separate solvency monitoring of takaful funds from shareholder (operator) funds. As takaful funds are the sole responsibility of the members (contributors), we see some regulatory logic in this, although in our view this seems to ignore the role of the shareholder in its active support and management of the takaful fund, as demonstrated through the provision of qard hassan (interest free loans), solvency margin and capital employed.

In its interactive ratings of takaful companies, Standard & Poor’s is of the opinion that there is real fungibility from shareholder funds (and the attaching assets) to the takaful fund if the latter is in deficit (unless demonstrated otherwise). At the early stages of a company’s development, when takaful fund deficits could be likely, this standard could create an onerous set of operational constraints. Standard & Poor’s will continue to monitor the overall capital adequacy of a takaful company by combining both takaful funds surpluses (and deficits) with shareholder funds.

Standard & Poor’s has some concerns about the management of fund surpluses. AAOIFI proposes that takaful fund surpluses can only be distributed to the managers of the takaful fund and therefore not to members, as is commonly understood to date, nor the investors in the company. We observed at the Takaful Summit last month that there are concerns that this ruling creates real moral hazard for both the fund members and the shareholders. As an example, for certain types of underwriting risk, claims development can happen over many years, and it is conceivable that a fund that is apparently in surplus for years one to four can turn into deficit in year five. Questions that arise from this ruling are: if those surpluses are distributed prematurely to the management team, are they subsequently recoverable from that team? Or is it the responsibility of the current/new members to restore the health of the takaful fund?

To date, the core business of the takaful sector has tended toward high volume/low value types of risk with short-tail claims development characteristics, typically the retail sector such as motor and medical. Where the risk profile of the takaful fund is homogenous, then we believe the establishment of and distribution of surpluses to members should be uncontroversial. However, as the takaful sector grows in scale, it will increasingly seek to underwrite larger risk values in more commercial sectors, for example, marine and aviation. Although use of retakaful capacity can control loss exposures from high-value covers, we question the feasibility of a single takaful fund comprising such a heterogeneous mix of risks. For example, a large commercial loss event on an aviation risk could push a fund into deficit, when the retail contributors from very different risk-types, such as motor and medical, remain in surplus. Therefore, should they realistically be expected, under the cooperative doctrine, to support risks, which as individuals they are totally unfamiliar with? This aspect of takaful fund management is less of an issue for the retakaful sector. The same issue exists in the family takaful sector. To date, the core business has been very short-tail medical risks, but as the longer-term life risks
develop, the members of such different operational risk types could be combined.

From a credit rating perspective, Standard & Poor’s expects a takaful company to have at least good risk-based capital adequacy, which encompasses prudent technical reserving, so the issues highlighted above are very much internal management issues for each company, rather than real external rating constraints. However, they are an indication of the still-evolving operational framework for the sector that creates ongoing uncertainty.

One of the themes of the summit was the impact of social media on the development and penetration of takaful into its targeted communities. We note the early adopters of services such as Facebook and Twitter typically tend to be relatively young and/or highly proficient users of technology. The relatively low average age of populations in the Middle East and South East Asia, the key areas of growth for takaful, combined with this population’s predisposition to use these services, means that insurance companies will need to embrace different ways of communicating with their target customers, as
well as the greater use of technology to drive their businesses forward. We note a number of insurers in the Gulf are already beginning to use technology, such as SMS, to support their existing customer service infrastructure. Therefore, the integration of more-sophisticated tools to market and win new business can only be a matter of time.

A related topic was “Globalising the Takaful Brand”–in essence expanding it to the non-Muslim community. We recognize that efforts are under way to establish takaful companies in “developed” regions, such as Europe and the U.S., but so far with limited success. We see part of the problem as the use of sometimes unfamiliar language (to the non-Arab/Muslim), particularly where an established “conventional” equivalent exists. This does not help the value proposition being promoted by the takaful sector, and in our view needs real definition and promotion. In our view, the successful development of the takaful sector depends on the identification and promotion of a real value proposition that is distinctive from that being offered in the conventional insurance sector.

Source : Standard & Poor’s Press Release

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Swiss insurer Zurich Financial Services (ZFS) announced second quarter net profit rose 88 per cent to $1.3 billion, boosted by the sale of a stake in a Chinese insurance company.   

“I am particularly pleased with the second quarter results as our second quarter business operating profit reveals excellent underwriting performance from general insurance where we continue to see further improvements in the underlying loss ratio,” ZFS chief executive officer Martin Senn said.

For the six months to June, the combined first and second quarter net profit came to $2.0 billion, above analyst forecasts for $1.8 billion.

Natural disasters hit earnings, the company said, with tornados in the US costing it around $200 million and an earthquake in New Zealand $80 million.

“Net capital gains on investments and impairments amounted to $561 million,” a statement said, adding this “included negative asset re-valuations, impairments, and active gain realizations in equities.”

Of this sum, “$441 million were due to the previously reported sale of shares in Zurich’s stake in New China Life Insurance Co., Ltd. reducing the Groups participation to 15 per cent from 20 per cent.”

Zurich, Aug 11, 2011 (AFP)

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Dutch insurance giant Aegon said Wednesday it had completed its sale of Transamerica Reinsurance to French reinsurer Scor for more than one billion dollars, a deal announced in April.   

“Aegon yesterday (Tuesday) completed the divestment of its life reinsurance business Transamerica Reinsurance to Scor, following final approval of relevant regulatory authorities,” Aegon said in a statement issued in The Hague.

The deal came to a total of $1.4 billion (974 million euros) after tax, with $900 million paid in cash and a further $500 million in released capital, Aegon said. Aegon added under the agreement it would sell its global life reinsurance activities with the exception of select businesses.

Earlier this year, Aegon said funds it would receive from Scor plus the released capital would allow it to complete a final 1.1 billion euro payback to the Dutch state as part of financial crisis measures in 2008.

It announced however on June 15 that all outstanding payments to the state to a total value of 4.1 billion euros had been completed.

“With the repayment completed, the company will now focus on carrying out its strategy to deliver sustainable growth with an improved risk-return profile,” it said at the time.

The Charlotte, North Carolina-based Transamerica Reinsurance employs 451 people. It realised underlying earnings before tax of $105 million in 2010 on  $2.2 billion of gross premiums.

The Hague, Aug 10, 2011 (AFP)

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Fitch Ratings believes the losses from the recent disturbances across the UK will have no impact on UK insurers’ ratings. Although the ultimate economic and insured costs of the riots that have affected Greater London and other areas for the past several days will not be known for months, the Association of British Insurers (ABI) estimates insured loss damages will exceed GBP100m.

“At current loss estimates, Fitch believes the industry as a whole will be able to absorb these losses into earnings,” says Chris Waterman, Managing Director in Fitch’s Insurance Group. “Ratings of insurance companies will be affected if economic costs impair balance sheet strength and at this moment that seems unlikely.” However, the agency recognises that situation is fluid and will continue to monitor events to determine if there is any ratings impact.

Fitch also believes that these events may cause pricing to rise in loss-affected areas but the unrest will not be a catalyst for major price changes in the UK. Fitch will review each company’s ultimate claim to determine the impact the riots may have on their financial strength.

In order to determine the cost of the riots, insurers will need to define what property damage was caused during the riot, review policy coverage, and whether or not the Riot (Damages) Act of 1886 will shift the economic burden from insurers to the police and ultimately the UK taxpayer. If the Riot Act does end up picking up some of the loss, it only covers property damage and not business interruption.

The policies most likely affected during these riots are residential property, motor, commercial property, and business interruption. It will be most difficult to gauge the ultimate insured costs of business interruption. Business interruption policies typically pay the insured a portion of their lost income when a business was unable to operate under certain circumstances.

Some of the more complicated and not easily decipherable claims will likely lead to litigation, which will add to the ultimate costs of the riots and delay payments.

Fitch notes the top insurers of property in the UK and their ratings are: RBS Insurance Group, Aviva Insurance UK Limited (‘AA-‘ IFS; Stable Outlook), Lloyds Banking Group, Royal & Sun Alliance Insurance plc (‘A’ IFS; Stable Outlook), and Axa General Insurance Limited (‘AA-‘ IFS; Stable Outlook).

Source : Fitch Ratings Press Release

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Scores of companies and entities, from the insurance business controlled by Warren Buffett to mortgage giant Fannie Mae and even including Israeli government bonds, saw their credit ratings hit Monday after S&P downgraded the United States. But Standard and Poor’s did not downgrade commercial banks, especially the four largest seen as resting on the implicit “too big to fail” policies of the government.   

As the impact of its cut of the US rating from triple-A to AA+ began to hit markets, S&P announced that numerous government-related enterprises like Fannie Mae and Freddie Mac — which hold half or more of US home mortgages — were likewise downgraded because they depend on the government’s guarantee of their own bonds.

Seventy-three investment funds — fixed-income funds, exchange-traded funds, hedge funds, and others — were downgraded, 70 of them by two notches, because they each had “significant exposure” to US government debt. Ten insurance companies were hit, five with downgrades to AA+, including TIAA, USAA and Northwestern Mutual, for their huge holdings of Treasury securities. Five others, including Berkshire Hathaway, the investment vehicle of billionaire Warren Buffett, kept their AAA ratings but were given negative outlooks.

Buffett on Saturday said his group holds $40 billion in short-term Treasury debt, but said the downgrade “doesn’t tempt me to sell. We’ll stay right there.”

“In fact, if there were a quadruple-A rating, I’d give the US that,” he said, criticizing S&P.    The downgrade hit $6 billion dollars of Israeli bonds guaranteed by the United States, only a portion of Israel’s $73 billion of debt. Ten out of 12 Federal Home Loan Banks, and the senior debt issued by the Federal Farm Credit Banks, were downgraded to AA+, because they depend on the guarantee of the federal government.

Three companies which operate retail services on US military bases were downgraded. Key securities industry clearing operations, including The Depository Trust Co, National Securities Clearing Corp, Fixed Income Clearing Corp, and Options Clearing Corp, were also cut to AA+.    “We have not changed our view of the fundamental soundness of their depository or clearing operations,” S&P said.

“Rather, the downgrades incorporate potential incremental shifts in the macroeconomic environment and the long-term stability of the US capital markets as a consequence of the decline in the creditworthiness of the federal government.”

S&P said the US sovereign downgrade did not affect its ratings of money market funds investing in US debt, especially its short-term debt. But it warned a decline in the prices of Treasuries and government securities could hit the net asset values of these money market funds.

US banks also got off without a downgrade, even though markets have seen the largest of them implicitly reliant on the view that the government sees them as too big to be allowed to fail.

“None of the banks we rate in the US has an issuer credit rating higher than the US sovereign rating,” S&P explained. “The sovereign downgrade does not alter the government support assumptions that we factor into our ratings on four banks.”

Washington, Aug 8, 2011 (AFP)

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Muifa, once a super typhoon with winds exceeding 250 km/h (1-min sustained), made landfall near the border between China and North Korea around 12:00 UTC Monday at tropical storm strength. Last week, the storm had been forecast to make landfall over the weekend near Shanghai. However, Typhoon Muifa turned to the north earlier than expected and bypassed China’s eastern coastal provinces. Muifa weakened to a tropical storm as it entered the East China Sea and passed to the east of the Jiaodong Peninsula of Shandong province.

On August 5, Muifa passed south of Okinawa, battering Japan’s Ryuku Islands with high winds and record rainfall (609 mm within 24 hours in Motobu, Okinawa). Officials canceled flights, closed ports, and suspended refining operations. While the storm caused some street flooding, no major wind damage has been reported.

 “From there, Typhoon Muifa approached China’s east coast and was originally forecast to hit Zhejiang province as it was steered along the periphery of a subtropical ridge that was moving southwestward over Japan,” said Jason Butke, senior scientist at AIR Worldwide. “However, the ridge weakened and stopped its westward motion, causing Muifa to turn to the north when it was still 200 km from the coast. While it did not make landfall in China, Muifa nevertheless weakened from its interaction with land and was downgraded to a tropical storm by Sunday.”

Along China’s eastern seaboard, intensive preparations were undertaken in anticipation of the storm’s arrival. Several hundred flights were canceled, tens of thousands of ships and fishing vessels were ordered to dock, and ports—including Ningbo, the country’s largest—were closed temporarily. Workers were evacuated from offshore platforms of the Shengli Oilfield near Weihai port in Shandong province. The oilfield, the second largest in China, has a daily output of 8000 tonnes.

In Zhejiang province, disaster officials reported that the storm destroyed 169 houses, 3,500 tons of crops, and 121,300 tons of aquatic products, and estimated the direct economic impact at 1.87 billion yuan (290 million USD).

In Liaoning province, high waves breached a dyke in Dalian city, threatening the Fujiahua chemical plant. Officials report that the dyke has been reinforced and that the situation is now under control.

Today near 12:00 UTC, Muifa made landfall in North Korea near the China border with maximum winds of approximately 70 km/h. It is expected to weaken to a tropical depression over the next 12 hours and turn to the northeast over Jilin and Heilongjiang provinces in China and then dissipate some time on Wednesday.

Because Muifa did not make a direct hit on China’s highly populated eastern coast and passed by with only moderate wind speeds and precipitation, AIR currently does not expected significant insured losses from Muifa.

Source : AIR Worldwide Press Release

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The recent sell-off in global equity markets is in our view not justified by either economic or political fundamentals. We believe that the economic slowdowns in the U.S. and Europe will not last, though they do justify downward revisions to excessively optimistic economic and corporate-earnings forecasts. We are confident about the solvency of countries such as Italy and Spain and consider that their risk of sovereign default is close to zero. We do not doubt the political commitments of euro-area political leaders, even though we share the market’s frustration about how long it is taking to reform governance in the euro area. Lastly, Standard & Poor’s downgrade of U.S. credit, a landmark event in the modern history of sovereign debt, does not add anything to what we already knew: The 2008-2009 recession increased OECD governments’ debts by roughly 30 GDP points, thus making debt dynamics unsustainable in most of these countries, starting with the US.

In the second quarter of the year U.S. output growth all but stalled, and in the third quarter euro-area GDP growth may also be close to zero. Both economies are suffering from an excess of either private or public debts that were accumulated over the previous cycle. This indebtedness will not go away easily and, for that reason, we expect recoveries to remain sluggish in both regions over the next few years.

However, the global economy is still in an early stage of its recovery from the recession. China and other Asian economies are growing robustly, Japan is recovering faster than expected and Central and eastern Europe, the Middle East and Latin America are expanding. Last but not least, the nonfinancial corporate sectors in the U.S. and Europe are profitable, not excessively leveraged and eager to increase their investment spending. Against this backdrop, we expect the balance of strengths and weaknesses in the global economy to be positive for growth and earnings over the next year.

Based on euro-area policy makers’ most recent decisions, some investors may be drawing the conclusion that Italy will shortly need a bailout, and that Germany will block it. We do not share that view, for several reasons:

1. Although the weakness of Italy’s recovery raises legitimate questions about the government’s long-term solvency, Italy is more resilient than recent market developments imply. Not only is Italy running a primary budget surplus, forecast at 0.8% of GDP this year, but its net external debt is also limited, at 20% of GDP (compared to 100% for Greece). In any case, the weighted average life of Italy’s government debt is high at just over seven years, beyond that of many AAA-rated sovereigns. So Italy can withstand high bond yields for some time, though we do not expect its yields to remain at their current elevated level.

2. Italian banks have strong balance sheets. Provided that their investments in Italian sovereign debt are not impaired, which is our assumption, they are well capitalised. If and when their funding might become stressed, the European Central Bank is ready to plug the gap, as President Jean-Claude Trichet made clear during his most recent press conference.

3. We have not detected any sign that euro-area policy makersin Germany in particularhave a weakened commitment to the single currency. On the contrary, the decisions taken on July 21 to strengthen the euro-rescue fund, and the ECB’s subsequent decision to reopen its Securities Market Program, only provide further evidence of this commitment. We do note that Bundesbank President Jens Weidmann remains opposed in principle to the ECB buying sovereign bonds on the secondary market. But he does not oppose the ECB’s extension of full-allotment refinancing operations for banks, which was the more critical decision. We are convinced that, if liquidity shortages worsen dramatically for sovereign-debt and bank funding in the euro area, policy makers (including at the ECB) would react in an appropriate way.

On both sides of the Atlantic, markets have overreacted to the unfortunate coincidence of bad-but-temporary economic news and worrying-but-manageable fiscal challenges. Consider that inflation, which only six months ago was seen as the main risk factor for financial markets, is now receding thanks to declining commodity prices.

When markets become directional and are driven by rising risk-aversion, it is tempting to take the gloomy view and to follow the trend. It is precisely in these testing times that it is rewarding to focus on fundamentals that, in the end, will have the upper hand.

Mr. Chaney is chief economist and Mr. Sorasio is chief investment officer at French insurer AXA.

Source : AXA Press Release

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    Warren Buffet reacts on Standard & Poor’s downgrade of the US credit rating. He believes the grade should have been raised to “quadruple A”.

    The Berkshire Hathaway chairman, 80, also tried to restore confidence in the markets after last week’s dramatic Wall Street sell-off, telling Bloomberg Television: “Financial markets create their own dynamics, but I don’t think we’re facing a double dip recession.”

    The Dow Jones Industrial Average plunged more than 4 per cent Thursday, as the U.S. stock market slumped over investor fears of the debt crisis in Europe and a weakening economic outlook in the United States.

    Markets made a shaky recover Friday, but are expected to open heavily down on Monday after the S&P downgrade.

    Buffett, 80, meantime, said Friday that that the S&P decision “doesn’t make sense” and that his Omaha, Nebraska-based company would hold onto its sizeable number of U.S. Treasury bills.

    “In Omaha, the U.S. is still triple-A. In fact, if there were a quadruple-A rating, I’d give the U.S. that,” he told Fox Business News.

    While Buffett told Bloomberg that he doesn’t rely on the views of ratings firms when buying and selling securities, Berkshire is the biggest shareholder of Moody’s Corp. The U.S. maintains the top credit rating at both Moody’s Investors Service and Fitch Ratings.

    Source : Global Post 

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    Over the last couple of years criminals have been targeting farms in Britain with a 17 per cent rise in agri-crime.

    New figures from NFU Mutual, reveals that theft to UK agriculture is estimated to have cost £49.7 million in 2010, with two thirds (62%) of branches reporting an increase in rural crime in their area.

    The NFU Mutual Rural Crime Survey (RCS) is based on the 2010 claims experience of its network of branch offices located in rural towns and villages. Unlike some other crime reports, NFU Mutual’s survey includes claims for crimes against homes, farms, commercial premises and vehicles.

    There is little sign of rural crime slowing as the countryside continues to prove difficult to police and attitudes towards security remain relaxed.

    When asked about the main reason thieves target the countryside, 41% of branches said the fact it was such a sparse area made it difficult to police, with 32% claiming there was less chance of thieves being seen. 23% thought relaxed attitudes towards to security measures could also be a factor.

    While thieves have focused on targeting farms and businesses during broad daylight to steal expensive tractors, heating oil, scrap metal and livestock, the latest Rural Crime Survey shows an emergence of some new trends.

    59% of NFU Mutual branches believe that the most common time of day for thieves to act is during the night (midnight – 6am). 59% also reported that thefts from farms or outbuildings was the biggest problem in their area, while 12% said garden sheds and garages have proven tempting for thieves.

    The Survey also highlighted an increased demand for high priced items that are portable and easy to sell on. The theft of power tools such as chainsaws, electric drills and lawnmowers has topped the most stolen items list, although the NFU Mutual Crime Map shows different priorities across the country.

    Commenting on the issue of rural crime and successful initiatives, Lindsay Sinclair, Chief Executive of NFU Mutual, said: “Whether it’s the recession, tighter security in towns, or the rise in oil, meat and scrap metal prices countryside people are feeling the blight of rural crime on their land.

    “However, country people are not taking this scourge lying down. Across the country new rural security initiatives are springing up involving rural communities and insurers such as NFU Mutual.

    “We’ve already seen that by working with the police forces and manufacturers, tractor theft and organised rural crime can be tackled head-on. A united front against crime in the countryside will help to protect communities from being targeted further with vigilance as the watchword.”

    Source : NFU Mutual

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    Fitch Ratings has revised Swiss reinsurer Signal Iduna Rueckversicherungs AG’s (SIRe) Outlook to Stable from Negative and affirmed its Insurer Financial Strength (IFS) rating at ‘A-‘.

    The revision of the Outlook to Stable reflects the improved business profile of SIRe’s ultimate parent company Iduna Vereinigte Lebensversicherung aG fuer Handwerk, Handel und Gewerbe (IL), based in Germany. After IL had fallen short of the German life insurance market growth several years in a row, it developed above the market average in terms of gross written premiums (GWP) and new business in 2010.

    The affirmation of SIRe’s rating reflects strong capitalisation, prudent reserving, and sound underwriting practices. SIRe benefits from strong support from its membership within the IL group, and is viewed by Fitch as “very important” under the agency’s group rating methodology. Due to its small number of employees, SIRe faces significant operational risks, mainly with regard to key-staff risk.

    Under its standard notching criteria, Fitch equalises Issuer Default Ratings (IDR) and IFS Ratings for reinsurance entities reflecting the absence of priority for reinsurance policyholders in a default situation. For SIRe’s rating, Fitch has deviated from this approach in favour of the application of standard notching for primary insurers where IFS ratings are typically notched above the IDR to reflect policyholder priority in a default. Fitch has assumed higher policyholder recoveries in this case, based on the significant internal group business written by SIRe, the small size of the reinsurer relative to the group and the expectation that, in case of need, parental support would be forthcoming.

    SIRe’s strong capitalisation is reflected by the fact that it achieved around 284% in the Swiss solvency test for 2011. Fitch views this level of capitalisation as appropriate given the company’s small size. The agency also takes a positive view of SIRe’s diversification efforts. Fitch views SIRe’s risk management as strong relative to its size.

    Fitch believes that IL group is following a long-term strategy to make SIRe an integral and significant part of the overall group. Group benefits include the allocation of a high core capitalisation of CHF100m. The agency expects IL group to inject another CHF25m during 2011. Fitch believes parental support would be available for SIRe in a stress scenario. SIRe also benefits from organisational and IT support from the parent company, and from the group’s relationship with European mutuals, which form the main part of SIRe’s customer base.

    IL group was able to achieve financial results in line with and better than the agency’s expectations in 2010. Fitch views IL’s resilience against the current low interest yield environment as better than market average. However, technical profitability is suppressed by the current yield rates.

    Fitch notes that an upgrade of the rating is unlikely in the near to mid term. However, a substantial increase in capitalisation and improvement in the group’s combined ratio as well as in the operational performance in life insurance could lead to an upgrade of SIRe’s rating. A deterioration in IL group’s credit quality, in particular a significant decrease in capitalisation, could lead to a downgrade.

    IL is a member of the German Signal Iduna group (SI group), which is based in Dortmund and Hamburg. SI group is headed by four mutual insurance companies. In 2010, SI group had total GWP of EUR5.6bn, total assets of EUR43.9bn and employed about 13,000 staff.

    Source : Fitch Ratings Press Release

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    The United States of America is no longer top graded AAA from Standard & Poor’s. This is an unprecedented blow to the world’s largest economy in the wake of a political battle that took the country to the brink of default.

    S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about the government’s budget deficit and rising debt burden. The action is likely to eventually raise borrowing costs for the American government, companies and consumers.

    “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” S&P said in a statement.

    The outlook on the new U.S. credit rating is “negative,” S&P said in a statement, indicating another downgrade was possible in the next 12 to 18 months.

    The move reflects the deterioration in the global economic standing of the United States, which has had a AAA credit rating from S&P since 1941, and it could have implications for the U.S. dollar’s reserve currency status.

    “The global system must now adjust to the many implications and uncertainties of the once-unthinkable loss of America’s AAA,” said Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Co which oversees $1.2 trillion in assets.

    The decision follows a fierce political battle in Congress over cutting spending and raising taxes to reduce the government’s debt burden and allow its statutory borrowing limit to be raised.

    On August 2, President Barack Obama signed legislation designed to reduce the fiscal deficit by $2.1 trillion over 10 years. But that was well short of the $4 trillion in savings S&P had called for as a good “down payment” on fixing America’s finances.

    The political gridlock in Washington over addressing the long-term fiscal problems facing the United States came against the backdrop of slowing U.S. economic growth and led to the worst week in the U.S. stock market in two years.

    The S&P 500 stock index fell 10.8 percent in the past 10 trading days on concerns that the U.S. economy may be heading into another recession and because the European debt crisis has worsened.

    Treasury bonds, once indisputably seen as the safest security in the world, are now rated lower than bonds issued by countries such as Britain, Germany, France or Canada.

    U.S. TREASURY QUESTIONS CALCULATION

    Obama was briefed earlier in the day regarding S&P’s intentions, but discussions only took place with Treasury officials and did not include the White House, a source familiar with the discussions told Reuters.

    Late on Friday, the Treasury said the rating agency’s debt calculations were wrong by some $2 trillion.

    S&P confirmed it changed its economic assumptions after discussion with the Treasury Department but said it did not affect its decision to downgrade.

    “We take our responsibilities very seriously, and if at the end of our analysis the committee concludes that a rating isn’t where we believe it should be, it’s our duty to make that call,” David Beers, head of sovereign ratings at S&P, told Reuters.

    The theme running throughout S&P’s analysis is the breakdown in the ability of the Democratic and Republican parties to govern effectively.

    The agency said that policymaking and political institutions had weakened in the past few months “to a degree more than we envisioned.” This has major implications for the nation’s budget and debt problems.

    For example, S&P now assumes that tax cuts brought in under President George W. Bush in 2001 and 2003 would not, as planned, expire by 2012 because of staunch Republican opposition to any measure that would raise revenues.

    The compromise reached by Republicans and Democrats this week calls for creation of a bipartisan congressional committee to find $1.5 trillion of deficit cuts by late November, beyond the $917 billion already identified.

    ‘DAUNTING’ IMPLICATIONS

    While the downgrade is a blow to U.S. prestige, it was largely expected and may not have a big impact on trading of U.S. Treasuries and other assets when markets reopen in Asia on Monday.

    In fact, Treasuries have rallied this week, driving the yield on the benchmark 10-year note to 2.34 percent, its lowest level in about 10 months. This reflects a belief among investors that U.S. government debt is still a safe bet at a time when prices of stocks and commodities are falling on concern about slowing global economic growth.

    “To some extent, I would expect when Tokyo opens on Sunday, that we will see an initial knee-jerk sell-off (in Treasuries) followed by a rally,” said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut.

    But the downgrade has implications for the country’s financial sector, ranging from insurance companies to government-related firms such as housing financiers Fannie Mae and Freddie Mac.

    “At least initially, the impact on the market will be negative because there will some forced liquidation of U.S. assets,” said Boris Schlossberg, GFT director of currency research.

    The downgrade could add up to 0.7 of a percentage point to Treasuries’ yields over time, increasing funding costs for public debt by some $100 billion, according to SIFMA, a U.S. securities industry trade group.

    The Federal Reserve and other bank regulators moved on Friday to reassure global markets that the downgrade would not mean that additional capital would be needed by banks and other institutions holding Treasury securities.

    The Fed also said the cut would not impact the operation of its emergency lending window for banks, nor its buying and selling of Treasury securities to conduct monetary policy.

    The impact of S&P’s move was tempered by Moody’s Investors Service’s decision earlier this week confirming, for now, the U.S. Aaa rating. Fitch Ratings said it was still reviewing its AAA rating and would issue its opinion by the end of the month.

    S&P’s move is also likely to concern foreign creditors especially China, which holds more than $1 trillion of U.S. debt. Beijing has repeatedly urged Washington to protect its U.S. dollar investments by addressing its budget problems.

    “China will be forced to consider other investments for its reserves. U.S. Treasuries aren’t as safe anymore,” said Li Jie, a director at the reserves research institute at the Central University of Finance and Economics.

    One currency strategist, however, did not think there would be wholesale selling by foreigners.

    “One of the reasons we don’t really think foreign investors will start selling U.S. Treasuries aggressively is because there are still few alternatives to the Treasury market in terms of depth and liquidity,” said Vassili Serebriakov, currency strategist at Wells Fargo in New York.

    He said there was likely to be weakness in the U.S. dollar but a sharp sell-off was unlikely.

    S&P had already placed the U.S. credit rating on review for a possible downgrade on July 14 on concerns that Congress was not adequately addressing the fiscal deficit of about $1.4 trillion this year, about 9.0 percent of gross domestic product, one of the highest since World War II.

    But Obama administration officials grew increasingly frustrated with the rating agency during the debt limit debate and accused S&P of moving the goal posts in its downgrade warnings, sources familiar with talks between the administration and the agency have said.

    The downgrade was immediately pounced on by candidates vying for the Republican presidential nomination. Mitt Romney said the move was “a deeply troubling indicator of our country’s decline under President Obama,” while Jon Huntsman said it was due to spreading of a “cancerous debt afflicting our nation.”

    The downgrade, 15 months before the next presidential election, and debt will be top campaign issues..

    Source : Reuters  

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    World markets were nervous this Friday after they plunged the day before. US unemployment figures were better than expected, but have not eased the world economic anguish. Here are a few of the top articles seen on the search engines.

     

    Stocks Close Mixed After Extremely Volatile Day

    After seeing substantial weakness in the previous session, stocks saw considerable volatility over the course of the trading day on Friday, as traders digested better than expected employment data.

    The major averages showed big swings back and forth across the unchanged line, eventually ending the session mixed. While the Dow rose 60.93 points or 0.5 per cent to 11,444.61, the Nasdaq fell 23.98 points or 0.9 per cent to 2,532.41 and the S&P 500 edged down 0.69 points or 0.1 per cent to 1,199.38.

    Read more RTT News                   

     

    GLOBAL MARKETS:European Stocks Slump On Euro-Zone Economic Fears

    European stock markets slumped Friday, as market participants worried about the ability of policy makers to provide the necessary leadership to drag the euro zone out of its current crisis.

    Leaders of euro-zone nations started frantic phone talks Friday about the escalating debt crisis in Europe as financial markets continued to plunge on concerns that changes to the euro zone’s rescue fund agreed to last month aren’t enough to address the currency bloc’s problems.

    EU economics commissioner Olli Rehn attempted to soothe concerns by saying the European Commission’s “longstanding policy” is to reinforce the rescue fund, but traders said he failed to offer clarity on its size.

    Read more : Financial Times 

     

     

    Markets Slide But US Bucks The Trend

    Many stock markets worldwide have suffered more falls but the US Dow Jones ended higher in volatile trading after better-than-expected jobs growth figures.

    In London, the FTSE 100 index of leading UK shares closed the day at 5246.99, down 146 points or 2.71%.

    More than £148bn has been wiped off the FTSE’s value since trading opened on Monday – a plunge of 568.2 points or 10.15% – caused by the eurozone debt crisis and fears the economy is stalling.

    In other European markets, Germany’s DAX ended Friday down 2.8% and the CAC in France fell 1.2%. Italy was 1.7% lower and Spain dipped by 0.2%.

    Read more : News Sky

     

    FTSE 100 tumbles in worst week since height of the crisis

    The FTSE 100 slumped to its worst week since the depths of the financial crisis as fears of a new global recession wiped more than $2tn (£1.2tn) from the value of stock markets around the world.

    The blue-chip index of Britain’s leading companies ended another volatile trading day down 146.15 points, or 2.7pc, at 5,246.99 – a 9.8pc tumble on the week. Across the Atlantic, the Dow Jones Industrial Average and the S&P 500 were poised for their steepest weekly declines in three years.

    Read more : The Telegraph  

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    Typhoon Muifa is tracking across the Pacific Ocean, en route to mainland China, after delivering heavy rain to the Philippines Tuesday and Wednesday. Muifa is forecast to make landfall south of Shanghai this weekend, bringing high winds and heavy rains.

    According to the Japan Meteorological Agency’s (JMA) 18:45 UTC advisory, Muifa’s maximum ten-minute sustained winds are 157 km/hr (97 miles per hour), classifying it as a weak Category 2 storm. Its maximum gusts are higher, at 203 km/h (126 km/h), and the storm’s radius of tropical storm force winds extends for about 220 kilometers. As of 8:00 am local time this morning, meteorological authorities in China’s eastern province of Zhejiang said the storm was roughly 1,000 km southeast of the province’s capital, Fuzhou.

    According to AIR, as it continues on its northwestward track, Muifa is expected to weaken despite very high sea surface temperatures. Weakening will come from increased environmental wind shear over the Yellow Sea, the northern part of the East China Sea.

    Though all agencies have Muifa making landfall south of Shanghai, differences in the forecast tracks do exist; the JTWC forecast track is the farthest north and the JMA forecast track is among the farthest south. Depending on the exact track, landfall will occur sometime during the day on Sunday, August 7, probably in the afternoon (local time).

    After landfall, Muifa is expected to follow a more northward trajectory and eventually move offshore, north of Shanghai, back over the Yellow Sea and towards North Korea. The storm center will likely stay close enough to the China coast to maintain a good moisture supply; thus, despite the weakening of the winds up to and after landfall, Muifa could generate a significant amount of precipitation. Over the last 24 hours, it has been generating estimated peak rainfall amounts around 300 millimeters. These amounts could increase as Muifa approaches warmer coastal waters and significant terrain—which serves to enhance rainfall—along China’s coast.

    As the typhoon approaches, an orange alert for high waves has been issued in the East China Sea. According to China’s National Marine Environmental Forecasting Center, the eastern part of the East China Sea could experience waves as high as six to nine meters. Muifa is likely to bring heavy rains and high winds to major growing areas of the north China plains and southern Manchuria, putting crops at risk.

    Earlier this week, Muifa battered parts of the northern and central Philippines with heavy rains, displacing more than 14,000 households. Muifa’s heavy rains—which enhanced rainfall already present from the regional monsoon.

    According to AIR, in China, the majority of residential buildings are masonry, with unreinforced masonry still found in older buildings, particularly in rural areas. Most urban dwellers, by contrast, live in mid-rise or high-rise apartment buildings. Mid-rise buildings are often confined masonry while high-rises tend to be reinforced concrete. When exposed to lateral wind loads, confined masonry performs better than unreinforced masonry due to the additional stability provided by the bond beams and columns. Concrete is more resistant to wind loads as well as flood damage than all types of masonry. Due to the superior materials and building practices, wind damage to apartment buildings is typically restricted to non-structural components, such as windows and balconies. The majority of commercial structures in China are concrete and masonry construction. Commercial and industrial buildings are generally more resistant to wind and water damage than residential buildings.

    According to AIR, Muifa’s track and intensity bear similarities to those of Typhoon Winnie, which brought heavy rain and damage across eastern China in 1997—a Category 3 storm at landfall. Muifa was upgraded to tropical storm strength on July 28th, having formed five days earlier. It was briefly a strong Category 4 typhoon, though it could not maintain this strength. It weakened on July 31, and has weakened further since.

    Source : AIR Worldwide

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    AXA Assistance UK has appointed Richard Ware as Director and Deputy Motor General Director.

    Ware, who was formerly Sales and Marketing Director for the business, has assumed a key commercial role within the company’s Motor operation. He is responsible for overseeing all aspects of the development and delivery strategy for the 400-strong motor breakdown supplier network.

    In addition, he will also provide client management for key accounts and drive company projects including the introduction of new products to the market.

    Commenting on his new role, Ware said: “Our motor operation has a robust strategy that has delivered consistent growth built on a reputation for strong account management, transparency and product innovation. In such a changing market place, these are important attributes that our clients and prospects recognise. We have to ensure we are meeting our clients evolving needs so one of my first tasks is to launch new product innovations such as excess insurance and end of lease protection products.”

    Source : AXA Assistance

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    British insurance giant announced that net profits nearly doubled in the year’s first half. This is boosted by strength in Asia and the United States, and shareholder dividends are hiked.

    Profit after tax jumped to £861 million ($1.4 billion, 990 million euros) in the six months to June, compared with £442 million a year earlier, Prudential said in a results statement.

    Operating profit, which excludes tax and interest payments, increased 25 per cent to £1.06 billion, as the company brushed off its failure to buy AIA, the Asian arm of US insurer AIG, for $35.5 billion last year.

    The operating figure — which is widely watched by the market — beat market expectations for underlying profit of £963 million, according to analysts polled by Dow Jones Newswires.    Prudential also ramped up its interim shareholder dividend by 20 per cent to 7.95 pence a share.

    “We have reported another good performance in the first half of 2011,” chief executive Tidjane Thiam said in the earnings release.

    “We have continued to concentrate on the fast growing and highly profitable markets of South-East Asia and the positive momentum of 2010 has been  maintained during the first half of this year.

    Thiam added: “We expect to see continued, profitable and cash generative growth in the second half of 2011.”

    However in afternoon trade, Prudential shares were down 1.98 percent to 617.50 pence on London’s FTSE 100 index of top companies amid a fierce global sell-off on world financial markets.     Analysts were reassured by the results despite the share price fall.

    “Overall, this is a strong set of numbers from Prudential, which should see continued growth given its strong exposure to emerging markets and highlights the stock’s longer term potential,” said analysts at Dolmen Stockbrokers.    The FTSE was down 2.22 per cent at 5,273.39 points amid heightened concern over the prospect of a sharp global economic downturn, dealers said.

    London, Aug 5, 2011 (AFP)

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    A need for innovation and flexibility is needed as new Government analysis forecasts a significant rise in the number of people living until 100.

    Analysis by the Department of Work & Pensions forecasts that the number of centenarians will pass 500,000 by 2066 and that 20-year-olds today are three times more likely to reach 100 than their grandparents. Girls born this year have a one in three chance of living to 100 while boys have a one in four chance.

    Pensions Minister Steve Webb says the UK needs to “radically rethink our perceptions about our later lives. We simply can’t look to our grandparents’ experience of retirement as a model for our own. We will live longer and we will have to save more.”

    MetLife is calling for the introduction of longevity insurance, through amendments to the new drawdown regime introduced on April 6th 2011, to allow more flexibility on assets held within drawdown plans, and also for the easing of rules on using pension funds to pay for long-term care.

    It highlights OECD research predicting that the UK will need to spend £50 billion on services for the elderly such as pensions, long-term care and health care.

    Peter Carter, Product Marketing Director at MetLife UK said: “It is entirely correct that retirement income planning needs a radical rethink and that people need to save more if they are going to live longer.

     “Retirees with defined contribution pensions need to make the most efficient use of their savings, whether in the form of regular income, or lump sums for expenditure on necessities such as long term care.

     “Longevity insurance is available in the US and can provide peace of mind that income will be assured in later life while allowing greater certainty and control over current income.”

    MetLife believes deferred annuities held within pension plans would enable savers to plan ahead for the risk of living longer than expected, and potentially exhausting their retirement savings. Deferred annuities protect against this risk by guaranteeing an income at a fixed age while allowing individuals to continue to draw an income from their existing fund.

    For example, someone with a fund of £250,000 could decide at 60 to buy a deferred annuity for £30,000 to pay out a guaranteed income of £26,065 per annum at age 85.  The remainder of their fund could then be used to provide the maximum income until the age of 85.

    Easing of existing capped drawdown rules to enable investors to use funds to help pay for nursing home care, with any money left subject to 55% tax, should also be considered, MetLife says.

    The proposals form part of a wider campaign by MetLife for pension reforms aimed at increasing total pension savings, engaging younger savers, and improving the standard of living of retirees. MetLife plans to launch its full proposals for pension reform in September.

    Source : Metlife

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    German insurance giant Allianz announced that its second-quarter net profit fell seven per cent to EUR 1.07 billion ($1.5 billion) after a large charge on the value of its Greek bond holdings.   

    Allianz’ operating profit was stable compared with the same period a year earlier, at EUR 2.3 billion, topping analyst forecasts for 2.14 billion euros as compiled by Dow Jones Newswires.

    Sales declined as expected meanwhile, losing 3.2 per cent to EUR 24.6 billion, a statement said.

    Allianz said that it had reduced the value of its Greek bond holdings to their current market value which entailed booking a charge of EUR 644 million.

    Some of that amount was charged to clients and the group also got a tax rebate on the loss, leaving the impact on its net result at EUR 326 million.

    Allianz chief executive Michael Diekmann said in the statement that “these are very satisfying results.”

    He said the second quarter and first half figures were “remarkably solid considering the high level of natural catastrophe events, the uncertainty of the capital markets, currency fluctuations and, last but not least, the current impairment of our Greek sovereign bond portfolio.”

    Diekmann said that despite the insurer’s second quarter losses, Allianz would meet its 2011 operating profit target of eight billion euros, plus or minus 500 million euros.

    German re-insurance giant Munich Re has also written down the value of its Greek bond holdings but insurers and banks in the country have not said to what extent they plan to participate in a second Greek rescue package backed by the European Union and the International Monetary Fund. Part of the programme calls for private investors to either voluntarily extend the maturity of their bonds or sell them back at a discounted rate, taking a loss estimated at some 21 per cent.

    On Thursday, the European Central Bank resumed purchases of sovereign bonds issued by heavily indebted Eurozone countries but the intervention failed to stop a massive sell off of stocks in Frankfurt and on other global markets.

    Frankfurt, Aug 5, 2011 (AFP)

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    Major US meat processor Cargill has launched a national recall of 36 million pounds of ground turkey linked to an outbreak of drug-resistant salmonella, blamed for killing one person and sickening 76 others, officials said.   

    The Arkansas-based Cargill announced the voluntary recall on Wednesday, following a July 29 US public health warning from the US Department of Agriculture that linked the salmonella poisoning to turkey products.

    Production of ground turkey products at Cargill’s Springdale, Arkansas plant is also being suspended as investigation into the source continues, the meat giant said.

    “While facts continue to be gathered, and currently there is no conclusive answer regarding the source of Salmonella Heidelberg contamination, given our concern for what has happened… we are voluntarily removing our ground turkey products from the marketplace,” said the head of Cargill’s turkey processing business Steve Willardsen.

    The Centers for Disease Control and Prevention said Monday that the outbreak strain has been reported in 26 states between March 1 and August 1.

    Just over a third of those infected with the bacteria were hospitalized.  The illnesses are being linked to a virulent strain of salmonella that has been around for decades and is resistant to many commonly prescribed antibiotics, said the CDC.

    The CDC urged consumers to cook meat thoroughly to a final temperature of 165 degrees Fahrenheit (74 Celsius), and said it was continuing its investigation in an attempt to identify the exact source of the bacteria.

    Washington, Aug 4, 2011 (AFP)

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    US weekly claims for unemployment insurance remained at a high 400,000 last week, the Labor Department said Thursday, as business and government layoffs persisted while new job creation remained weak.   

    The figure, for the week to July 30, was virtually the same as the previous week’s 401,000 (revised from 398,000). But on a four-week moving average, they were on a slight downward trend, the data showed.

    The total number of people across the country receiving unemployment insurance payments was 7.57 million in the middle of July, the Labor Department said, about 1.1 million less than a year earlier.

    The total number of unemployed — those both receiving and not receiving jobless benefits — was 14.1 million, according to figures for June.

    The jobless claim numbers came a day before the government releases its total job creation and national unemployment figures for July, on Friday.

    Those figures are expected to confirm that the economy continued at a near-stalled pace during the month, as governments at all levels continued to pare workforces under budget-cutting pressure while businesses stayed cautious about hiring.

    Economists expect the total unemployment rate to remain at 9.2 percent, and the average estimate for net new jobs created is 84,000, not even keeping pace with the growth of the working age population.

    Washington, Aug 4, 2011 (AFP)

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