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Recent stress tests carried out in Europe show most European banks have enough capital and don’t need additional capital buffers to withstand the current crisis, BNP Paribas Chairman Michel Pebereau said Monday.

Stress tests carried out at the European level at the end of July “don’t obviously show that the European banking system as a whole needs more capital,” Pebereau told a conference organized by Paris-based think-tank Institut Montaigne.

Pebereau said most of the banks scrutinized by the new European banking regulator passed these tests, with only eight out of a total of 90 banks tested failing them.

Pebereau’s comments come as recent remarks by the new International Monetary Fund managing director, former French finance minister Christine Lagarde, have raised eyebrows among large banks. She has called for banks to bolster their capital buffers in the face of the ongoing sovereign debt crisis in the euro zone.

Several banking officials pointed out after Lagarde’s comments that most global banks have already undergone a round of recapitalization in the wake of the 2008 financial crisis.

Even as he recognized that “utter transparency” and more oversight on banks is needed, Pebereau said efforts to better police the global financial system shouldn’t hinder credit to the economy.

In particular, he repeated his opposition to a capital surcharge being slapped on systemic banks–a measure that is recommended by the Financial Stability Board, the body advising the Group of 20 industrialized and emerging nations on financial reform.

Instead, Pebereau said, systemic banks should be subjected to tighter supervision.

Pebereau also warned against implementing new envisaged liquidity rules for banks without further assessing potential risks related to the new standards. Under the Basel-III framework, banks will be required to hold more government bonds as part of their most liquid assets.

“We have to know whether when banks are holding government bonds, investors think that they are in danger,” he said.

Paris, September 5, 2011, (Dow Jones)

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Deutsche Bank AG Chief Executive Josef Ackermann said Monday that many European banks wouldn’t be able to absorb losses from sovereign bonds if the securities were valued in line with market prices, but insisted that a forced recapitalization of the sector isn’t needed.

“It is obvious, not to say commonplace, that many European banks wouldn’t cope with having to mark the sovereign debt held in their banking book down to market value,” Ackermann told a banking conference.

He said this was why support was put in place by the European Union for troubled states and that the forced recapitalization of European banks would send a signal that politicians no longer had faith in the measures they themselves initiated.

International Monetary Fund Managing Director Christine Lagarde in late August called for the urgent recapitalization of European banks. The proposal stirred a mixed reaction from banks, regulators and analysts.

The European Commission said it saw no current need for additional support for the region’s banks and that this discussion had already taken place between the EU and the IMF.

The European Banking Authority confirmed that it was sending its views to European Union institutions on various “policy options” for helping Europe’s banks, but didn’t confirm a report by Financial Times Deutschland that its recommendations included the direct recapitalization of individual banks by the European Financial Stability Facility.

The German and French banking associations rejected the proposal of a direct financial injection into banks by the EFSF. Meanwhile, the British Bankers’ Association said it was apparent that banks in some European countries must raise fresh capital, whether through the EFSF or other sources, to complete the reparation of the European banking system that has largely already taken place in the U.K. and U.S. since the financial crisis. Analysts said the forced recapitalization should be limited to peripheral euro-zone banks.

Frankfurt, September 5, 2011, (Dow Jones)

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The Access to Justice Action Group, AJAG, has published a robust rebuttal of the Association of British insurers’ (ABI) arguments in favour of the LASPO Bill.

AJAG Co-ordinator Andrew Dismore said:

“The ABI is in overdrive in its well-financed campaign to blame the public, lawyers and the government for rises in insurance premiums: everyone but themselves. But there is another side to the story they do not tell. The insurers want to be their own judge and jury. The present system protects claimants and ensures they receive what the law says they are entitled to, not what the insurance company says it is prepared to pay.

 “The government’s proposals promoted by the ABI will affect access to justice for up to 600,000 people a year. The government acknowledges, in terms, that the winners will be the insurance companies (and their shareholders) and the losers will be claimants. The number of genuine claims will fall by 25%.

 “The no win, no fee system that the ABI and Government want to abolish helps not just road accident victims. It is the main, and often only, recourse available to victims of breaches of privacy like phone hacking, those who have suffered from professional negligence, victims of asbestos poisoning, the families of those killed at work, consumers, small businesses, those seeking to recover debts, victims of medical malpractice, victims of environmental damage including from the developing world, people seeking judicial review of unfair official decisions, whistleblowers, and those acting in the public interest such as  exposing scandals like MPs expenses. In their determination to cut the rights of road accident victims, the ABI would deny all these others their rights too.

 “There is no compensation culture. The reality is that 23% of road accident victims do not bother to claim and only 52% claim for an accident at work, even when they each know another person is to blame. The biggest barriers claimants identify are fears of legal costs and inadequate compensation levels, set to be made worse by the Bill.

 “While the ABI routinely allege fraud, the proven number of cases is comparatively small. The Experian Fraud Index confirmed the real figures: only 12 in every 10,000 applications and claims; and there is the other side of the coin, when insurers allege spurious or fraudulent defences to deny claimants rightful compensation.

 “If the lawyers and ATE providers, whose margins are tight, are branded fat cats, then the liability insurers are clinically obese!  A mere 20 liability insurers have cornered 94.6% of the motor liability market. Admiral, almost exclusively motor, recorded a pre-tax profit of £266m for 2010, up 23% on 2009 (£216m.) and a further increase of 29% after tax in the first half of this year, as their turnover surged 53% to £1.1billion – yet they still increased premiums by 11%. Huge amounts in free shares were paid as staff bonuses.

 “Although they complain about the impact of claims, the liability insurers have not indicated by how much they would reduce premiums, or even that premiums would be reduced at all, if the changes they demand are implemented. Indeed, there is evidence that premiums may actually increase. Insurance premiums have never gone down after a reform or major court victory in the insurance industry’s favour.

 “The ABI says that a claimant doesn’t need a lawyer, as their offers are fair and should be accepted, cutting costs. But 33% of claims need court proceedings to get a satisfactory offer. In 47% of cases, the insurers’ offer was inadequate; and 2% needed a full court judgment to get a fair sum. The Personal Injury Bar Association (PIBA) found that in 99% of 1349 cases where offers were made on the basis of the insurers’ computer model, the claimant beat the offer.

 “Cases only go to court when the insurers deny liability or refuse to pay adequate compensation. The insurers have only themselves to blame for legal costs: if they accept liability and make early reasonable offers, then the costs are contained. As three senior costs judges wrote in response to the consultation: ‘the fault lies with defendants such as these and not with the recoverability regime as a whole.’

 “Success fees, which the ABI wants abolished, provide the swings and roundabouts in the system, averaging costs across the caseload, which enables meritorious but problematical or difficult cases to be investigated and pursued. This includes important test cases on appeal, as often as not defending insurers’ picked appeals on major points of law (where the claimant has little choice but to defend).

 “On the one hand, the ABI says claims management companies (CMCs) are not needed because the public know where to go when they have a claim, yet on the other, they blame CMCs for the increase in the number of claims.

 “While the ABI wants referral fees banned, they do not speak of the insurance industry’s dirty secret: they make huge profits from referral fees themselves. Ancillary income including referral fees made up 54% of Admiral’s first half year UK motor profit before tax.  Admiral Insurance Chief Operating Officer David Stevens said ‘banning referral fees is not a fundamental reform – it will not have that material an impact on car insurance premiums.’

 “The Legal Services Board recently found that the levels of referral fees were linked to the services provided by introducers; there was no evidence that increases in referral fees had led to an increase in the price of legal services; and referral fees had aided access to justice. The ABI want to stop lawyers advertising through CMCs, but again this smacks of double standards: in 2009, just one of the UK’s largest insurers spent £182m on advertising alone (mainly television).  The answer to referral fees lies in better enforcement of the existing rules, especially on cold calling and data protection including tougher regulation of the insurers themselves.

“The ABI argues the cost to the taxpayer – but they have overlooked the losses to the taxpayer. AJAG has calculated that the net cost to the NHS even after allowing for any anticipated savings, will be almost £100m.

“As the Government acknowledge, the changes mean millions more for the liability insurers’ shareholders at the expense of individual claimants. There is a better way of controlling costs without losing wholesale access to justice. AJAG has produced a comprehensive package of proposals, set out in our main brief, which achieves this key policy objective.”

Source : AJAG Press Release

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Boris Johnson, London’s mayor, has announced the launch of an energy efficiency fund that will help local authorities such as schools and hospitals in the city reduce their carbon emissions. The fund should provide as much as GBP 100 million.

The London Energy Efficiency Fund will be managed by the Amber Green Consortium, led by Amber Infrastructure Ltd. and including Arup as technical adviser and Royal Bank of Scotland PLC (RBS).

The fund is the first of its kind in Europe and aims to help London’s public buildings reduce their carbon emissions, which currently amount to 4 million tonnes a year, or 10% of the capital’s overall carbon footprint.

Of LEEF’s funding, GBP50 million comes from the European Regional Development Fund, London Development Agency and London Waste and Recycling Board, while another up to GBP50 million comes from RBS. The total amount is expected to be invested fully by 2015, and will be managed and operated by the consortium for 10 years.

London, September 2, 2011, (Dow Jones)

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Fitch Ratings has affirmed Sterling Insurance Co Ltd’s (SICL) and Sterling Life Ltd’s (SLL) Insurer Financial Strength (IFS) ratings at ‘BBB+’. The Outlooks are Stable.

The companies are the underwriting members of the UK-based Sterling Insurance Group Limited (Sterling). The affirmation reflects consolidated capital commensurate with the rating level, Sterling’s business position and the group’s moderate investment risk.

Fitch considers capitalisation levels at both of the operating companies and at the group level to be commensurate with the rating levels. Sterling’s main shareholder converted GBP5m of preference shares into share capital in 2008 and GBP3m of debt into share capital in 2009, with a resulting improvement in capital adequacy, according to Fitch’s internal assessment. The agency views the main shareholder’s strong support to date and the absence of dividend payments as positive and considers it important that the group remains profitable to avoid capital erosion.

Fitch notes a continued improvement in Sterling’s profitability, driven by improved underwriting margins as well as strong investment returns, and expects this trend to continue in 2011 and 2012. Although net income fell to GBP0.5m from GBP1m in 2010, the Fitch calculated combined ratio improved to 102% from 104% over the same period. Nevertheless, Sterling still falls short of its own as well as Fitch’s underwriting expectations, which the agency views negatively.

Growth in non-life underwriting earnings resulted from stronger GWP as well as improved cost and claims management. Fitch expects these positive trends to continue in the light of management’s focus on strengthening weak profitability.

Fitch views Sterling’s investment risk as above average compared to peers. The group increased its credit exposure considerably in 2009 and 2010 and Fitch notes that at end-2010, corporate bonds represented 69% of invested assets (H110: 54%), which is a high proportion relative to peers. More positively, the credit quality of Sterling’s fixed income portfolio is healthy and Sterling holds only a minor portion of its portfolio in equities. The agency does not believe that Sterling’s investment risk will deteriorate to a level no longer commensurate with the current ratings.

Sterling remains dependent on a small number of clients, which the agency continues to view as a weakness. In addition, the group’s exposure to creditor business remains a concern, although this has steadily declined in recent years and represented 13% of GWP in 2010, compared to 21% in 2009. The fact that the group is largely owned by one individual also exposes the group to some uncertainty, although the agency views favourably the strong support and commitment the main shareholder has shown to the business.

In 2011, Sterling started to administer a book of credit insurance policies on behalf of a bank. The group assumes no underwriting risk and the deal is expected to add to Sterling’s profitability. Fitch understands that the transition has been smooth to date. In addition, the agency notes that the group is confident of securing another administrative deal shortly of a similar size and profitability. Fitch currently views this as credit-neutral, but could view it positively in the future if it successfully diversifies the group’s revenue base.

Fitch views capital deterioration as the most likely reason for a downgrade. This could result from a change in dividend policy resulting in significant capital extraction, as well as poor underwriting profitability and/or poor investment results leading to a depletion of capital. Fitch would be concerned if the group reported a combined ratio in excess of 105%. In addition, introduction of further risk into the investment portfolio could also lead to a downgrade.

Source : Fitch Ratings Press Release

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BGL Group has launched a new Microsoft .Net IT Academy aimed at training and equipping employees with valuable IT skills. As part of the launch, BGL will employ six people in their new Microsoft .Net IT Academy, which will involve successful applicants spending 12 weeks in classroom-based training, before formally beginning their new roles as Trainee Web Developers.

More than 360 people work in IT across the BGL Group, and the new recruits will be involved in building and developing web applications on behalf of a number of leading household name insurance brands. Other recent BGL IT Academy schemes have successfully trained 21 people in other technologies, including Microsoft SharePoint and IBM System i programming, which are also used by BGL in the development of a wide range of IT solutions to meet constantly growing business requirements.

Ian Leech, Chief Financial Officer, BGL Group: “IT delivers real business advantage through innovative services and solutions and is pivotal to the ongoing success of the BGL Group. Continued investment in initiatives such as the new .Net IT Academy will help position us for future growth. Skills in .Net are in great demand within the company – with all of our websites and customer journeys moving to .Net platforms – so to have in-house, highly trained employees in this area is becoming increasingly important.”

Jo Addington, Senior HR Manager, added: “The IT Academy is a unique opportunity for people with a passion for a career in IT who are either just starting out or are looking for a completely new career path. Previous IT experience is not necessarily required, however successful trainees will have a natural aptitude for logical thinking as well as a keen desire to work towards a career in IT. Working in IT can be extremely rewarding but does involve a commitment to life long learning – with technology constantly evolving.”

Source : BGL Group Press Release

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Aon Hewitt announced findings from its annual U.S. Salary Increase Survey. While there is projected to be a slight uptick in salary increases in 2012 compared to 2011, companies will continue to place the greatest focus on variable pay.

Aon Hewitt surveyed 1,494 large U.S. companies in June and July, which revealed a 2.9 per cent base salary increase projection in 2012 for salaried exempt (employees who do not receive overtime pay), executives, salaried nonexempt (employees who receive overtime pay) and non-union hourly workers.  This is up slightly from 2011 for all groups – salaried exempt (2.7 per cent), executive (2.8 per cent), salaried nonexempt (2.8 per cent) and non union hourly (2.7 per cent), and more than a percentage point better than the record-low pay raises workers saw in 2009 (1.8 per cent).

Historical U.S. Salary Increases

2007

2008

 2009 –
Record Low

2010

2011

2012 –
Projected
Executives

4.0%

3.9%

1.4%

2.4%

2.8%

2.9%
Salaried exempt

3.7%

3.7%

1.8%

2.4%

2.7%

2.9%
Salaried nonexempt

3.6%

3.7%

1.9%

2.4%

2.8%

2.9%
Nonunion hourly

3.6%

3.6%

2.0%

2.4%

2.7%

2.9%
Union

3.3%

3.4%

2.2%

2.5%

2.6%

2.7%

“Three percent is the new 4 percent, meaning we are not likely to be back to the 4 per cent levels of the late 1990s any time soon,” said Ken Abosch, Aon Hewitt’s Compensation group leader.  “Employees should also keep in mind that despite employers anticipating increases, if current economic conditions continue, the 2012 projections may come in lower than anticipated.”

Salary Freezes to Decrease Again

The number of companies freezing salaries is down for the second year in a row, and this trend is expected to continue into 2012.  In 2011, 5 per cent of organizations froze salaries, compared to 21 per cent in 2010 and nearly half (48 per cent) in 2009. Approximately 4 per cent of employers anticipate salary freezes in 2012.

Prevalence of Variable Pay Plans and Expected Increases in 2012

Variable pay plans, or performance-based award programs where the award must be earned each year, reached an all-time high in 2011, with 92 percent of employers implementing this type of program.  This is a significant increase compared to 2005, when just 78 percent of employers offered variable pay.

Economic pressures have had a slight impact on variable pay this year, as organizations had anticipated spending 11.8 per cent of payroll on these programs for salaried exempt employees.  Instead, employers have earmarked 11.6 per cent of payroll for variable pay this year.  Spending in 2012 is expected to dip slightly to 11.5 per cent.

Aon Hewitt’s survey also shows the majority (86 per cent) of employers will fund variable pay based on company performance, though some are funding it through reduced merit increases and reductions in head count (5 per cent each). Just 2 per cent of companies are budgeting for variable pay through reduced spending on benefits, while only 1 per cent are doing so through pay freezes.

“The growing use of variable pay, along with lower salary increases, represents the new normal in compensation practices for employers nationwide,” explained Abosch. “This pay mix creates greater motivation for employees to be productive and greater flexibility for employers to compensate based on individual and company performance.  However, this does create a need for performance discussions throughout the year, so employees know what they are doing well and areas for improvement in order to maximize productivity and potential pay opportunity.”

2012 Salary Increases by City and Industry

According to Aon Hewitt’s survey, salaried exempt workers in some U.S. cities can expect to see salary increases higher than the national average in 2012. These cities include Detroit (4.0 per cent), Dallas (3.4 per cent), Chicago (3.0 per cent), Houston (3.0 per cent) and Milwaukee (3.0 per cent). Cities that can expect lower-than-average increases in 2012 include Washington, D.C. (2.8 per cent), New York (2.7 per cent) and Philadelphia (2.7 per cent).

The industries that can expect to see the highest salary increases in 2012 include, energy/oil/gas (3.6 per cent), real estate (3.6 per cent), construction/engineering (3.5 per cent), telecommunications (3.2 per cent) and not-for profit (3.2 per cent). The lowest increases are projected to be in government (1.7 per cent), building materials (2.5 per cent), research/development (2.5 per cent), rubbers/plastics/glass (2.6 per cent) and education (2.6 per cent).

Source : Aon Hewitt Press Release

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Fitch Ratings says that earnings prospects for the global reinsurance industry remain uncertain, due to pressure on investment income, premium price adequacy and dwindling reserve surpluses. After unprecedented catastrophe losses in 2011, the agency expects earnings to gradually recover in 2012 if catastrophe losses normalise.

The rating Outlook for the global reinsurance sector remains Stable, due to the industry’s capital strength and projected underwriting and operating trends, which Fitch expects to support reinsurers’ current ratings over the next 12-24 months. Reinsurers’ resilience to this year’s catastrophe losses reflects the sizeable capital buffers accumulated from earlier years of profitable business and effective use of retrocessional protection.

The most likely trigger for a Negative rating Outlook would be catastrophic losses that would erode over 10% of the reinsurance industry’s capital together with an inability of reinsurers to replenish lost capital. Fitch estimates for that to occur, losses from a single event may need to exceed USD75bn and capital markets would need to lose confidence in the sector, at least temporarily. Such a combination would be rare.

Two or three years of material underwriting losses outside of normal cyclical variations, or severe dislocations in the capital markets impacting reinsurers financial flexibility over longer periods, could also result in a Negative Outlook. Moderate elevated catastrophe losses, or underwriting performance within normal cyclical variations, are typically not triggers for a Negative Outlook.

“Reinsurance pricing is at a crossroads, and an upturn in pricing is the factor most likely to improve the sector’s medium-term earnings prospects,” says Chris Waterman, head of EMEA Insurance ratings at Fitch. “Reinsurers’ ability to raise prices into 2012 will mainly depend on the extent of catastrophe losses occurring during the remainder of the year. The recent downward revision of economic growth expectations by several major economies is expected to reduce demand for primary insurance and therefore makes it less likely that reinsurers will be able to raise rates.”

“Fitch does not view Hurricane Irene as a market-changing event, but the storm adds to the unprecedented catastrophe losses incurred so far in 2011,” says Martyn Street, Director in Fitch’s Insurance team. “It is unclear whether insurers will achieve meaningful premium price increases outside loss-affected lines.”

Fitch forecasts the global reinsurance industry’s combined ratio (i.e. claims and expenses expressed as a percentage of net premium income) will deteriorate to 107.9% in 2011, from 94.7% at end-2010, based on Fitch’s analysis of its monitored universe of reinsurance companies.

Source : Fitch Ratings

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Salaries are not up for discussion for British people, especially with their employers according to research from Scottish Widow’s Dare Not Ask Survey.

Nearly half of Brits (49%) are not prepared to discuss their salary with the people they work with, followed by friends (27%) and family (15%). People’s reluctance to talk about this sensitive topic extends to asking employers for a salary increase. Even though only 43% are happy with their salary, less than one quarter (24%) of people indicated they had ever asked for a pay rise.

Men prove to be more confident than women when asking for more money, with over one quarter (28%) having approached their employer for a salary increase compared to just 18% of females. Men are also more comfortable when it comes to asking for a larger percentage increase (4.6% of their salary compared to 4.1% for female counterparts).

Further to this, over one quarter (27%) of those that haven’t asked for a pay rise say they have never needed to as they have always been given fair salary increases, with far more men saying their worth has been recognised compared to women (32% vs. 24%).  Over one in ten (11%) people who haven’t had the courage to ask for a salary increase admit they felt too embarrassed to ask for an increase, and less than one in ten (8%) were worried that their employer would say no.

Catherine Stewart, savings expert at Scottish Widows said: “The nation is split when it comes to talking about their salary, as it’s a sensitive topic. If people don’t feel comfortable talking to their nearest and dearest about their salary it makes it even more important to seek expert advice to keep on top of their finances.”

However, people are looking for alternative ways to make money, and it turns out that young people (those aged 18 – 34 years old) are the most open to asking advice on how to earn more, and are twice as likely as the national average to ask friends, family and work colleagues for help in this area.

Who have you asked for advice on how to earn more money? National average 18-34 year olds
Friends 11% 20%
Family 11% 23%
Colleagues 7% 13%

Catherine Stewart continued: “By carefully planning their finances for the future, people can start to reduce any financial fears they may have and help to avoid a lot of worry and heartache for themselves and their families in the long-term. As a nation we should be taking the lead from the younger generation and seek advice to make our money go further. An option for people is to speak to a financial adviser who can help explain the range of products and services most suitable to their financial needs.”

Source : Scottish Widows

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As the clocks go back in October, many solicitors will be left in the dark as to whether they’re covered for new professional indemnity (PI) risks in the wake of relaxation of market regulations, warns leading Lloyd’s underwriter

As of the 6 October, many medium-large law firms in the UK will take the opportunity to break free from regulatory shackles which haven’t changed for hundreds of years.

Under the amendment to the Legal Services Act 2007, ownership and investment restrictions will be lifted, allowing non-lawyers to effectively have a large stake in an alternative business structure (ABS) and a seat on the board. In addition, there’s consolidation in the legal services sector where UK and international law firms have merged to create global professional practices.

Over the past 12 months Brit Insurance has witnessed an increase in claims from corporate law firms which have attempted to diversify the range of professional services they offer compared with the number of claims made by specialist or boutique firms.

According to Mark Figes, class underwriter for professional indemnity at Brit Insurance – leading the UK and international team – many law firms must think more carefully about the challenges they now face in managing newly merged as well as multi-disciplinary practices where new owners come from outside the legal profession.

“As a general rule of thumb, as people start dabbling, the risk goes up. And the risks that these new types of businesses face are two fold – many of their clients are trading in difficult conditions that have increased the risk of business failure and bankruptcy. This has led to an increase in PI claims against professional advisors as claimants hope they’ll succeed in getting substantial payouts for purported negligent advice. The second business jeopardy is that many of the partners of these ABS practices may lack relevant management experience of working in such structures and with multi-disciplinary teams such as lawyers, accountants and loss adjusters.

“As a result, we’ve responded to help these practices manage such risks by working closely with specialist professional indemnity agency Libra in determining the PI policies required to mitigate such exposures whilst at the same time allowing greater flexibility and freedom for solicitors practices to manage their businesses and maintain a stable environment for their premiums in the future,” he says.

Ed Pickard, managing director, Libra – a professional indemnity insurance agency – adds: “We are delighted to be working with one of the world’s most respected and experienced PI insurers who have demonstrated significant leadership in the professional advisor market segment by increasing their appetite for excess layer risks.”

The core team at Brit Insurance has increased in capability and experience with the recent hire of Patrick Ruffell as a specialist underwriter of this class who has over a decade of UK and professional services sector experience in understanding risks, procedures and protocols.

Figes concludes: “This is an exciting time in the evolution of legal firms in the UK and internationally and we are delighted to be at the forefront in assisting these practices through a combination of innovative PI products supported by a world class team to help meet the needs and requirements of the legal services sector.”

Source : Brit Insurance Press Release

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Aon Benfield has released its annual Insurance Linked Securities (ILS) report. This examines the trends witnessed in the ILS sector during the last 12 months ending June 30 2011.

 “Consistency and Confidence” reveals that 24 separate catastrophe bond transactions resulted in an annual issuance volume of USD4.4 billion to June 30, 2011 – a slight decrease from the USD4.7 billion across 21 transactions seen in the prior year period. Also, sidecars experienced resurgence in 2011, further demonstrating investors’ interest to continue to provide fresh capital after market losses.  Catastrophe bonds outstanding at June 30, 2011 totaled USD11.5 billion, with USD37.6 billion of cumulative catastrophe bond issuance since 1997.

Paul Schultz, President of Aon Benfield Securities, said: “Consistency in issuance, including strong participation from repeat issuers, demonstrated the continued reliance of both sponsors and investors on capital markets capacity.  Renewed interest in sidecar structures also demonstrates the flexibility of the ILS market to provide fresh capital following market losses.  Despite the effects of both the Great East Japan Earthquake on March 11 and the major updates of the RMS U.S. Hurricane and Europe Windstorm models, we anticipate a good catastrophe bond issuance pipeline in the historically active second half of the year.  Additionally, we believe the fundamentals are positive for market growth in 2012 and beyond.”

U.S. hurricane risk continued to dominate the catastrophe bond market in the 12 months to June 30, 2011, accounting for 46 percent of natural catastrophe issuance while U.S. earthquake risk and Europe windstorm risk accounted for 15 percent and 19 percent, respectively.

All four of Aon Benfield’s ILS Indices posted gains in the 12-month period to June 30, 2011. The Aon Benfield All Bond and BB-rated Bond indices recorded annual returns of 5.97 percent and 4.52 percent respectively, while the returns on the U.S. Hurricane and U.S. Earthquake Bond indices were 8.51 percent and 7.21 percent respectively. The current annual returns fell below comparable returns for the prior year period, with the exception of the U.S. Earthquake Bond index, which performed marginally better. The decrease was primarily due to the effects of global catastrophes and downgrades which had led to mark-to-market decreases in 2011.

Source : Aon Benfield

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LV= new research shows about 6 per cent of UK drivers would take the blame for another person’s penalty point. Currently, of all license holders in the UK, there are 3,823,544 with penalty points of which a majority for speeding.

One in twenty drivers say they would be willing to lie and take on penalty points for a friend or relative. Two thirds (66%) of these say they would do it to ensure their friend was not disqualified from driving and over half (59%) say they would do it to protect their friend’s livelihood as they would lose their job if their licence was taken away. A fifth (21%) say they would be prepared to take on points for a friend because despite incurring penalty points, their friend is a safe driver.

Of those who admitted taking on someone else’s penalty points, 6% said they were paid to do it. Since 2001, approximately 300,000 drivers have lied and said they were driving their friend or partner’s car when they were caught speeding and taken on the penalty points incurred by the offence.

LV= research shows that drivers ready to take on someone else’s penalty points do not believe it is a serious motoring crime. About one in twenty drivers (4 per cent) believe it not against the law and 12 per cent feel it is too harsh a pnishement to receive points for speeding.

Lying to the police and taking on penalty points for another driver is against the law and it will become more difficult to get away with as police forces across the UK trial and roll-out a new video speed gun. These new speed cameras record a vehicle’s speed and capture the driver on film, which can then be matched against driving licence photos held by the DVLA. There are already a number of cameras in the UK that photograph the front of the vehicle as well as the driver and these are also becoming more commonplace.

When surveyed, one in three (33%) drivers said they were aware that police forces across Britain are planning to test a new speed gun that will capture footage of the driver. Over two thirds (67%) of these said it would not change their behaviour but 17% said it would make them less likely to swap penalty points.

The findings come as a high profile case of alleged penalty point swapping is in the media spotlight and the subject of a police investigation into allegations of perverting the course of justice.

John O’Roarke, managing director of LV= car insurance, said: “Penalty points are designed to deter drivers from repeatedly breaking the law and to penalise those who do. Police know that drivers take on points and have direct access to the DVLA data where they can look at anyone’s driving record to compare photos. Swapping points is more serious than people realise and it will be much harder for them to get away with it once the new speed cameras are rolled out.”

Source : LV=

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More and more governments are leveraging private insurance skills and the growing capacity of the sector to cover catastrophe losses as well as a wide range of other risks, Swiss Re reveals in its latest sigma research publication. The Japanese earthquake tragedy earlier this year caused more than USD 200 billion in total property losses, but only USD 30 billion was covered by private insurance. In contrast, private insurers will pay about USD 9 billion of the USD 12 billion in total property losses from the recent Christchurch, New Zealand earthquake.

State involvement in insurance differs widely between countries and product lines. It includes setting the regulatory framework within which insurance companies operate, explicitly underwriting some types of products, making some types of insurance mandatory and responding after an event as insurer of last resort.

Vast potential to insure public infrastructure

Central governments mainly self insure government property and activity while smaller government subdivisions are able to find economies in pooling risks with others through private insurance. Most state entities also self insure government property like roads, bridges, and buildings. “While many governments self insure or pool risks, there are opportunities for states to leverage the skills and growing capacity of private insurance to allocate risks efficiently and retain only the portion that is truly uninsurable,” says Rudolf Enz, Swiss Re economist and author of the study titled “State involvement in insurance markets”. In this way, risks become a budgeted cost and the impact of adverse events can be shared with private insurers.

Natural catastrophes impact governments’ budgets significantly

“Governments are rethinking catastrophe insurance coverage,” says Enz. He notes that, “Japan, Turkey and Taiwan have come up with innovative earthquake catastrophe schemes. Mexico issued a MultiCat bond to smooth the impact of disasters on their annual budget. This allows Mexico to make a quarterly payment to investors in exchange for USD 290 million earthquake and hurricane cover. A common feature of these solutions is that by buying some additional protection from private insurers and capital markets, the government, as insurer of last resort, will have a smaller exposure in case of a major catastrophe. This has become increasingly necessary because, as the sovereign debt crisis has shown, there are limits to how much financial market investors are willing to loan to governments, especially when fiscal balance sheets are stretched.”

Risk subsidising has unintended consequences

The sigma study finds that some states provide subsidised insurance in natural hazard prone areas which would otherwise be much more expensive to obtain in the private market. This results in increased building in dangerous areas. “Subsidies like this have the unintended consequence of forcing some taxpayers – living inland or on higher ground – to subsidise the insurance of the owners of expensive beachfront homes. A damaging hurricane this summer would place severe strains on governments with such subsidies at a very inopportune time,” warns Enz. He recommends that “governments eliminate subsidies for coverage that private insurers are willing to extend, thus conserving increasingly scarce government resources for investments in infrastructure that reduce losses when catastrophes occur and to provide coverage only for risks that truly are uninsurable.”

Mandatory liability insurance protects third parties

There is a long history of states mandating private liability coverage to make sure injured parties are compensated. For instance, motor liability insurance is obligatory in most countries. “People might not have savings or borrowing capacity to compensate someone they accidentally seriously injure,” points out Enz. Insurers can pool their policyholders’ risks so that uncorrelated events can be diversified. By making insurance mandatory, the government ensures that the pool is large enough to cope with the needs of the victims. In addition, the cost of insurance provides an incentive for people to reduce risky behaviour.

Limit to wealth redistribution through social safety net insurance schemes

Nearly all governments either provide or mandate health, disability, workers’ compensation, unemployment, and pension coverage. “Government programmes ensure all citizens are provided with a minimum level of protection against risks to their income or assets and often provide subsidies for the chronically ill, elderly or low income segments of the population. These programmes are usually mandatory, so that the more affluent segments of society effectively help to finance the subsidy,” says Enz. However, public support for social security systems with distributional elements can erode if they are perceived to be excessive. In a bid to contain the overall costs of such benefits, especially given the current strains on government finances, states are beginning to target benefit payments more narrowly by means testing, so that only low-income households receive financial support, and to privatise part of these social insurance programs.

Source : Swiss Re Press Release

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Tropical Storm Nanmadol is moving slowly at about 3.2 km/h across the Taiwan Strait toward a landfall in China’s Fujian province sometime in the next 12 hours. Nanmadol’s current sustained winds are at about 85 km/h, having weakened to tropical storm strength after it made a landfall on southernmost Taiwan early Monday morning local time as a Category 1 typhoon. Nanmadol currently is heading toward Xiamen, Fujian’s second-largest city (population 1.5 million, 2010).

As of the Japan Meteorological Agency’s (JMA) 12:00 UTC analysis (8:00 pm local time in China), Nanmadol had maximum sustained winds of 85 km/h with gusts up to 128 km/h. The center was located about 60 km east-southeast of Xiamen; its tropical storm-force winds stretch across 370 km.

At present, Nanmadol is poised to strike somewhere near to the Fujian “Min Nan Golden Triangle” made up of the three large cities of Xiamen, Quanzhou, and Zhangzhou, and which together account for 40 percent of the GDP of Fujian province. This is an area that has developed very rapidly in recent decades. It thus includes both urban and rural areas, broad residential areas, and many light-industry facilities.

According to AIR, residential homes in the region where Nanmadol is expected to make landfall consist mostly of masonry construction. Apartment buildings, which have become common in recent years, are made largely of reinforced concrete and confined masonry. Commercial and industrial structures are also largely of reinforced concrete, but older structures are of unreinforced masonry and some confined masonry.

 “At Nanmadol’s expected wind speeds at landfall—about 80 km/h—only minor damage is expected to the general building stock. For apartment buildings and commercial facilities, expected damage is very low to none,” said Dr. Peter Sousounis, principal scientist at AIR Worldwide. “For houses, wind damage can be more considerable. Trees may be blown over if their root structures are sufficiently weakened by the storm’s heavy rains, and they can cause damage to nearby buildings. Minor to moderate levels of damage to light fabrication facilities and warehouses, especially in the case of older structures, and to signage, also can be expected. All in all, flooding is expected to cause more damage than wind, especially to the poorly constructed houses in the hilly and mountainous countryside, where mudslides and river-overflow are substantial dangers.”

Insurance penetration in China generally is low, and especially for residential structures. Accordingly, although damage from wind, flood, and landslides is expected, insured losses should be low.

Reported Impacts:  Taiwan

Nanmadol struck southernmost Taiwan at 4:25 am local time Monday morning (20:25 UTC, August 28) with the intensity of a Category 1 hurricane on the Saffir-Simpson Hurricane Wind Scale. Its sustained winds at landfall were 119 km/h (just at the borderline of Category 1), gusting to 155 km/h. “Although Nanmadol remained over the island for only a few hours, it weakened in its interaction with Taiwan’s mountains and was downgraded to a tropical storm later in the day,” added Dr. Sousounis.

About 40,000 households in southern and eastern Taiwan lost power and scores of roads and bridges were closed because of heavy rains. This was Taiwan’s first typhoon landfall of the year, and government officials were exercising extreme caution in their preparations after having been strongly criticized for an inadequate response in 2009, when Typhoon Morakot caused extensive damage.

 “Mountainous regions of Taiwan have received between 70 and 110 centimeters of rain from Tropical Storm Nanmadol, and rain continues to fall in many areas,” said Dr. Sousounis. “One area, Hengchun Township, received 51 cm in two days, with 22 cm having fallen in one eight-hour period. The rain, squalls, and gusty winds have caused significant damage to crops in several areas of the east and south.”

Reported Impacts:  Philippines

Before making landfall on Taiwan, Nanmadol made landfall three days earlier, on August 26th, in the Philippines. Nanmadol’s winds just before striking northern Luzon had risen to just below 250 km/h, only a kilometer or two per hour lower than Category 5 status—the highest. Large parts of northern Luzon remain without power and more than 60,000 people are still not able to return to their homes from evacuation centers. In addition, nearly another 60,000 people were cut off by Nanmadol’s flooding and other damage.

Forecast Track and Intensity

“Nanmadol is the eleventh named storm of the 2011 Pacific typhoon season,” continued Dr. Sousounis. “At the speed of its present forward movement, Nanmadol is expected to reach the Fujian coast in the early hours (local time) of Wednesday morning. Nanmadol’s landfall will probably coincide with an astronomical high tide, and its waves are expected to crest at from two to three-and-a-half meters along Fujian’s coast.”

Given these and other precautions undertaken, insured losses in Fujian province from Tropical Storm Nanmadol are not expected to be large. AIR is continuing to monitor Nanmadol and will provide additional information as events warrant.

Source : AIR Worldwide Press Release

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Swiss Re warns that the economic environment, in the wake of the financial crisis is still very challenging and turbulent. 

The industry is moving from coping and survival to fixing profitability, product development, risk management and maximising capital efficiency. Many life companies still have a heavy focus on savings-type products with expensive guarantees. Refocusing after the crisis will have massive consequences for cash flow, product distribution, and the skills needed to run these firms. But there will also be new business opportunities.

The consequences of the worst global financial crisis since the 1930s have yet to fully play out. At the conference later this morning, Swiss Re’s Chief Economist and Head of Economic Research & Consulting, Thomas Hess, will warn: “After three years, we can begin to draw some conclusions. The global banking system teetered on the brink of collapse. The insurance sector remained functional throughout the crisis. Its business model proved robust even in times of extreme financial stress, but it’s unclear if we can continue as before. The tectonic plates of capital and insurance markets have shifted.”

Nordic countries
During the crisis, economic performance differed across Nordic countries. None suffered exceptional insurance sector damage. “Nordic insurers face challenges but will be spared those associated with stressed sovereigns that were in relatively good shape when the crisis hit and did not have to borrow as heavily to keep their economies afloat,” he will say.

Life insurance
In life insurance, tighter regulation and low investment returns not only threaten industry profitability but for several product lines, the very business model. Savings products with return guarantees will need to be either redesigned or re-priced. Some are no longer viable. Higher capital requirements for these products will call for thicker buffers or capital, Thomas Hess predicts. Given the importance of savings products for many life insurers, the whole business model needs to be re-thought. Mortality and disability protection products may need re-pricing but are fundamentally secure.

Non-life insurance
For Thomas Hess, in non-life insurance, the new environment will require less of a change in the business model but needs tighter cost controls and higher premiums to counter lower investment returns and higher claims expense inflation. The new solvency standards under the EU’s Solvency II regime will challenge companies that are less well capitalised.

Challenges
The post-crisis environment presents massive challenges for insurers. Products will have to be redesigned. Demand changes are difficult to predict. Dealing with both national and international regulations will make capital and risk management far more complex.

Growth and innovation
The Global Risks Report issued annually by the World Economic Forum – to which Swiss Re experts made a substantial contribution- provides a compelling list of future risk and challenges that must be mitigated to ensure a prosperous global economy that provides a reasonable quality of life for the world’s population.
Reto Schneider, Swiss Re’s Head of Emerging Risk Management, also speaking at NORIS today, will explain: “One major cluster of risk relates to food, water and energy security. These things must be successfully managed based on future population and economic growth, which in turn will create tremendous pressure on the environment. In light of global governance failures and the widening economic disparity between rich and poor countries, the potential for geopolitical conflicts is on the increase.”

Reto Schneider will say, it is possible to spot huge potential for innovation and new business opportunities: “In order to successfully manage the global risks of the future, we need dramatic improvements in energy efficiency, renewable energy, energy storage. We also need a boost in the development of clean technologies. The insurance industry can play a pivotal role as an enabler of this urgently-needed technology transformation. But to ‘de-risk’ these new technologies, we also need a mutual and sound understanding of emerging risks among the stakeholders involved.”

Source : Swiss Re

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Eat dark chocolate, watch funny movies, avoid stressful jobs, and pedal hard when biking are all ingredients in the recipe for a healthy heart, according to experts meeting in Paris this week.   

Whether one is afflicted by a heart attack, high blood pressure or constricted arteries depends in large measure on a host of lifestyle choices. But the ideal formula for avoiding heart problems remains elusive: it is hard to tease apart the factors that impact cardiovascular health, and the right mix of things to do — or not do — can vary from person to person.

Even common-sense measures such as exercise or a balanced diet must be fine-tuned.

It is not, for example, how long one rides a bike but the intensity of one’s effort that matters most, according to research presented Monday at a five-day gathering, ending Wednesday, of the European Society of Cardiology.

The study, led by Danish cardiologist Peter Schnohr, showed that men who regularly cycled at a fast clip survive 5.3 years longer than men who pedalled at a much slower pace. Exerting “average intensity” was enough to earn an extra 2.9 years.    For women, the gap was less striking but still significant: 2.9 and 2.2 years longer, respectively, compared to slowpokes.    “A greater part of the daily physical activity in leisure time should be vigorous, based on the individual’s own perception of intensity,” Schnohr said in a statement.

The old adage “laughter is the best medicine” was proven true by another study which found that a good dose of humour helps blood vessels.

Michael Miller, a professor at the University of Maryland School of Medicine, had already shown in earlier research spanning a decade that men and women with heart disease were 40 per cent less likely to see typical life events in a humorous light.

In the new study, he asked volunteers to first watch a stressful movie such as Steven Spielberg 1998 World War II film “Saving Private Ryan.”

During harrowing battle scenes, their blood vessel lining developed a potentially unhealthy response called vasoconstriction, reducing blood flow.

But when the same subjects later saw a funny, heart-warming movie the blood vessel linings expanded.

Over all, there was “a 30-to-50 percent difference in blood vessel diameter between laughter and mental stress phases,” Miller said.

Acutely stressful working conditions, both physical and mental, have long been associated with poor health. But new research unveiled Monday shows that a mix of intense pressure to produce results coupled with conditions making it hard to meet those demands is a recipe for heart disease, and even early mortality.

Finnish researchers led by Tea Lallukka of the University of Helsinki, in a review of recent academic literature, concluded that “job strain and overtime are associated with unhealthy behaviours, weight gain and obesity,” according to a press release.

At the same time, they noted, “employed people are generally better off.”

Perhaps the most painless path to better cardiovascular health is one that comes all-too-naturally to many people: eating chocolate.

Earlier research had established a link between cocoa-based confections and lowered blood pressure or improvement in blood flow, often attributed to antioxidants, but the scale of the impact remained obscure.

Oscar Franco and colleagues from the University of Cambridge reviewed half-a-dozen studies covering 100,000 patients, with and without heart disease, comparing the group that consumed the most and the least chocolate in each.

They found that the highest level of chocolate intake was associated with a 37 per cent reduction in cardiovascular disease, and a 20 per cent drop in strokes, when compared with the chocolate-averse cohort.

No significant reduction was reported in the incidence of heart attack.

The findings, alas, come with an important caveat: the healthful molecules are found in the bitter cacao, not in the sugar and fat with which they are routinely combined.    “Commercially available chocolate is very calorific and eating too much of it could in itself lead to weight gain, risk of diabetes and heart disease.”

Paris, Aug 29, 2011 (AFP)

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Aon has appointed Matthew Levin as Executive Vice President and head of Global Strategy.

In this role, Levin will be responsible for developing Aon’s overall global strategy, with a particular emphasis on accelerating its growth agenda. He will report directly to Aon President and CEO Greg Case and be a member of Aon’s global Executive Committee.

“As the magnitude, scrutiny and complexity of risk continue to rise, we see significant opportunities to grow our industry-leading capabilities around the world,” said Case. “Matt’s deep strategy background and track record in driving growth activities–including his recent experience at Hewitt Associates–will be a tremendous asset to our firm as we look to develop innovative strategic initiatives that help our clients manage their most complex risk and people challenges. We are delighted to have him as part of the team.”

Levin, 38, brings more than 16 years experience in corporate development and strategy, where he led growth initiatives for a number of Fortune 1000 companies, including Hewitt Associates, Neustar and IHS, a global provider of technical information and decision support tools. Levin recently served as senior vice president of Corporate Development and Strategy at Hewitt Associates, where he was a core member of the team that led the merger between Aon Consulting and Hewitt Associates in October 2010. He also led Hewitt’s overall strategy and corporate development process, including the successful completion of eight global acquisitions and four dispositions.

Levin holds a master’s degree in business administration from the University of Chicago and a bachelor’s degree from Northwestern University. He currently serves as a visiting lecturer at both institutions.

“Risk and people are two of the most important issues facing companies today, and Aon is uniquely positioned to capitalize on opportunities that will further its market-leading position,” said Levin. “Greg and I share an excitement about the opportunities for Aon’s future, and I am thrilled to lead the strategy function at such an important time.”

Source : Aon

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The US President Barack Obama announced that Republican and Democratic leaders have reached an agreement to raise the government’s debt ceiling and thus avoid a default.

 “I want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default, a default that would have had a devastating effect on our economy,” Obama said in a televised address from the White House.

More than $2 trillion in spending cuts would be imposed gradually so they don’t create a drag on the economy, he said.

The spending cuts would reduce government spending to the lowest level it has been since when Dwight Eisenhower was president in the 1950s.

He also said there would be no initial cuts to entitlement programmes like Social Security and Medicare. But he said both could be on the table along with changes in tax law as part of future cuts.

“I want to urge members of both parties to do the right thing and support this deal with your votes over the next few days,” Obama said.

Details of the framework will be presented to the congress Monday morning in the hopes of avoiding default before the Tuesday deadline, congressional leaders said.

House Speaker John Boehner said the pact “isn’t the greatest deal” but lives up to the GOP’s principles on taxes and spending.

The agreement pairs spending cuts demanded by Republicans with an immediate increase in the government’s borrowing cap that’s needed to avoid a first-ever default after Tuesday.

The annoucement had an immediate positive impact on Asian markets.

US corn wheat and soybeans futures rose in early Asian trading on Monday after Obama said a deal had been reached.

“There is a collective sigh of relief across markets in Asia,” our correspondent Aela Callan, reporting from Tokyo stock exchange, said.

In the Global Market, Equities rose while gold and the yen dropped on Monday, with investors cutting safety trades after Washington reached a last minute deal to escape default, though the top US credit rating could still be downgraded.

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Asiana Airlines refused to comment as news of one of the two still missing pilots has taken out a number of life and property insurance policies before the crash of one of its cargo planes.

The Boeing-747 aircraft, operated by South Korea’s second-largest air carrier, crashed into waters about 107 kilometres west of the southern resort island of Jeju early Thursday.

According to industry sources, the pilot’s personal claims on the seven insurance policies total more than 3 billion won (US$2.85 million).

“We are now focusing on finding the cause of the crash,” said an official of the airline. “We can’t comment on the pilot’s personal matters.”

Local maritime police are still searching for the two pilots who went missing when the cargo plane crashed into the sea.

The crash was presumably caused when some inflammable materials in the 58-tonne cargo hold caught fire, the airline and maritime police said. There may have been a fire on board before the crash, the country’s transportation ministry also said earlier. But the exact cause will remain unknown until the aircraft’s voice recorder and black box flight recorder are found and analysed.

Asiana Airlines said earlier the crash of its cargo freighter caused 200 billion won of damage. The freighter was heading to Shanghai from South Korea’s Incheon International Airport.

Source : Bernama 

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Over half (52%) of employees do not understand the total value of the benefits package their employer provides, according to research from Vebnet and Standard Life.

New research shows that over half of employees do not fully grasp the benefits of the package provided by their employer. This research is provided by Vebnet and Standard Life.

The research also revealed a quarter (25%) of 18-24 year olds make no use of the benefits available to them at all.

Despite the lack of understanding nearly two thirds (64%) of those surveyed indicated the employee benefits package was important when choosing a job.

Stephen Ingledew, Corporate Managing Director, Standard Life said: “Many employers invest a considerable amount of cost and effort in providing a quality benefits package. Unfortunately a significant number of employees are not recognising the value.

“The research clearly demonstrates the need for employers to review how they engage employees with their benefits. The technology and communications expertise which is now available in the market allows employers to be more innovative than ever before.”

Outside of salary the benefits valued most by employees were pension (68%), flexi-time (15%) and bonus (6%).

Ingledew continued: “Benefits optimisation is becoming increasingly important to employers and it is an exciting time to be involved in the Rewards and Benefits industry. We are committed to continuing to develop and deliver innovative solutions to the market to help employers meet the challenges they face, and to ensure they get a return on their investment.”

Source : Standard Life

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