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RICS : the change in climate can cost businesses up to £355m extra a year

Industry News

Mar 17, 2012

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The annual electricity bill for the business sector could rise by hundreds of millions of pounds by 2030 as a result of climate change, warns RICS.

The RICS research report reveals that by 2030, it could cost up to £355m extra a year in electricity to run the UK’s warehouses. The retail sector and office-based businesses could be paying more than £250m with buildings relying on air conditioning for cooling being more vulnerable to price increases.

It is forecasted that hotter summers and more extreme weather will force occupiers across the country to use significantly more electricity to run their buildings – with businesses using warehouses and the retail sector being the hit the hardest.

The RICS research undertaken by Sturgis Carbon profiling was commissioned to measure the impact of climate change on future energy demand in commercial buildings.

It shows that the average commercial property is ill-equipped to cope with the change in climate – with summer temperatures throughout most of the UK predicted to be up to two degrees higher by 2030 and up to two degrees cooler in the winter.

By 2030 a commercial property of around 2,500 square metres in London can expect to pay more than £5,000 per year in electricity alone – having a significant impact on the environment and in business spend and investment.

The report highlights that it is London’s commercial properties that will incur the largest increase in electricity demand with the subsequent cost expected to rise to an additional £3.20 per square metre, compared to approximately £2.87 per square metre in Newcastle.

The report also reveals that some of Britain’s business buildings could become obsolete by 2030 as the cost of refurbishing current buildings to cope with the impact of climate change may run into hundreds of thousands of pounds.

Martin Russell-Croucher, RICS Director of Sustainability and Special Projects, commented:

“Many of Britain’s current commercial buildings as they are, are just not energy efficient and suitably equipped to cope with the future predicted changes in climate. Many existing properties may become too pricy to run and unsuitable to provide employees with the right conditions to work.

“It is important that property professionals and businesses understand how they can and should adapt, and maintain their buildings now to ensure they are not only cost efficient but also sustainable for generations to come. Failure to do so, can result in electricity costs spiraling out of control.”

An analysis of the current energy consumption of more than 60,000 non-domestic buildings across the country revealed that a building’s function, design and technology and external temperature and climate volatility all play an essential role in driving electricity demand and use.

Alongside the expected temperature increases – it is the volatility between more extreme cold and warm weather that will have the greatest impact on electricity demand as more power is used to maintain a ‘comfortable environment’ for employees, school pupils and hospital patients.

Prudential : Asian insurance demand lifts Prudential profits

Financial News

Mar 14, 2012

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Britain’s biggest insurer Prudential on Tuesday announced a small rise in annual net profits to £1.49 billion on strong Asian demand and posted a rosy outlook ahead of stricter European regulation.

Prudential, the country’s largest insurer by market value, said in a results statement that profit after tax climbed four per cent to £1.49 billion (1.77 billion euros, $2.33 billion) in 2011, compared with £1.43 billion in 2010.

“Prudential has delivered another strong performance in 2011 led by Asia,” chief executive Tidjane Thiam said in the earnings release.

“The heart of our strategy remains Asia, where our positive momentum has been maintained in 2011 …. Asia is generating both growth and cash and our focus on the fast-growing markets of South-East Asia continues to pay off.”

Thiam added that the company was on track to deliver its profit growth and cash generation objectives going forward.

“In this uncertain macroeconomic environment, our clear strategy and the strength of our products and distribution — combined with our balanced portfolio of businesses and market-leading positions in Asia — mean we are well positioned to deliver continued relative outperformance in the medium-term.”

Prudential said on Tuesday that group operating profit, or earnings before tax and interest payments, grew 7.0 per cent to £2.07 billion in 2011, beating analyst expectations.

Thiam added that for the first time, Prudential’s life insurance business in Asia was the single largest contributor to the group’s operating profit total.

“Since 2008, Asia’s contribution to this benchmark profit measure has almost trebled from £257 million to £709 million,” he added.

There has been long-running media speculation that Prudential could switch its headquarters from London to Asia, where the group makes about 45 per cent of its total sales. Ahead of its latest earnings update, Prudential last month said that it was looking at possibly moving its base to avoid new European capital requirement regulations for the insurance sector.

On Tuesday, the company repeated its opposition to aspects of the reforms. “Solvency II, which is currently anticipated to be implemented from 1 January 2014, represents a major overhaul of the capital adequacy regime for European insurers,” Prudential said in its statement.

“We are supportive in principle of the development of a more risk-based approach to capital but we have concerns about the potential consequences of some aspects of the Solvency II regime under consideration (…) Lack of certainty over the policy content and timetable continues to impede the industry’s ability to prepare fully for the new regime,” it said.

Prudential meanwhile added on Tuesday that it would pay a full-year dividend of 25.19 pence a share, up 5.6 per cent compared with 2010. The group’s shares rallied 1.99 per cent to 742.02 pence in afternoon deals on London’s FTSE 100 index, which was higher.

“The Asian business today became the largest contributor to earnings for the first time, and underlined that the company is well positioned in several of the region’s strongest markets,” noted Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.

“The strategy to fund this expansion from the fruits of its profits elsewhere is vindication of having a strong geographical diversity, whilst the general cash position looks increasingly solid.”

London, March 13, 2012 (AFP)

Promotions in Arista to drive further schemes success

Social

Mar 14, 2012

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Commercial lines underwriting specialist, Arista Insurance, has promoted Andrew Ball to head up its schemes division and appointed Mark Ellinor to the newly created role of schemes product manager.

Andrew, who has been with Arista since 2008 and has worked in the insurance industry for 39 years, has seen his role expanded to include overall responsibility for schemes business.

Arista has further strengthened the management of it schemes business by hiring Mark Ellinor to support Andrew as schemes product manager. Mark Ellinor brings 19 years experience to the role and joins Arista from Legal and General.

In line with broker demand, schemes will continue to be a core part of Arista’s operations. With this new schemes team in place, Arista has the appropriate personnel and range of services required to meet ambitious schemes targets and maintain the speed and quality of delivery as this channel grows.

Commenting on the changes, Arista CEO, Charles Earle, said: “We are delighted to welcome Mark Ellinor and to announce that Andrew’s talents will be put to even greater use in his expanded role. Both directly support and facilitate our ambition to develop and build Arista’s schemes business. Andrew’s extensive experience will ensure Arista’s excellence in supporting the needs of Arista’s broker partners as well as building new broker relationships across the UK.”

Arista currently services over 360 brokers from its network of offices in London, St Albans, Bristol, Southampton, Redhill, Manchester, Leeds and Birmingham.

Prudential is considering moving its headquarters out of the UK

Industry News

Feb 27, 2012

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British insurer Prudential said Monday that it was considering switching its headquarters out of London to avoid new European capital requirement regulations for the insurance sector.

There has been long-running media speculation that Prudential could switch to Asia, where the group makes about 45 per cent of its total sales.

“Prudential notes recent press speculation in relation to the group,” it said in an official statement. The London-listed company is worried about the potential impact of an upcoming European capital regime for insurers called Solvency II.

“Prudential regularly reviews its range of options to maximise the strategic flexibility of the group,” it said.

“This includes consideration of optimising the group’s domicile, including as a possible response to an adverse outcome on Solvency II.

“There continues to be uncertainty in relation to the implementation of Solvency II and implications for the group’s businesses. Clarity on this issue is not expected in the near term.”

London, Feb 27, 2012 (AFP)

Plum Underwriting : back to broker training events double in size

Communication

Feb 27, 2012

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Non-standard specialist Plum Underwriting has doubled the size of its Back To The Broker training events. The latest, held in Birmingham hosted over 40 attendees from 20 broking firms, double the number of attendees present at the last event in Bristol in November and the first event in London in June last year. Plum plans to continue expanding the national open-forum event to meet broker demand.

Back to the Broker aims to enhance brokers’ ability to cater for non-standard household insurance risks. The events include case-studies to highlight live examples of the difficulty those with non-standard risk profiles face in obtaining insurance in the standard market. In the event brokers can quiz speakers in more depth about the issues raised. Attending brokers are awarded CPD points for participating, and all post-session feedback provided by brokers has a direct bearing on the products and services Plum offers.

Plum managing director David Whitaker said: “The Back to the Broker events are part of our commitment to brokers, helping them gain a sharper understanding of how to respond to the demand for non-standard risks. By creating a knowledge-sharing environment, Plum seeks to add job-useful value to brokers and build closer working relationships with them for mutual benefit and for that of end policyholders. It is fantastic to see the popularity of this initiative has led us to up the scale of the events”.

Plum Underwriting : strong demand from brokers for home insurance products

Market

Feb 20, 2012

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Continuing growth in the number of people struggling to obtain cover is feeding strong demand from brokers for the home insurance products provided by Plum Underwriting Limited. As a result Plum sales have more than doubled over the past twelve months to a five year high.

Demand for both Plum Flex – which caters for risks involving non-standard construction, flood risk, subsidence, adverse claims histories, previous convictions, bankruptcy, non-standard occupations and irregular occupancy – and Plum HomeWorks, Plum’s specialist cover for properties undergoing substantial alteration or renovation have trebled.

Commenting on the results, Plum Managing Director David Whitaker said: “With mainstream insurers and the aggregators focusing on less complex ‘standard’ risks, and tightening their risk acceptance criteria and underwriting parameters, they are excluding an ever increasing number of homeowners.

“Our success is built on our ability to help brokers meet the needs of what is essentially a growing ‘insurance underclass’. We do this by providing a highly individual, accessible service underpinned by a real commitment to delivering a ‘traditional’ approach to underwriting and top-quality service and support.

“By focusing more on the non-standard marketplace brokers have a real opportunity to win new business, from clients who will really value the advice and support which an experienced broker can provide. At the same time we recognise that the general economic outlook means that 2012 is going to be a particularly challenging year, so we will be redoubling our efforts to help them to provide the products service and cover their clients require.”

In an independent nationwide service survey last week, brokers voted Plum the best personal lines insurer for underwriting flexibility.

Aon form Security Consulting Practice

International

Feb 10, 2012

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Aon Fire Protection Engineering (FPE) today announced the formation of its Security Consulting Practice and the appointment of Sean A. Ahrans as global leader of the project.

According to Mark Rochholz, chief operating officer of Aon FPE, “Security consulting is a logical extension of our core services of fire protection, life safety and building code consulting.

“As security has become an ever-growing concern for many organizations over the past decade and they continue to face countless internal and external threats, the timing is right to expand our investment in this area. I am confident in Sean’s leadership and his team’s capabilities to drive value for our clients by taking proactive steps to address today’s needs and tomorrow’s uncertainties.”

With more than 19 years of security experience, Ahrens joined Aon FPE as a security consultant in 2003. He holds a master’s degree in security and organizational management from Webster University as well as numerous security-related designations.

During his time at Aon FPE, Ahrens was primarily responsible for the marketing and delivery of security services. He played a crucial role on some of Aon FPE’s largest, most complex projects worldwide, successfully tailoring global security services to meet the needs of clients and their organizational goals, whether in the U.S., Asia-Pacific, Europe, Middle East or Africa.

In his new role, Ahrens is responsible for the management of Aon FPE’s Security Consulting Practice, from client service strategies to personnel, marketing and business development.

Under Ahrens’ direction, the Security Consulting Practice will focus on offering robust operational consulting and tailored security system design services for a wide range of facility types. Thought leadership and innovation will be delivered to clients through services such as benchmarking, risk and security assessments, targeted workplace violence assessments, organizational reviews, security program development, security systems design, force protection planning and Crime Prevention through Environmental Design.

Increased minor events, but no single major natural loss for Jan : Aon

International

Feb 8, 2012

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Despite dozens of notable events occuring in January costing the insurance industry millions of pounds, the month of January saw no single major loss event.

The news came in Aon Benfield’s latest Global Catastrophe Recap report, which analyses the natural disaster perils that occurred worldwide during January. The report was released on Wednesday.

A few of the most notable events outlined in the report include:

Windstorm Ulli. In the United Kingdom and Scandinavia, windstorm Ulli killed at least two people early in the month and caused widespread damage. Thousands of insurance claims were filed in the affected regions, with total insured losses estimated at approximately £200 million.

Freezing temperatures. Elsewhere in Europe, prolonged low temperatures killed at least 306 people in the east of the continent, while in Japan, heavy snowfall from a series of winter storms killed at least 56 people and injured 750 others, with the hardest-hit areas comprising Akita, Niigata, Nagano and Aomori.

Winter storms. The United States endured widespread multiple winter storms during January, with heavy snow and freezing rain in parts of Oregon and Washington, that caused total damages estimated to be well above USD50 million.

Steve Jakubowski, President of Impact Forecasting, commented on the events, “Following an extremely active 2011, this year has already seen an elevated number of natural disaster events. However, contrary to last year, 2012 has thus far lacked what we would term a significant event.

“Severe winter weather impacted many countries during January, and we would expect this trend to continue into February across the Northern Hemisphere.

“Climatology and the current La Nina phase suggest that heavy rainfall and tropical cyclones are a threat for the Southern Hemisphere, especially after Cyclone Yasi’s landfall and flooding across parts of Australia last year during the months of January and February.”

Meanwhile, a rare January tornado outbreak caused widespread damage to portions of Alabama, Arkansas and Mississippi, with total economic losses anticipated to exceed USD100 million and insured losses in Alabama alone expected to be at least USD30 million. The number of tornado touchdowns during the month made 2012 the third-most active January since official records began in 1950.

Severe weather was also prevalent in parts of Indonesia, where separate events led to widespread damage and fatalities. The first event swept through Jakarta, where total damages were recorded at IDR270 billion (USD30 million), and a event saw a tornado kill at least 14 people and destroy more than 2,000 homes in the provinces of Jakarta, Central Java, East Java and West Java.

Flooding and landslides caused damage and fatalities in multiple continents, with the countries of Fiji, Papua New Guinea, Australia, Brazil, Mozambique and South Africa all sustaining effects. Tropical Cyclone Funso brought torrential rains and gusty winds to Mozambique, though never officially making landfall. At least 30 people were killed and tens of thousands of homes were affected.

Europe Assistance to leave group

Industry News

Jan 31, 2012

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Europe Assistance has announced the intention to become an independent entity after an agreement was reached for a management buy out.

The company will continue to offer full underwriting services against all existing lines of business and will retain access to Europ Assistance Group’s worldwide network.

The development aims at allowing greater flexibility to focus on the development of new and innovative solutions.

The firm will be managed by the current Chief Executive Officer Patrick Leroy, supported by the current management team. Tim Ablett takes the role of company Chairman.

Commenting on the new independent company, Patrick Leroy said, “I am delighted by the opportunity to lead the new organisation. The new structure will enable us to continue to support our existing clients and gives us the flexibility to develop new and innovative services.”

S&P affirm German Talanx after acuisition

International

Jan 24, 2012

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Standard and Poor’s today affirmed their ‘A+’ rating on German insurer Talanx, after the company announced a complete acquisition of Polish based Towarzystwo Ubezpieczen i Reasekuracji WARTA S.A (Warta).

The agency also affirmed their current ‘A-‘ rating of the parent company. Both outlooks are stable.

Once the acquisition of Warta, worth around €770 million, is closed Talanx’s strategic partner Meiji Yasuda will take over 30% of WARTA’s shares.

Standard and Poor’s didn’t seem very confident about the short term success of the deal, predicting capitalisation will deteriorate to around the ‘A’ range this year. However, they continue to say this would be a temporary drop and the company would bounce back to around the ‘AA’ range in 2013.

The ratings agency commented, “We believe the impact of the transaction on TPG’s financial leverage would be moderate.

“We expect the financial leverage would increase to about 23% in 2012 from about 21% in 2011, which we consider well in line with the current rating level.

“Operational execution risk exists, in particular, in view of Warta’s relatively large size and given integration risk of combining several other acquisitions that Talanx executed in 2011.”

Poland is one of Tanalx Groups main targets for development. Standard and Poor’s says the acquisition will be helpful in achieving this, “significantly improving Talanx’s presence” in the area. The agency predicted the deal will thrust Talanx will into the second position in Poland.

While they predicted a lower capitalisation for next year, the ratings agency expects strong earnings, with EBIT of €650 million to €700 million and an ROE of 8%-10%.

Fitch: ratings movements

Industry News

Jan 18, 2012

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(From Fitch Ratings)

Fitch Ratings has affirmed Old Mutual PLC’s (Old Mutual) ‘A-‘ Long-term IDR and Old Mutual Life Assurance Company (South Africa) and Skandia Life Assurance Company Ltd’s IFS and IDRs. The agency has also revised the Outlooks on the group’s International scale IDRs and IFS ratings to Negative from Stable. A full list of ratings actions is at the end of this comment.

The rating actions follow the affirmation of South Africa’s Long-term foreign and local currency IDRs at ‘BBB+’ and ‘A’ respectively and the revision of the Outlooks on the ratings to Negative from Stable. Around two-thirds of Old Mutual’s IFRS group operating earnings come from South Africa, with the remainder largely from the UK and the Nordic region.

A downgrade of South Africa’s Long-term foreign or local currency IDR could trigger a downgrade of Old Mutual’s ratings. A downgrade could also result from a lack of progress by Old Mutual towards hard currency interest cover of at least 3x, or if there is greater-than-expected earnings pressure on its South African operations from weak consumer confidence and recessionary fears. Given that Fitch expects Old Mutual’s hard currency interest cover to remain under 3x in the short term, an upgrade is unlikely at present.

The rating actions are as follows:

Old Mutual plc

Long-term IDR: Affirmed ‘A-‘; Outlook revised to Negative from Stable

Senior unsecured debt: Affirmed at ‘BBB+’

Lower Tier 2 subordinated debt:

EUR750m 4.5% subordinated notes due 2017 (XS0282807428): Affirmed at ‘BBB’

GBP500m 8% subordinated notes due 2021 (XS0632932538): Affirmed at ‘BBB-‘

Upper Tier 2 subordinated debt:

EUR500m 5% subordinated notes undated (XS0234284668): Affirmed at ‘BBB-‘

Tier 1 subordinated debt:

GBP350m 6.376% perpetual callable securities (XS0215556142): Affirmed at ‘BBB-‘

Short-term IDR and commercial paper: affirmed at ‘F2’

Old Mutual Capital Funding L.P.

USD750m 8% guaranteed cumulative perpetual preferred securities (XS0168687100): Affirmed at ‘BBB-‘

Old Mutual Life Assurance Company (South Africa)

National IFS rating: Affirmed at ‘AAA(zaf)’; Outlook Stable

National Long-term rating: Affirmed ‘AAA(zaf)’; Outlook Stable

Subordinated debt: ZAR3bn callable notes (ZAG000026816): Affirmed at ‘AA(zaf)’

Skandia Life Assurance Company Ltd

IFS rating: Affirmed at ‘A+’; Outlook revised to Negative from Stable

Long-term IDR: Affirmed at ‘A’; Outlook revised to Negative from Stable

ClusterSeven : data control standardisation needed

Industry News

Jan 11, 2012

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Only one in five actuaries and insurance finance professionals are confident of their firm’s data control processes, in particular the handling of spreadsheets, according research by ClusterSeven. Two in five respondents stated that controls around spreadsheet access could be improved and 13% said they are simply not confident at all about the oversight process behind spreadsheets.

According to the research, only 28% of people believe there is enough information for others to manage their spreadsheets in case of their absence. 19% went so far as to say that a qualified actuary would have to rebuild spreadsheets given a lack of basic continuity protocols.

The study highlights how exposed modern financial institutions are to data risks, as demands placed on their spreadsheet-based systems have expanded.

“A core thrust of the research was to calculate how exposed respondents felt they and their companies were to spreadsheet risks and the overall transparency and accessibility of their data management systems,” said Ralph Baxter, CEO of ClusterSeven.

“Actuaries hold the keys to excellence in data management and the spreadsheets that underpin data processes. Here, the survey indicated that people had real concerns about the inability of other qualified individuals to understand their company’s spreadsheets and the lack of standardisation of data management.”

The survey also found that 49% of respondents use spreadsheets more than any other software application for modeling, data management and reporting activities, including 9% that solely use spreadsheets for these activities. Only 16% of respondents said they either did not use spreadsheets at all, or used them less than other applications. This means that 84% of the insurance risk management analysis supporting pensions and policies are significantly or entirely dependent on spreadsheets.

Baxter added, “Overall one in five respondents rated spreadsheet risk very serious while a further 31% put it as fairly serious. This is a stark indication of just how important this issue has now become to the insurance profession.”

A.M. Best : global reinsurance segment stable

Industry News

Jan 10, 2012

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Despite numerous challenges facing the market, A.M. Best has affirmed the global reinsurance segment as stable. The company sited strong risk-adjusted capitalisation, prudent enterprise risk management practices and an improving pricing environment across a broadening spectrum of business classes as the reasons for the decision.

The company said because of these factors, the industry will be able to navigate and handle future obstacles that arise as a result of the uncertain and turbulent global economy.

“What [reinsurers] have demonstrated over the past several years is that their enterprise risk management processes have been working very very well and to a great deal have enabled them to maintain their financial strength through a very difficult operating climate,” A.M. Best Co. Vice President Bob DeRose said in an interview.

“It’s going to continue to be a challenging market environment. We are seeing some positive signs – we think that the pricing momentum is certainly gaining in the property arena and encouragingly we’re seeing a flattening in casualty pricing as well.”

Insurance claims rejected after storms

Industry News

Jan 9, 2012

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Claims relating to last weeks storms could be turned down if customers don’t have the right policies, a number of large insurers reported last week.

The warning comes after windstorm Andrea crossed the UK last week, bringing with it gale force winds which took down trees, cut power and disrupted travel. Insurers reported huge increases in claims numbers with Direct Line having it’s busiest day in five years and Co-operative having more claims on Tuesday than it expected for the entire January.

Carmel McCarthy from More Than warned of the importance of knowing what your policy covers.

“Some policies may not cover damage to gates, fences or contents in the open such as garden ornaments so it’s important to check what cover you have in place,” he said.

It’s also important to have the right claims limit on your policy, especially if you have expensive garden equipment or ornaments. A policy with seemingly huge cover for storm damage wont be as good if you have items valued above your claims limit.

Another area where customers are having claims rejected is where there is evidence that an item was not maintained before the storm damage.

Lee Mooney of Co-operative Insurance, said: “Although most insurers review claims on a case-by-case basis, sometimes home insurance won’t cover for loose items such as tiles or fencing when necessary arrangements to maintain these properly were not made before the storm.”

To make sure you don’t have any trouble with claiming, you should ensure that your property is in good order and there is no pre-existing damage. If further storms are forecast, it is a good idea to lock away any loose items that you may have in the garden.

Mr Mooney continued to say these precautions would be useless, however, if you don’t have the right insurance in the first place.

“Bad weather like we’re experiencing reminds us how vital it is to protect our homes with insurance. All too often we go for the cheapest policy rather than checking which one offers the best level of cover.”

Moodys affirms Girbraltar Life’s IFS after merger

International

Jan 4, 2012

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Moody’s has affirmed the A2 insurance financial strength (IFS) rating of Gibraltar Life Insurance following its merger with AIG Edison and AIG Star Life. The rating outlook of Gibraltar Life remains positive.

At the same time, Moody’s affirmed and withdrew the IFS rating of AIG Edison because of a reorganisation of the company and its merger into Gibraltar Life. Early in 2011 Gibraltar Life’s parent company, Prudential, completed an acquisition of AIG Edison and AIG Star.

In their rational, Moody’s said they affirmed their rating because the consolidated company’s credit situation after the merger remained essentially the same as the individual companies. In saying this, Moody’s also recognised the improved business profile of the group as a result of the merger, which was their reason for the positive outlook.

The ratings company went on to predict the consolidated company will continue to see healthy growth in the new year.

“Following the merger, Gibraltar Life’s market share will increase by maintaining the business base of the three insurers which do not overlap with each other,” Moody’s said in their report.

The ratings company also said that, in the short term, the deal would actually weaken Gibraltar Life’s asset quality, but “the continued rebalancing of the combined investment portfolio should help improve asset quality over time.”

Fitch : Japanese marger won’t effect ratings

International

Dec 22, 2011

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Fitch Ratings has said that there will be “limited immediate impact” on ratings after Tokio Marine Holdings Inc. (Tokio Marine) announced it’s plans to buy Delphi Financial Group.

Japanese insurance giant Tokio Marine has agreed to pay JPY200 billion (GBP1.6 billion) in cash for Delphi Financial Group Inc., an American based insurance company.

The agency said there would be little effect on ratings because despite how big the deal may seem, it is small compared with Tokio Merine’s net assets of JPY1,806bn, shareholders’ equity of JPY1,238bn and cash and equivalent of JPY711bn.

The deal will be beneficial for Tokio Marine’s credit profile over the medium term because of Delphi’s strong market position in the US, Fitch said. Because Delphi specialises in areas with limited exposure to natural catastrophes, it will broaden Tokyo Marines risk profile and increase the groups overseas earnings.

Fitch was very confident about the merger, saying, “the acquisition should enhance Tokio Marine Group’s global diversification by increasing overseas adjusted earnings to about 46% of the group’s total, compared with the current 37%. Negative impact [for Tokio Marine] in terms of capital adequacy and leverage is likely to be limited.”

European insurers worse off now than 6 months ago

Industry News

Dec 22, 2011

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European insurance companies are more exposed to financial risk than at the beginning of 2011, a report showed today.

In it’s twice yearly report on financial stability in the insurance and occupational pension fund sectors, the European Insurance and Occupational Pensions Authority (EIOPA) found that risks in the sector “are at high levels, and are more pronounced than the first half of 2011.”

Exposure to sovereign and banking debt as well as the macroeconomic outlook were the two main driving factors of the weakening, EIOPA said.

The watchdog also reported poor results on ‘stress tests’ which it conducted on the sector.

The tests were conducted using two different interest rate scenarios. Eight insurance companies failed the first scenario and four firms failed the second one, the watchdog said.

EIOPA reported that the solvency position of the industry on average would be “adversely affected” by a prolonged period of low yields.

Significant natural catastrophes over the past year had let to “above-average losses” for insurers, it explained.

Summing up, EIOPA said that while the financial turmoil has had an impact on pension funds and insurance, it has in not affected them as severely as some other financial industries.

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