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Sofia Ashmore

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    The value of commissions earned through bancassurance – the sale of retail insurance products to a commercial bank’s client base – is set to grow at a CAGR of 5.29% globally between 2013 and 2017. However, this growth is not evenly distributed between regions, with the distinct features of emerging markets fostering the vast majority of this growth.

    Asia-Pacific – An Emerging Channel

    In Asia-Pacific, bancassurance is still an emerging channel, with most markets still dominated by traditional channels such as agencies and direct marketing. However, the region’s declining interest rates – which have a detrimental effect on the remuneration offered by bank savings – have sparked a growth in the demand for savings based insurance products offered by bancassurance ventures. Furthermore, the Asia-Pacific bancassurance sector has swelled thanks to the entry of large foreign insurance players into the market, who are primarily targeting the region’s high net worth individuals.

    Further drivers in the Asia-Pacific bancassurance market include the dramatic improvement in customer service facilities, the use of CRM technology, and the increasing use and effectiveness of automated sales and servicing systems. With these shifts in the market, strong growth is forecast for the Asia-Pacific region, with Japan, South Korean, China and India set for a combined CAGR in the life sector of 19.04% between 2006 and 2016.

    Europe Strides Ahead

    Bancassurance originated in Europe, where it holds one third of the total market share. As such, many of its bancassurance markets – such as France, Italy and Spain – have reached maturity. Whilst declining interest rates and reductions in social spending – which boosts demand for private insurance that can be met by bancassurance ventures – are still likely to yield growth in these markets, it is forecast to be minimal.

    Conversely, Europe’s emerging markets of Turkey and Poland are set to grow significantly, with a projected combined average CAGR of 14.94%. This is primarily due to the low levels of insurance penetration in those countries, coupled with attractive investment related life insurance and retirement savings products that are in high demand.

    Latin America Offers Growth

    There is a relatively high penetration of bancassurance in the majority of Latin American states, with countries such as Brazil and Mexico benefitting from a favourable regulatory landscape and the presence of large foreign players who have successfully captured large client bases by partnering with banks. A combination of low insurance penetration and high bank penetration presents significant growth potential for bancassurance ventures, facilitating their easy distribution of insurance products to large customer segments that are not covered by traditional distribution channels.

    The significant exception to this trend is Chile, where direct marketing by large foreign insurers dominated the market and slowed the growth of the bancassurance channel. However, aggressive marketing and attractive product offerings, combined with a high demand for pension products is set to reverse this trend, and bancassurance growth is forecast to rebound dramatically until 2016.

    The United States – A Struggling Channel

    Despite early indications that bancassurance market penetration in life insurance might achieve levels comparable to Europe’s 33.3%, US banks have in reality struggled to achieve a market share of 2%. Furthermore, the US joins the UK as the only markets where the value of commissions earned through bancassurance is set to drop.

    The 1999 Gramm-Leach-Bliley (GLB) legislation that deregulated the US’ financial structure – in part as an attempt to emulate the success of the European bancassurance market – brought high hopes, and whilst it has contributed to the growth of bancassurance in the US, comparable success has proven elusive. A factor in this slow growth may be attributed to the almost total separation between the insurance provider and bank distributor in the US market, where banks essentially just sell third-party insurance products to their clients. Whilst this model is low-risk, and offers high commission and fee income, it has higher costs and lower efficiency than the integrated model.

    Thus, the insurance market in the US is dominated by more established channels such as agencies and brokers.

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    QBE, the business insurance specialist, has announced that Sebastian Rice is to join QBE Trade Credit with effect from 28th June as Senior Underwriter.

    Reporting to Ian Bocca, Seb will be responsible for the development and servicing of new trade credit business in the UK. Working with the London-based specialist trade credit brokers, Seb’s role will encompass UK-domestic, multi-regional, and global business across all product types emanating from London.  His previous roles include Global Sales Manager at Atradius and Strategic Account Manager at Euler UK.

    Trevor Williams, Head of Credit & Surety Europe, comments: “Seb is a well known and highly regarded senior underwriter in UK trade credit insurance who brings a breadth of experience to this role from over nine years in this market.  This appointment further demonstrates our commitment to the trade credit market, our desire to explore new opportunities and to profitably grow our business”.

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    According to catastrophe modeling firm AIR Worldwide, a magnitude 6.0 earthquake struck central Taiwan on March 27, 2013, at 10:03 a.m. local time (02:03:20 UTC). With its epicenter located at 23.840° North latitude and 121.135° East longitude, according to USGS, and a focal depth of 20.7 km, the event shook rural Nantou County (located about 250 km south of the capital of Taipei) and was felt throughout the island. Buildings swayed in Taipei for about 15 seconds, but building damage was confined to the Nantou region. Damage is expected to unreinforced masonry construction near the earthquake’s epicenter. In the population center closest to the epicenter (15 km from the epicenter), some building damage is expected, with the majority of damage largely limited to nonstructural elements such as glazing, cladding, suspended ceilings, and interior walls, as well as to contents. Well-engineered high-rise buildings should be unaffected by the earthquake.

    “Yesterday’s event occurred about 30-40 km east of the Chelungpu fault, the fault that generated the 1999 Chi-Chi earthquake,” said Dr. Bingming Shen-Tu, senior principal scientist at AIR Worldwide. “The location and fault mechanism indicate that the event occurred further down dip of the 1999 earthquake rupture to the east. It may have ruptured the deep part of the fault system that was responsible for the 1999 Chi-Chi earthquake.” Removed extra space.

    “Building damage inflicted by the earthquake includes cracked exterior walls, fallen tiles, and broken windows. Contents damage has also been reported. Most damaged buildings are located in the Nantou, Changhua, and Taichung regions of central Taiwan.”

    Although the temblor made buildings in the capital city of Taipei sway, building damage in this city has not been reported. However, there have been reports that the earthquake gave rise to a fire in Taipei, but damage or disruption caused by this fire following event have not yet been reported at the time of this advisory.

    The temblor also caused disruption to transportation services; large boulders reportedly fell onto some roads in central Taiwan, and sections of high-speed rail line were temporarily shut down for inspection.

    Dr. Shen-Tu noted, “Due to its location, damaging earthquakes are not uncommon in Taiwan; for example, in 1999, the M7.6 Chi-Chi earthquake in central Taiwan caused property losses estimated at USD 11 billion. Taiwan is located in the collision zone between the Philippine Sea Plate and the Eurasian Plate. The most important tectonic features in Taiwan are the Longitudinal Valley Fault Zone (LVF) in eastern Taiwan and the Deformation Front Fault Zone (DFZ), a fold-thrust fault zone in western Taiwan. The DFZ is composed mainly of a series of active crustal faults along its central and northern segments. Thus, most historical earthquakes in central and northern Taiwan have been shallow.”

    According to AIR, in Taiwan, the majority of low- to mid-rise buildings are constructed with reinforced concrete frames and brick infill walls. Current Taiwan Building Codes (TBC) require ductile detailing of reinforced concrete frames, similar to the requirements of the American Concrete Institute and the Uniform Building Code (UBC) of 1982. Tall buildings are dominated by construction using reinforced concrete frames and shear walls.

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    Research conducted by Xchanging has estimated that the London Market Bureau is collectively saving market participants at least £150m annually.

    Presenting the Value of the Bureau research findings to the London Market Group Forum in the Willis Auditorium yesterday, Max Pell, managing director of Xchanging’s UK insurance business, said the detailed study, which involved representatives of the company market insurers and managing agents, showed the main drivers of the savings were economies of scale and doing things ‘once on behalf of the many’. This results in companies requiring significantly fewer staff to service insurance business that is placed through the bureau. The study also showed value being further derived from the central utility as it reduces the need to duplicate IT infrastructure within the individual participants of the bureau. Initiatives such as ECF have also dramatically improved operational efficiency, taking less than half the time to process than paper-based claims.

    Although the Bureau was originally designed 25 years ago Pell said the underlying process design remained fit for purpose and that the bureau had developed a rich functionality over time which a future re-fresh of the underlying technology would look to emulate.

    Regarding the future Pell also spoke of the increasing market desire for a global solution, citing recent public comments by Steve McGill, group president of Aon PLC that “We need systems that allow us to operate in a consistent manner globally”.  John Charman, Axis Capital founder and former CEO also cited “the need for a global clearing house for insurance”.

    Pell also praised the work of the London Non Bureau Group: “Generally, outside the London market bureau, accounting and settlement processes are highly dysfunctional.  The work of the Non Bureau Group has already delivered significant benefits to the participant brokers and carriers and could be the basis for a new global utility that would meet the needs of both London and the wider global insurance community “

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    Professor of International Business Geoffrey Wood believes the new BRICS development bank can rival the International Monetary Fund (IMF) and the World Bank if it can reconcile its competing agendas.

    Leaders of the so-called BRICS nations – Brazil, Russia, India, China and South Africa – are in Durban putting together the new bank, which will initially focus on infrastructure and development projects.

    The BRICS nations make up 40 per cent of the world’s population and 17 per cent of world trade and though where it will be based and how much capital it will have is yet to be decided Professor Wood, of Warwick Business School, can see it becoming a big attraction for emerging markets.

    “The track record of the IMF and World Bank austerity policies are very mixed, and there is little doubt that many nations would welcome an alternative to these bodies,” said the Warwick Business School Professor. “This is likely to make the BRICS development bank hugely influential if, indeed. But, in the short term, this is contingent on the extent to which it reconciles the competing agendas of the BRICS countries.

    “Most people assume that the current economic crisis has led to a great strengthening of the power of the World Bank and the IMF, and that this power is largely uncontested. What is interesting however, are the limits of the power of these bodies.

    “The aftermath of the Asian financial crisis saw a number of countries in Asia – and Russia as well – stockpiling foreign exchange reserves precisely so they did not have to make recourse to the IMF or World Bank again.

    “The proposed BRICS development bank represents an important new development, that, potentially further circumscribes the influence of these bodies.

    “The BRICS development bank will be extremely attractive to many developing countries who have had their fingers burned through engaging with the World Bank and the IMF.

    “In theory, the BRICS bank could erode the role and status of the IMF and the World Bank. However, the details of how the BRICS bank is governed and how it will operate remain unclear. What is even unclear is the amount of initial capitalization; very different sums of money are being bandied about. It will certainly be some years before the bank is operational, but in the long term it could have a significant impact.”

    The bank would have access to a huge and growing market, though the power struggle between the nations involved could lead to difficulties says Professor Wood.

    “China holds vast foreign exchange reserves and is likely to be, in some manner or other, the dominant player in the BRICS bank,” said Professor Wood.

    “As the weakest BRICS member, South Africa has perhaps most to gain from establishing the bank, although all may gain from the international clout the new body may confer.

    “South Africa is the smallest BRICS member and has become increasingly reliant on minerals exports, which provide volatile revenue streams and, ultimately are a depleting resource.

    “South Africa could be faced by a balance of payments crisis in the future, and the BRICS bank could potentially be a lifeline for it.”

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      A separate UK regulator for conduct risk will boost its importance and is likely to raise costs for financial institutions, says Fitch Ratings. The newly formed Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA) will intensify regulatory scrutiny of UK banks and insurance companies.

      We expect the FCA to adopt a strong and broad agenda to improve services and protection for consumers following the banking crisis and a series of mis-selling and rate-fixing scandals. Certain products, for example those that are complex, innovative, bundled with others, or involve advice, are likely to be subject to greater scrutiny and therefore potential fines and consumer redress.

      In the annuities market we expect the FCA to take steps to make consumers more aware of their right to shop around when buying an annuity at retirement. Some pensioners have lost out significantly by sticking with the provider they built their savings with rather than checking with others for a better deal. One area of focus in the mortgage market is fair treatment of borrowers when interest-only mortgages reach maturity and repayment strategies are inadequate. Costs and the risk of losing their homes can increase for customers if lenders take inappropriate forbearance and repossession measures.

      Many financial institutions are already feeling the effects of the shake-up as they prepare for the burden of having to deal with two regulators rather than one. In some cases they have to build relationships with new regulatory contacts. Firms are likely to experience a significant increase in management and compliance costs and could well face inconsistent regulatory decisions, at least until the new structure has bedded down.

      The two regulators will often be looking at the same issues from two different perspectives, which could lead to conflicting guidance and confusion. The FCA will be looking from a consumer protection point of view, whereas the PRA will be interested in the entity’s solvency and liquidity.

      Potential areas of conflict include claims settlements, forbearance measures and mis-selling compensation. For example, the FCA is likely to have regulatory responsibility for the fairness of bonuses for with-profits policyholders from the customer perspective, while the PRA will have regulatory responsibility for reviewing the affordability and solvency implications from the insurer’s perspective.

      The FCA and PRA will replace the Financial Services Authority on 1 April 2013.

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      The ABI welcomes the announcement from the Government that they are to publish a Green Paper on young driver safety.

      At a follow-up to the Prime Minister’s Insurance Summit held in February last year, the Department for Transport (DfT) announced its intention to publish a Green Paper this spring. We have long campaigned to change the way young people learn how to drive in order to reduce death and injury on the roads and make young drivers safer.

      We are calling for:

      – One year minimum learning period for young drivers.

      – Limiting the number of young passengers and restrictions on night time driving foryoung drivers for an initial period after passing their driving test. With exemptions for young people driving to and from work.

      – Zero blood alcohol driving limit for an initial period after a young person passes their driving test.

      Otto Thoresen, the ABI’s Director General, said: “The ABI welcomes today’s announcement from the Government that they will publish a Green Paper on young driver safety. We have long campaigned for changes to the current approach to learning to drive which does little to help young people become safe, secure drivers. Sadly young newly qualified drivers are at a much higher risk of having a serious crash on our roads which is reflected in the cost of their car insurance.  Insurers want to see young drivers become safe drivers which in turn will result in more affordable premiums. If the Government implemented the ABI’s proposals, lives would be saved and the cost of car insurance for young drivers could reduce by 15-20%.”

      Key statistics:

      – Young drivers could pay between around 15-20% less for their car insurance if the Government introduce, in full, ABI proposals to improve young driver safety

      – Average annual premium of a 17-18 year old driver: £1,853

      – Potential reduction in a 17-18 year olds premium: up to £370 a year

      – Nearly 3 million young people who hold a driving licence could benefit, which is nearly 8% of Briton’s licence holders

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      Fitch Ratings has affirmed Standard Life Assurance Limited’s (SLAL) Insurer Financial Strength (IFS) rating at ‘A+’ and Long-term Issuer Default Rating (IDR) at ‘A’. Fitch has also affirmed Standard Life plc’s (Standard Life) Long-term IDR at ‘A-‘.

      Standard Life is the top holding company for the Standard Life group. In addition, the agency has affirmed Standard Life’s perpetual subordinated notes, which benefit from a guarantee given by SLAL at ‘BBB+’ and the GBP500m subordinated bond maturing in 2042 at ‘BBB-‘.. The Outlooks on the Long-term IDRs and IFS ratings are Stable. At the same time Fitch has withdrawn all ratings on the Standard Life group.

      The affirmation of Standard Life’s ratings reflects the insurer’s maintained strong competitive position within the UK pension market, its strong capitalisation and profitability as well as its modest financial leverage. In 2012, Standard Life’s pre-tax operating profit rose to GBP900m (2011: GBP544m), benefiting from improved profitability of its UK, Canadian and Asian insurance operations as well as an increased contribution from Standard Life Investments.

      Fitch has decided to discontinue the ratings, which are uncompensated.

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      Allianz Global Corporate & Specialty Africa (AGCS Africa) has strengthened its local team further by making four key new appointments since the beginning of the year to broaden its expertise across the company’s African portfolio.

      As the African economy continues to grow, AGCS Africa is laying further foundations to expand its footprint and offer its clients the technical underwriting skills and products needed during Africa’s rapid economic expansion. The appointments are:

      – Graham Smith has joined the team as a Senior Marine Underwriter. Previously from Aon his role incorporated management support and new business development within the Specialty Division which encompassed Marine, Aviation, Trade Credit and Energy.

      – Alasdair Walker has been appointed as Energy Underwriter in South Africa. His previous role was Business Strategy Analyst / Executive Assistant within the AGCS CUO Energy team, based in Europe.

      – Leuba Modiba has joined the company as Engineering Underwriter. Mr Modiba’s extensive experience of the African engineering sector was gained from his previous role as a Senior Underwriter at AIG.

      – Rob Ter Morshuizen has been appointed as a Risk Engineer. He previously held a similar role at AIG, working with many of South Africa’s bluechip brands and has a wealth of experience of various sectors such as brewing, telecommunications and retail.

      Background

      AGCS is not just focussing on SA but is keen to expand throughout the continent, particularly Sub-Saharan Africa. The Sub-Saharan economic area is forecast to grow by more than 5% over this year. The growth trend is expected to continue given the region’s economic potential, requirements for infrastructure development and particularly its richness in natural resources.

      Delphine Maidou CEO of AGCS Africa comments: “We are seeing large growth in engineering and construction industries across Africa. As part of this expansion, there has been an increase in marine through the need to move equipment to support these projects. This is linked to the fact that the economic outlook for Sub-Saharan Africa is much better than elsewhere in the world. The appointments we have made reflect this. We want to offer our clients the knowledge and expertise on the ground as they have grown to expect from our offices globally. As Africa is set to grow, we will grow with it and be there for those who need us.”

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      The International Association of Insurance Supervisors’ capital proposals for global systemically important insurers (GSIIs) do not plan to force GSIIs to hold extra capital, other than for specific non-traditional insurance businesses such as variable annuities and credit default protection, according to press reports this week. The focus on risk rather than just size would be in line with that underlying Fitch’s ratings.

      The largest Fitch-rated global insurers already have strong capital positions, which support high ratings. Any limit on ratings is more associated with earnings power and market position than capital, although some insurers do have high debt leverage and additional capital could reduce this. The singling out of non-traditional businesses reflects the historical performance of large insurers, which with a few exceptions, such as AIG Financial Products and AEGON, have not required government support through the financial crisis.

      The experience of AIG Financial Products in 2008 shows how some non-traditional businesses, such as credit derivatives and products with complex financial options and guarantees, can change insurers’ risk profiles, making them more susceptible to short-term risks. Traditional businesses are subject to long run-off periods, which reduces vulnerability to liquidity risk. This has been a key factor in insurers’ stability since the global financial crisis.

      Most large insurers no longer underwrite the sort of products that got AIG Financial Products into trouble, but some non-traditional businesses have shorter pricing and performance track records that the IAIS is likely to investigate further. One of these is variable annuities (VAs). We consider them a potential source of risk and have addressed this in our ratings. For example, the rapid growth of variable annuity business at Jackson National Life, the US subsidiary of the UK insurance group Prudential Plc, was one of the reasons for our downgrade in 2010. VAs are largely a US product but other European insurers with significant US VA business are AEGON and AXA.

      Insurers are lobbying against the proposals for GSIIs. This, and the long timeframe for implementation, mean that there is a significant chance that the proposals will be amended, possibly even abandoned, before implementation.

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      Xchanging, the business process, procurement and technology services provider and integrator has been appointed by Homecare Insurance Ltd (part of CPP Group Plc) to provide business continuity and recovery solutions for its infrastructure. 

      Under the three year contract Xchanging will provide a roadmap and effective solutions to ensure that Homecare is provided with a stand-alone capability as part of its approach to risk management, prevention and recovery.  This will include a hot-start business recovery centre which has been provided by Xchanging.

      Mike Reynolds, head of sales for insurance said: “We are delighted to be working with the Homecare team and look forward to developing our partnership with them, drawing on our significant insurance and technology expertise to support them in achieving their business strategy.”

      Claire Sirett, general manager of Homecare said: “We are pleased to be working with Xchanging to support us in our risk management planning.  Our main objective  is to deliver a solution that allows us to support customers should any event impact our operations as we improve our operational efficiency and manage, predict and identify areas of risk to our business.

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      AXA Commercial Lines and Personal Intermediary has increased the number of account managed brokers at its Bolton-based National Trading Centre from 100 to 1,000 following a quarter of a million pound investment.

      The investment has enhanced electronic, telephone and face-to-face account management systems, which has resulted in a 900% increase in the number of regional brokers that have a dedicated point of contact at AXA.

      The majority of the investment was directed to the National Trading Centre in Bolton, which has grown the number of telephone based staff, allowing more account managers to remain on the road visiting brokers face-to-face. Additional dedicated marketing and market intelligence resources have also joined the team at Bolton, as well as funds dedicated to specific training programmes for existing staff.

      Additional support has also been given to developing AXA’s Simple e-trading products, designed specifically to help brokers trade smaller products efficiently.

      Matthew Reed, Managing Director, Commercial Intermediary said: “This investment was directed specifically to support community brokers, a sector that is largely ignored by insurers who have traditionally focused their efforts on firms at the larger end of the scale. These brokers make up the majority of the intermediary market and with several insurers centralising their operations, they just can’t get access to the support they need. We’ve taken the time to listen to their feedback and what they want is someone that values their business and regular contact with the same individual to develop the business relationship.

      “We have seen brokers respond positively to our change in strategy, evidenced by the huge increase in brokers now choosing to do business with us. We will continue our programme of expansion, both through the national Trading Centre in Bolton, as well as through our branch network. We want to reassure local and regional brokers that they can come to us and are able to get the contact, service and products they need.”

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      As the world seeks to re-establish itself following the 2008 financial crisis and the 2010 Arab Spring, Aon’s 2013 political risk map, developed in partnership with Roubini Global Economics, identifies certain emerging markets that are experiencing reduced political risk exposures. 

      To complement its print version Aon Risk Solutions unveiled a new online and interactive political risk map with data going back more than 15 years. The map measures political risks, political violence and terrorism in 163 countries and territories to help companies assess the risk levels of exchange transfer, legal and regulatory risk, political interference, political violence, sovereign non-payment, and supply chain disruption. In 2013, for the first time, the Aon Political Risk Map also measures banking sector vulnerability, risk to fiscal stimulus and risk of doing business.

      The map can be accessed at http://www.aon.com/2013politicalriskmap/index.html.

      The Aon Political Risk Map produces high level country overviews and tailored comparisons of country ratings and changes in risk over time. By accessing Aon’s interactive map, institutions can track their specific political risk exposures in emerging markets, both on a current and historical basis. The map data will be updated quarterly and at the time of significant political risk events.

      For 2013, Aon’s Political Risk Map shows an increase in the number of countries with upgraded political risk ratings (where the overall country or territory risk is rated lower than the previous year).   Thirteen countries were upgraded in 2013 as opposed to three in 2012. The 2013 map also shows only 12 countries experiencing downgrades in comparison to 21 in 2012. A list of these countries and the risks facing entities doing business with or in them are described below.

      Leading insight from a leading team
      Aon’s long-standing strength in Political Risk management has been bolstered this year by partnering with Roubini Global Economics, an independent, global research firm founded in 2004 by renowned economist Nouriel Roubini, in order to take advantage of RGE’s unique methodology, Quantitative Country Analytics, for systematically analyzing political risks around the world. Unlike other approaches to country risk, QCA systematically analyses 158 data series, and provides clients with an unparalleled level of transparency on how each country is assessed.

      –       The Aon Political Risk Map is unique as it now follows a three layered approach in analysing political risk in emerging countries (excluding EU and OECD countries). Country ratings reflect a combination of:

      • analysis by Aon Risk Solutions
      • analysis by Roubini Global Economics
      • the opinions of more than 20 Lloyd’s syndicates and corporate insurers actively writing political risk insurance

      Luigi Sturani, head of Aon Risk Solutions’ property, casualty and crisis management team of the Global Broking Center in London, commented, “With political risk rising up the boardroom agenda, our clients must have access to first-class data and analytics to determine the global drivers of change.  Aon’s leading crisis management expertise combined with the current and historical data means we can provide our clients with a valuable and in-depth Political Risk Map unsurpassed in the market.”

      Matthew Shires, head of Aon Risk Solutions’ political risk team in London, comments, “Aon is always looking at ways to provide innovative solutions for our clients. This interactive map, now available online, not only allows our clients to see what is happening in selected regions in 2013 but now offers access to the insights from our leading team going back as far as 1998. This will inform our clients’ strategic and financial decision-making in today’s highly regulated and demanding marketplace.”

      Shires added, “Despite the upgrades this year, businesses operating in emerging markets still face significant political risks. We work closely with our clients to identify their exposures to these risks. Supported by powerful data and analytics of current and historical trends this new interactive map gives clients unprecedented clarity when assessing their political risks in the emerging markets.”

      Richard Green CEO, Roubini Global Economics, said “Roubini Global Economics is proud to partner with Aon to deliver this insightful approach to mapping political risk and political violence for its clients. This year the political risk exposure across emerging markets remains volatile, however our data illustrates a differentiation led by a country’s financial ability to bolster its balance sheets. Our analysis indicates that Oman, Bahrain and UAE have all experienced upgraded political risk exposure, illustrating their strength in the region to withstand the impact of the 2010 Arab Spring. The unique and interactive Aon Political Risk Map will give clients a fresh insight into the trends in emerging markets and a quarterly snapshot of how political risk is evolving based on the industry’s strongest research.”

      Map overview:

      2013 Upgrades and Downgrades in Country Ratings
      Upgrades (where the overall country or territory risk is rated lower than the previous year)
      13 upgrades (2012: three upgrades): Armenia, Azerbaijan, Bahrain, Barbados, Belarus, Guatemala, Macedonia, Montenegro, Oman, Pakistan, Swaziland, Thailand, the United Arab Emirates

      Downgrades (where the overall country or territory risk is rated higher than the previous year)
      12 downgrades (2012: 21 downgrades): Algeria, Cameroon, Chad, Ethiopia, Madagascar, Mali, Namibia, Moldova, Turkmenistan, Uzbekistan, Panama and Paraguay.

      Trends:
      More upgrades than downgrades: After several years of greater downgrades due to the Arab Spring, the political effects of the global financial crisis and persistent strains in South Asia – political risk has eased in 13 countries, compared to downgrades in 12 countries. We identified the following trends:

      Improvements on Europe’s Periphery
      Several Central Asian and Caucasus countries – Azerbaijan, Armenia, for example, showed improvement, admittedly from a low base. This reflects a concerted effort in emerging Europe and Commonwealth of Independent States toward structural reform to attract investment and to increase market share.  While there is still room for improvement, the persistent economic strain in Western and Eastern Europe increased economic pressure on several regional governments and brought downgrades in Moldova and Uzbekistan (the improvement in government institutions mitigates the effect of these risks on investments by strengthening country balance sheets).

      A new order in the Middle East
      After dominating the downgrades in 2012, three Middle Eastern countries (Bahrain, Oman and UAE) were upgraded in 2013, reflecting a stabilization and differentiation of political risk in the MENA region. While this might be temporary, as the region is still fragile, this crystallizes a divergence in the region between the countries with stronger economic and financial institutions and those with greater wealth which increases their resilience to adverse political and economic events. Moreover, it underscores the importance of strong corporate and financial institutions, which cushion the effects on individual countries.

      Aftershocks in Western Africa
      Cameroon, Chad, and Mali all were downgraded, along with adjoining Algeria, reflecting the spillovers from the difficult regime changes in North Africa which destabilized these countries. Flows of weapons and insurgents across borders have exacerbated high political risk. Developments so far in 2013 indicate the potential for further downgrades.

      About the 2013 Aon Political Risk Map
      Aon measures political risk in 163 countries and territories to assess the risks associated with exchange transfers, sovereign non-payment, political interference, supply chain disruption, legal and regulatory regimes, political violence, ease of doing business, banking sector vulnerability and governments’ capability to provide fiscal stimulus. In each specific risk category, as well as the overall rating, each country is rated as Low, Medium-Low, Medium, Medium-High, High or Very High. Member countries of the EU and Organization for Economic Cooperation and Development are not rated in the 2013 map.

      Country ratings reflect a combination of analysis by Aon Risk Solutions, Roubini Global Economics—a global analysis and advisory firm—and the opinions of 26 Lloyd’s syndicates and corporate insurers actively writing political risk insurance.

      Roubini Global Economics and Quantitative Country Analytics
      Aon partnered with Roubini Global Economics, an independent, global research firm founded in 2004 by renowned economist Nouriel Roubini, to produce the 2013 Political Risk Map in order to take advantage of RGE’s unique methodology, Quantitative Country Analytics, for systematically analyzing political risks around the world.  Roubini’s proprietary Quantitative Country Analytics allows RGE and its partners to track changes in countries systematically, provides meaningful cross-country comparisons and, most importantly, decomposes each risk to uncover the various elements that drive that risk.

      As well as producing more robust results, Aon’s shift to this methodology will allow its clients the opportunity to interact with the risk map. They will be able to perform such tasks as decomposing each risk icon and monitoring the drivers of changes in risk icon scores.

      Each country on the map is rated according to the different types of risks it faces. These risks are indicated by the individual icons, with the first six icons driving the overall country rating, and the three new icons included for additional information.

      Brief Descriptions of Each Risk Icon
      Country rating on the map derives from six core risk icons, which represent insurable risk and these are;

      Exchange Transfer: The risk of being unable to make hard currency payments as a result of the imposition of local currency controls. This risk looks at various economic factors, including measures of capital account restrictions, the country’s de-facto exchange rate regime and foreign exchange reserves. This risk icon has been newly added to 29 countries and territories since the 2012 map, including Bermuda, Cameroon, Sri Lanka, and Ukraine. This risk has receded in 13 countries, including Albania, Cambodia, Paraguay and Zambia.

      Legal and Regulatory: The risk of financial or reputational loss as a result of difficulties in complying with a host country’s laws, regulations or codes. This risk comprises measures of government effectiveness, rule of law, wider property rights and regulatory quality. This risk icon has been newly added to two countries and territories since the 2012 map: Armenia and Mali. This risk has receded in 10 countries, including Brazil, Croatia, Peru and Saudi Arabia.

      Political Interference: The risk of host government intervention in the economy or other policy areas that adversely affect overseas business interests; e.g., nationalization and expropriation. This risk is composed of various measures of social, institutional and regulatory risks. This risk icon has been newly added to three countries and territories since the 2012 map: Guatemala, Honduras and Moldova. This risk has receded in 14 countries, including El Salvador, Peru, Thailand and Zambia.

      Political Violence: The risk of strikes, riots, civil commotions, sabotage, terrorism, malicious damage, war, civil war, rebellion, revolution, insurrection, a hostile act by a belligerent power, mutiny or a coup d’etat. Political violence is quantified using measures of political stability, peacefulness and specific acts of violence. This risk icon has been newly added to 21 countries and territories since the 2012 map, including Argentina, Philippines, Russia and Serbia. This risk has receded in 12 countries, including Columbia, Kuwait, Indonesia and Oman.

      Sovereign Non-payment: The risk of failure of a foreign government or government entity to honor its obligations in connection with loans or other financial commitments. This risk looks at measures of both ability and willingness to pay, including fiscal policy, political risk and rule of law. This risk icon has been newly added to 12 countries and territories since the 2012 map, including Gambia, Lesotho, Russia and Senegal. This risk has receded in 7 countries, including Bosnia, Croatia, Trinidad & Tobago and the United Arab Emirates.

      Supply Chain Disruption: The risk of disruption to the flow of goods and/or services into or out of a country as a result of political, social, economic or environmental instability. This risk icon has been newly added to 47 countries and territories since the 2012 map, including Algeria, Burundi, Mali and Tunisia. This risk has receded in 8 countries, including Brazil, China, India and Panama.

      Icons new to 2013 and not used in overall country rating
      Risks to Doing Business: The regulatory obstacles to setting up and operating business in the country, such as excessive procedures, the time and cost of registering a new business, dealing with building permits, trading across borders and getting bank credit with sound business plans. This risk is found in 96 countries, including Argentina, Bolivia, Dominica, Nigeria and Russia.

      Banking Sector Vulnerability: The risk of a country’s domestic banking sector going into crisis or not being able to support economic growth with adequate credit. This risk comprises measures of the capitalization and strength of the banking sector, and macro-financial linkages such as total indebtedness, trade performance and labor market rigidity. This risk is found in 106 countries and territories, including China, El Salvador, India and Thailand.

      Risks to Fiscal Stimulus: The risk of the government not being able to stimulate the economy due to lack of fiscal credibility, declining reserves, high debt burden or government inefficiency. This risk is found in 94 countries and territories, including Albania, Liberia, Morocco, Tanzania and Uganda.

      0 3

      With the long-awaited British Summertime just around the corner, homeowners are being warned to lock their garden sheds and garages as light-fingered thieves will be out to take advantage of the extra daylight.



      Analysis of ten years of claims data from Aviva reveals that thefts from gardens and outbuildings shoot up by 20% when the clocks go forward with the average haul totalling around £850.
And thieves will be keen to get their hands on anything within easy reach – from children’s toys to bikes to garden tools:

      Of the garden equipment stolen last year:

      – 42% of thefts were for power tools, of which 56% were drills

      – 39% were for simple hand tools like spades, shovels, rakes and forks

      – 19% were for electric and petrol lawnmowers, chainsaws and ladders

      However, the thieves don’t just wait for British Summertime to begin before they start looting gardens, as the lighter evenings in March show a 10% increase in thefts compared with the dark nights of January. 

And as the nights get lighter the number of claims increase, with July and August peeking at almost 30% higher than at the start of the year.

      Jonathan Cracknell, household underwriting manager at Aviva, says; “We’re all looking forward to a bit more sunshine, but lighter evenings also mean all your expensive power tools, bikes and children’s toys are more visible to passing criminals.

      “So after a day in the garden or doing a bit of DIY ensure everything is secured away inside your home, shed or garage. And remember items such as ladders and wheelie bins are perfect for burglars to use to get into your home, so keep them out of reach and out of sight if you can.”

      Aviva’s Top Tips to beat the shed burglar

      – Don’t tempt the thieves in, put away your garden tools, paddling pool, trampoline and bikes at the end of the day

      – Lock your sheds and out-buildings, replace any rusty padlocks.

      – Close gates and repair damaged fences – deterrents are sometimes the best prevention.

      – Hide or cover bulky items which can’t be locked away, such as large gas barbecues and picnic benches.

      – Lock up ladders and secure wheelie bins – they are perfect for giving burglars a leg up into the rest of your home!

      0 2

      The Motor Insurers’ Bureau (MIB) has received a Gold award from Pennies from Heaven (“PFH”), the UK’s fastest growing micro giving scheme for employees and pensioners.

      The PFH annual awards celebrate employers and employees who have demonstrated commendable commitment and generosity. Bronze medals are awarded to employers with more than 10% of staff participating in the scheme, Silver to those with over 15% and Gold to those with more than 20%.

      At the start of this year MIB reached a milestone, contributing 300,000 pennies, as more of MIB’s employees choose to join the PFH scheme.

      Ashton West, Chief Executive of MIB, said: “MIB is committed to supporting communities, and Pennies from Heaven provides businesses with an effective way to do just that. We are very proud that almost 50% of our employees have signed up to donate their odd pennies each month. By giving our people the opportunity to pull together and regularly support our chosen charity, Pennies from Heaven has helped make us all feel part of something really meaningful.”

      MIB is one of 220 UK organisations working with PFH to encourage a team approach to charitable giving. Employees choose to donate the pennies from their net monthly salaries to collectively raise pounds which are then donated to the organisation’s charity of choice. In MIB’s case, this is The Children’s Trust.

      Commenting on the Awards, Kate Frost, Director of Pennies from Heaven said: “We would like to congratulate all the Award winners for their dedication and commitment to the scheme over the year and their success in encouraging their colleagues to donate their pennies.

      Despite concerns in the media that charitable giving will suffer in a tougher economic climate, we are particularly pleased to see that this year, 23% more employers have won a Gold Award, where more than 20% of staff are taking part in the scheme.

      These Awards are testament to the success of the PFH scheme in encouraging employers to collectively give a lot, by each giving a little. We continue to work with new companies, introducing Pennies from Heaven as an innovative way to improve their charitable involvement in the workplace beyond traditional payroll giving schemes.

      We want to say thank you to all our members and hope that these Awards inspire even more organisations, staff and pensioners to join us in the future.”

      0 0

      Parabis has announced the key Board appointment of David Neave, as a Non-Executive Director.

      David, who recently announced he was stepping down as Managing Director, General Insurance, of the Co-operative Banking Group, after seven years with the Group, is the first Board appointment to be made since the legal arm of Parabis gained ABS status last Autumn.

      Neave brings more than 30 years’ insurance industry experience to the Parabis Board having spent 25 years with RSA before joining Co-operative Banking Group in 2005.  He has extensive non-executive experience including as Chairman of the Insurance Fraud Bureau, Directorships at the Motor Insurers Bureau, ICMIF and Co-operative Legal Services. In addition, as part of his work with the ABI, he sits on the General Insurance Committee, the Insurance Data Initiatives Board and chairs the Financial Crime Committee.

      “This is a real coup for Parabis and an exciting appointment as we shape our business to meet and anticipate the fast-changing demands of the insurance and legal markets,” said Tim Oliver, CEO of Parabis Group.

      “David’s wealth of experience both at a strategic level and in designing insurance services for evolving markets will be of immeasurable value to Parabis. He has an impressive track record and shares the Parabis vision for innovation and service transformation.”

      David Neave commented: “This is a challenging time for the sector and a very exciting time to be joining the Board of Parabis.  The insurance and legal markets are undergoing major change. Those with real vision prepared to embrace change and innovate for clients can have a real impact on the market. I believe Parabis is just such a group.”

      0 2

      AXA Commercial Lines and Personal Intermediary has signed an exclusive five year capacity deal worth £150m with Prestige Underwriting Services.

      The deal will see AXA provide Prestige with capacity to underwrite non standard household and motor products and ties in with AXA’s stated aim of broadening its footprint in the personal lines market.

      The agreement is an extension to an existing partnership with Prestige which provides a range of non-standard household and motor products to over 500 brokers.

      Karen Hogg, Managing Director, Personal Intermediary at AXA, comments: “We’re delighted to be able to continue working with Prestige as their knowledge and expertise allows us to offer a much wider range of products to customers.

      “One of the reasons that our relationship with Prestige works so well is that it is based on mutual benefits with neither party holding the upper hand and this is exactly the type of relationship we want to establish with all our partners.

      “I am convinced that Prestige is well positioned to continue growing in this particular market, and will support us in being able to offer brokers an extended range of insurance products, and extend our reach into niche markets.”

      Trevor Shaw, Managing Director at Prestige, comments: “Prestige has enjoyed a strong business relationship with AXA and we are delighted to confirm this five year agreement to provide capacity for Prestige household and motor products. This agreement reflects the tremendous commitment and energy of the people in our respective business teams and will allow us to provide continued support to our existing panel of brokers as well as extending our reach to new brokers throughout the United Kingdom.”

      0 1

      Xchanging, the business process, procurement and technology services provider and integrator has appointed Sean Norris as director to head the recently launched global net settlement platform Netsett.

      Netsett, the result of a partnership between Xchanging and Deutsche Bank, went live in December 2012 with the stated aim of transforming the way in which global insurers and brokers transact financial settlements.

      Norris joins Xchanging from Brit Insurance where he was head of group services. Norris brings a strong background in risk, credit and cash management and general business operations in the company, reinsurance and Lloyd’s markets.  At Brit Norris developed and implemented market-leading centralised operational platforms and this, plus other broad ranging industry experience, will help progress Netsett through the initial development lifecycle and beyond.

      Norris joins following Netsett’s successful completion of its first netting cycle for a live client. Sean will be supported in his role by the existing team of Richard West as Netsett business development director, Steve Robertson as Global Insurance commercial director and Tony Willis as overall program manager, working in partnership with Deutsche Bank.

      Max Pell, managing director of Xchanging’s UK insurance business said: “We are delighted to have someone of Sean’s calibre join Xchanging to lead Netsett. His deep understanding and insight into the customer issues that Netsett is looking to resolve will be of tremendous value to those customers and the development of Netsett itself.”

      0 4

      The first “Big Money Index” of 2013 from AXA finds that on top of two years of ‘significant cutbacks’, the next year will force extreme cost-cutting measures on many consumers. Almost two-thirds (64 per cent) of consumers said their purchasing behaviour has changed significantly over two years and one in four believe they face a huge compromise in 2013.

      AXA’s twice-yearly report presents a snapshot of financial confidence, behaviour and attitudes as well as views on topical money issues among eight demographic groups.

      Already economising to the hilt, 25 per cent of consumers admit they are now ‘in real danger of being forced to make major lifestyle changes in the next 12 months due to financial issues’, such as moving to a cheaper house, giving up a car, holiday or children’s private education or even delaying marriage, children or retirement. Consequently, AXA urges brokers to warn customers thinking of cutting back on insurance of the possible consequences.

      Just 18 per cent felt their financial situation would improve in the long-term (rising to a happier 32 per cent among the ever-buoyant younger working sectors of the population) with many consumers feeling forced to put the brakes on saving simply to survive. Almost one in five (18 per cent) had stopped putting money into savings altogether by the end of 2012.

      Matthew Reed, Managing Director, Intermediary at AXA Commercial Lines and Personal Intermediary said: “Cutting back on insurance can seem like an easy way of saving some money from the household budget. But it can be a false economy if something then happens, such as a burst pipe, or car accident. Consumers could then face a huge bill, even more than the cost of the insurance paid out in the first place.

      “Therefore, as consumers are struggling to get their finances in control, it is a crucial time for brokers to get in touch with existing customers, as well as new ones to help review their finances, and look at their insurance needs. This could alert brokers to any potentially dangerous decisions but could also result in their clients being able to save a few crucial pounds.”

      The impact is harsh: one in six (16 per cent) of the UK’s working population admit they would simply “not be able to cover” their financial outgoings for the next three months if they lost their job today, whileone in fivegot into more debt as they “simply could not survive without a large overdraft facility or credit card”.

      Scrimping where they can, consumers looked to their household budgets and continued to cut back on the necessities. Even as winter hit, one in five (20 per cent) cut back on using oil, gas and electricity, rising to 35 per cent of Under-funded Seniors. When asked which ONE measure in the Chancellor’s Budget this month would help them most, over a quarter (27 per cent) of respondents chose a freeze on consumption taxes such as fuel duty.

      More than one in five (22 per cent) also cut back on food spending, which came close to doubling among The Stretched at 41 per cent. Even the more affluent groups found themselves beginning to change their shopping habits, with more than one in 10 (11 per cent) now going to Pound Shops.

      Money (mis-) management: blame the parents?

      Consumers felt there was a clear need for people to take more financial responsibility – and that parents should play a more prominent role in equipping them. Indeed, more than half (52 per cent) of 25-34 year-olds said the reason for people struggling to stay afloat was not being taught money management skills by parents. Across all groups, 43 per cent believed people are too disorganised and over a third (38 per cent) blamed lack of money management teaching at school.

      Donna Dawson, psychologist specialising in personality and behaviour, commented: “The harsh economic times can make strange bedfellows: even those considered ‘affluent’, are now rubbing shoulders with those considered less well-off in the discount shops and supermarkets along the High Street. There is now a sense that all levels of society are facing the same pain of cutbacks, the same struggle to make ends meet, and the same uncertainty about the future. There is a more communal feel to hardship, reminiscent of the war years, when we were ‘all in it together’. Not feeling alone in financial hardship makes it easier to bear, and allows individuals to develop a better understanding and a more compassionate attitude towards each other.”

      0 0

      The British Property Federation has today welcomed an independent review of pre-pack administrations.

      The review, announced by ministers this week, comes as figures reveal that 85% of pre-packs are so-called “Phoenix” deals, where a troubled company is brought out of administration by its existing owners or management. In all pre-packs creditors receive no information on the sale of the troubled company before a deal is done, and therefore particularly in phoenix deals it provides scope for existing owners or managers to shed liabilities and potentially buy back the business at below its value.

      The BPF has argued that the insolvency industry had so far failed to improve the pre-pack process through self regulation, making a full review vital.

      British Property Federation Chief Executive Liz Peace said: “Landlords absolutely support an entrepreneurial rescue culture, but this must be applied fairly to all sides. Landlords are businesses too – from SMEs on the high street to the giant pension funds and listed companies who invest for our retirement.

      “This review will provide an opportunity for our industry’s long-standing concerns to be raised. We were disappointed, though not totally surprised, when the Government ruled out legislative checks and balances on pre-packs last year in favour of self-regulation.

      “However, the insolvency profession’s attempt at improving the self-regulation of pre-packs is now overdue by months, raising serious concerns about its ability to self-regulate, and so an independent review is timely.”

      A pre-pack is a fast-track administration that avoids a failing business being sold on the open market. An insolvency practitioner instead lines up an advance purchaser to take over the profitable parts of the business, with the company going into administration simultaneously. Retail failures including Game, Blacks and La Senza were snapped up in this manner.

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