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Munich Re : first solar panel warranty insurance

Market

Jul 28, 2011

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Munich Re provides the first Japanese solar panel warranty insurance to thin-film manufacturer Solar Frontier for installations worldwide. Munich Re’s global insurance solutions for the renewable energy sector redefine the industry’s project bankability and are major stepping stones in the financing of large-scale installations.

Solar Frontier’s proprietary CIS thin-film technology has been developed since 1993 in order to overtake the crystalline silicon market standard. The company became the world’s largest CIS thin-film and one of the world’s largest photovoltaic module manufacturers, after opening its new 900MW plant in Miyazaki prefecture, Japan, in early 2011. Prior to the agreement being signed, Munich Re had conducted an in-depth review of Solar Frontier’s product quality control and manufacturing processes.

The new insurance solution covers the long-term technology performance risk of Solar Frontier’s “CIS” photovoltaic modules. In the event of an unexpectedly large performance loss below guaranteed performance specification, Munich Re covers the insured manufacturers’ performance warranty obligations for up to 20 years. By providing this insurance, Munich Re allows solar plant operators and investors greater planning security. The innovative insurance solution is an important milestone in the implementation of photovoltaic projects, offering critical financial protection while significantly mitigating the long-term, technical guarantee risk for module manufacturers. In order to realise the insurance solution, Munich Re has worked closely with a primary insurer in Japan.

“Munich Re’s solution offers Solar Frontier’s solar panels an even further competitive advantage,” said Atsuhiko Hirano, Solar Frontier’s Vice President of Global Marketing and Power Generation. “It adds a great deal of clarity to the process of developing projects with results-focused power producers.”

“We are delighted to have concluded the first contract of this kind on the Japanese solar market and to support Solar Frontier in their ambitious global growth plan. With our expertise, we can assume very special renewable energy risks and help provide greater investment security,” said Thomas Blunck, member of Munich Re’s Board of Management. “We see considerable growth potential in risk transfer solutions for renewable energy. This market will gain in importance considering the change in the worldwide energy mix due to climate change.”

Source : Munich Re

Motor insurance : The AA British Insurance Premium Index shows premium rise slowing

Market

Jul 28, 2011

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According to the latest benchmark AA British Insurance Premium Index, the cost of both car and home insurance appears to be levelling off, with welcome but small falls in the cost of cover for young drivers and for home insurance.

This follows two years of unprecedented premium increases.

The average Shoparound cost of an annual car insurance premium increased overall by 3.6 per cent over the three months ending 30 June 2011 to £923.90, the lowest rise for 18 months. Nevertheless, over 12 months, the Shoparound premium has risen by 30.1 per cent.

However, for drivers aged 17-22, premiums fell by 5.6 per cent during the quarter – a welcome respite for young drivers after more than two years of sharp quarterly increases.

Simon Douglas, director of AA Insurance, says: “The easing of insurance prices is welcome news, especially for young drivers whose premiums have become unaffordable for many.

“I predicted last year that during 2011 we would see competitive pressure returning to the market which would help to reduce the rate of increase.

“This is the smallest increase we have seen for some time, and I believe that over the rest of this year we will at last see premiums level off, despite the gloomier predictions of other market commentators.”

Headline figures

Shoparound Index: Car insurance

Average Premium	Jul-11	Apr-11	% Change	Jul-10	% Change
Comprehensive	£923.90	£892.08	+ 3.6%	£709.91	+ 30.1%
TPFT Fire & Theft	£1,465.23	£1,538.62	– 4.8%	£979.66	+ 49.6%

The most welcome news in the latest benchmark AA British Insurance Premium Index is an unexpected fall of 5.6 per cent in the average Shoparound cost of an annual comprehensive car insurance policy for young drivers.

This has helped to bring the overall Shoparound average increase to just 3.6%, the smallest quarterly premium increase for nearly two years.

The Shoparound index calculates the average of the cheapest three premiums from a range of insurers for each ‘customer’ in a UK representative basket of risks.

Says Simon Douglas, director of AA Insurance: “Young drivers have for a long time been the biggest losers in the insurance market with premiums driving them off the road. They share the greatest number of serious crashes, premiums have been rising at a disproportionate rate, but it seems at last that insurers are starting to compete a bit more for their business with rates starting to come down.”

Nevertheless, the average Shoparound premium for a 17 to 22-year-old is £2,294 compared with the £924 average. However, Mr Douglas warns that with the end of gender-based pricing in December 2012; young women under 25, who typically pay premiums up to 40 per cent less than their male counterparts, can expect to see a sharp rise in the cost they pay for their cover.

The average premium paid by 17-22 year-old men is currently £2,872 and for women £1,671.

Commenting on the overall slowing in premium increases, Mr Douglas believes that insurers have done sufficient work to overcome most of the underwriting losses of the past couple of years.

“At the end of 2009, for every £100 taken in premiums, £123 was being paid out in claims. By the end of 2010 this had fallen to £116 and I believe that the gap has closed further since then. This is encouraging insurers to price more competitively which is benefiting every driver, but especially young drivers.”

In addition, new legislation is helping to restore confidence for car insurers.

“The recent introduction of continuous insurance enforcement means that it is now illegal to keep a registered car that is neither insured nor recorded as off the road through a Statutory Off Road Notification (SORN). The Motor Insurers’ Bureau is now writing to the owners of all vehicles on the DVLA database that are not insured, encouraging their owners to take action or face a fine and possible confiscation of the vehicle.

“Similarly, the police have been very successful in stopping uninsured drivers – last year, they confiscated over 150,000 cars being driven illegally.”

Other developments that will help to reduce insurer costs include the setting up of a dedicated police fraud unit and, in the longer term, a new industry-wide fraud database and access to DVLA driver data for insurers.

“Fraud continues to be one of the biggest challenges facing the insurance industry,” Mr Douglas points out. “According to new figures from the Association of British Insurers, the value of detected fraud amounts to £17.5 million per week, an increase of 9 per cent over the previous year.

“However, we believe that this is just the visible tip of the iceberg – beneath the waterline there is a serious culture of insurance crime that must be stopped.

“While insurers are getting better at identifying attempts at fraud, the formation of a new police fraud unit early in 2012 will help ensure that insurance criminals are brought to book much more quickly.”

One of the biggest contributors to premium increases has been false and exaggerated personal injury claims, Mr Douglas points out.

“One recent case involved a claim for over £1m by a man who said that he had to rely on a stick to walk and a wheelchair, yet he was witnessed uncoupling and pushing a caravan without difficulty. He was jailed for nine months.

“It’s vital that the industry strongly gets the message over that there will be no hiding place for those who attempt to rip off their insurance company.”

Mr Douglas added that he welcomes the recent public outcry over the no-win, no-fee claims culture that has encouraged people to make false or exaggerated injury claims.

“The sooner legislation is introduced to bring to an end the cold-call marketing of accident management firms; the better it will be for everyone.”

Regional car insurance winners and losers

Regionally, the biggest jump in car insurance premiums over the three months ending 30 June was London with a 4.8% rise to an average Shoparound premium of £1,069 – overtaking Yorkshire to become the second most expensive region to insure a car.

In Yorkshire, premiums increased by 3.1 per cent to a Shoparound average of £1,058. And despite an increase of just 1.4 per cent, the North-west retains top position in the premium leaderboard.

The cheapest region to insure a car remains Scotland with an average quoted Shoparound policy price of £556, up by 1.9% over the quarter. It is perhaps also no co-incidence that claims management firms don’t operate in Scotland, where the legal system is very different.

Region	Jul-11	Apr-11	% Change
London	£1,069	£1,020	+ 4.8%
South	£795	£778	+ 2.2%
Anglia	£734	£720	+ 2.0%
Central	£912	£888	+ 2.6%
West & West Country	£725	£702	+ 3.2%
Wales	£793	£780	+ 1.7%
North-west	£1,521	£1,500	+ 1.4%
Yorkshire	£1,058	£1,026	+ 3.1%
Border & Tyne Tees	£893	£888	+ 0.7%
Scotland	£556	£546	+ 1.9%
Northern Ireland	*	*	*

*Insufficient number of risks for analysis

Further data is available on age and gender by calling Ian Crowder on 01256 492 844 or ian.crowder@theAA.com

Home insurance : the AA British Insurance Premium Index shows slowing premiums

Market

Jul 28, 2011

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The Shoparound index for home insurance has seen premiums fall very slightly over the second quarter of 2011: a drop of 0.6 per cent for buildings cover to £146.35 and for contents a drop of 1.1 per cent to £75.53. However, the typical cost of a combined buildings and contents policy rose by 1.5% to £202.54.

The AA British Insurance Premium Index has been tracking the quarterly movement of both car and home insurance since 1994. It measures the market average premium (an average of all quotes on a UK-representative basket of ‘customers’) as well as the three cheapest quotes for each ‘customer’ to provide the Shoparound index.

Shoparound Index: Home insurance

Average Premium	Jul-11	Apr-11	% Change	Jul-10	% Change
Buildings	£146.35	£147.29	– 0.6%	£130.93	+ 11.8%
Contents	£75.53	£76.39	– 1.1%	£69.82	+ 8.2%
Combined	£202.54	£199.51	+ 1.5%	£199.85	+ 1.3%

Home buildings and contents premiums ease

The latest AA British Insurance Premium Index brings welcome news for home owners with a small fall over the past three months of just over £1, to £146.35, in the average cost of an annual buildings policy.

This follows a steady rise over the past two years that added almost 20 per cent to the cost of insuring a home. The cost of contents insurance also fell by a few pence over the quarter ending 30 June, to £75.53.

However, Simon Douglas, director of AA Insurance, doesn’t believe that this will mark the start of a sustained fall in premiums, pointing out that home insurers are suffering increases in both the cost of severe weather claims as well as fraud.

“While we can do little about the weather, the creation of a new Police Fraud Unit should help insurers to significantly improve detection and prosecution of insurance fraud,” Mr Douglas says.

“The number of people attempting to make claims for losses that are grossly exaggerated or non-existent has risen sharply, according to the Association of British Insurers.

“We need to persuade those thinking of swindling their insurer to think twice. After all, those who are caught falsifying or exaggerating claims will find it difficult to obtain cover from any other insurer because the industry is also getting better at sharing data about those attempting fraud.”

Insurers continue to be concerned about future extreme weather damage and flash flooding. The freeze in December turned out to be very expensive for insurers, covering as it did so much of the country and over such a long period.

Meanwhile the industry has been meeting Defra officials to consider the best ways to provide insurance protection for those homes that are most at risk of flooding.

“This will become particularly important after the current ‘statement of principles’, that ensures homes in flood-prone locations can continue to get insurance protection, comes to an end in 2013,” Mr Douglas points out.

“The industry is keen to continue building reserves for future severe weather events and I believe that premiums may need to rise further.

“The competitive market has ensured that home insurance remains remarkably good value for money. After all, the cost of contents cover has risen only by 8.5% over 17 years while buildings cover has risen by 34% over the same period – even that is well below inflation.” Mr Douglas says.

“My concern is that insurers may be faced with more regular, extreme weather events. If that happens, then current premium rates will not be sustainable and premiums might have to be brought sharply into line.”

Further data is available on age and gender by calling Ian Crowder on 01256 492 844 or ian.crowder@theAA.com

Friends Life : glass ceiling hard to break for women

Communication

Jul 27, 2011

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New research from Friends Life suggests that the glass ceiling preventing women from climbing the corporate ladder could still be in place by the end of this decade.

The report, entitled ‘Working Women’ and part of Friends Life’s Vision of Britain 2020 series, reveals that the majority of working women see no end to the obstacles hindering their advancement in the workplace. Some 55% of women believe there will still be a significant pay gap between men and women in 2020, while 53% think women will still be struggling much more than men to secure senior roles. In contrast, men expect more equality between the sexes by 2020. Less than a third (31%) of men think there will still be a significant pay gap, and only 30% believe women will be at a disadvantage when applying for the top jobs.

The findings highlight just how much progress still needs to be made to ensure male domination of the boardroom is ended and women can reach their full potential professionally. A Government-commissioned report from Sir Mervyn Davies, published in February, called for at least a quarter of FTSE 100 boards to be made up of women by 2015, while the 30% Club is campaigning for a series of measures to improve the prospects of women at senior and board level.

Motherhood, and childcare pressures in particular, remain the biggest barriers for women, according to today’s report. Over half (51%) of working mothers who have taken maternity leave agree that childcare is so expensive that financially it is not worth returning to work. Some 24% of working women with children under five spend more than a quarter of their salary on childcare.

Of those who do choose to go back, the need for flexible working is almost universally recognised. Some 88% of working women believe they should be allowed to reduce their hours for the sake of their family without this affecting their career prospects.

While some organisations, particularly in the public sector, have made big strides in offering flexible working, there is still a long way to go. The report found that a shorter working week, subsidised childcare and the ability to work from home are all offered far less than many working mothers would like.

Kim Clarke, Head of HR, Friends Life, said:
“The glass ceiling preventing women from getting to the top is still a long way from being shattered. Britain also faces a lost army of mothers who are willing but unable to work because of the prohibitive cost of childcare, with serious implications for both the economy and family finances. The right flexible working policy and culture can help women in particular. Flexible working alongside mentoring can help foster a culture of understanding among senior management of the pressures facing women and can ultimately help both women and business prosper.”

Maggie Berry, Managing Director of womenintechnology.co.uk, added:
“An employer’s willingness to offer flexible working often comes down to the attitude of individual managers. We need to move to a position where all employers, large or small and across all sectors, are prepared to help women struggling to juggle the demands of their work and home lives. However, women need to be realistic too. They must understand there will be compromise on both sides, and their employer may not be in a position to give them exactly what they ask for.”

Today’s report is a comprehensive study of the financial challenges facing working women today. Other key findings include:

– Women in their 20s are significantly more likely than average to be taking greater control of their personal finances, with the recession having driven this trend
– Home ownership aspirations are stronger among young women than among young men
– The majority of women in their 50s affected by the Pensions Bill plan to carry on working until they become eligible rather than retire at the age they originally intended
– Some 88% of working women in their 50s believe their age would make it difficult for them to find a new job if they were made redundant

Source : Friends Life

S&P : Assuranceforeningen outlook to positive

International

Jul 27, 2011

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Standard & Poor’s Ratings Services has revised its outlook to positive from stable on Oslo-based marine insurer Assuranceforeningen SKULD (Gjensidig) (Skuld or the club). At the same time, they affirmed to ‘A-‘ the long-term counterparty credit and financial strength ratings on the company.

The ratings reflect the club’s strong competitive position, strong technical operating performance, and strong capitalization supported by strong financial flexibility. These positive factors are offset by the lower level of reserving relative to its peers.

S&P considers Skuld’s competitive position to be strong. It is supported by Skuld’s membership of the International Group of Protection & Indemnity Clubs (IG; a group of mutual organizations that insures approximately 90% of the world’s shipping for third-party liability); compared with peers, Skuld is a midsize, albeit increasingly prominent and diversified, protection and indemnity (P&I) club. S&P believes that Skuld’s recent setting up of its own syndicate within Lloyd’s of London has the potential to constitute a strong differentiating factor relative to the club’s peers.

S&P considers Skuld’s operating performance to be strong. In the year to Feb. 20, 2011, it recorded a combined ratio of 87% and a record pretax surplus of $68 million, based on positive contributions from underwriting and investments. Skuld has achieved eight consecutive years of underwriting profitability, which remains the strongest underwriting track record in the IG.

Capitalization is strong and supports the rating. Free reserves increased by 32% to $266 million at the February 2011 year-end, although this has been offset by the club’s investment in its new Lloyd’s syndicate and by capital charges derived from an increase in higher risk investments. Consequently, Skuld’s capital adequacy, as measured by Standard & Poor’s risk-adjusted model, is in the lower end of the ‘AA’ range.

However, the overall view of capitalization is constrained by Skuld’s lower level of reserving relative to its peers. In 2010/2011, the ratio of outstanding claims reserves to net premiums written (153%) increased slightly. Although Skuld has generally recorded a positive run-off of reserves relating to claims from previous policy years, this ratio still appears low by comparison with the IG average, which is around 200%. S&P largely attributes this to Skuld’s policy of settling claims with the minimum of delay. Despite operating in P&I, a long-tail class of business, Skuld’s average duration is 2.5 years, which is lower than the IG average.

The positive outlook reflects Skuld’s strong underwriting track record and S&P’s ensuing expectation that Skuld will maintain capital adequacy at least at a strong level. They therefore expect the combined ratio to remain at the lower end of the IG average over the medium term. Although the club’s level of investment risk has fallen below its target range, any significant shift into higher-risk investments is not to be expected.

The ratings could be upgraded should Skuld meet the expectations outlined above and also demonstrate a satisfactory outcome from the new Lloyd’s syndicate’s first year of operation which would not impair Skuld’s operating performance and capital. S&P expects growth in this area to be carefully managed to ensure that financial strength and member service are not weakened. If Skuld does not meet expectations, the outlook would likely revert to stable.

Source : S&P

Appontment : QBE named Patrick Coene Managing Director, European Markets

Social

Jul 27, 2011

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QBE has appointed Patrick Coene as Managing Director for European Markets. Based in Brussels, Patrick will join QBE in September 2011 and report to Terry Whittaker, Managing Director, Distribution, QBE European Operations.

Patrick was previously Chief Executive Officer of Amlin Corporate Insurance NV. Patrick graduated as a PhD in Engineering Economic Systems at Stanford University in 1981 and started his career in management consultancy with DRI Europe and McKinsey. Patrick joined the P&C division of AG 1824 (now AG Insurance) in 1992 where he was latterly head of motor insurance. In 1998 he joined Fortis Corporate Insurance with responsibilities including Fleet, Property, IT and country management Belgium and was subsequently appointed Chief Executive Officer of Fortis Corporate Insurance (now Amlin Corporate Insurance).

Commenting on the appointment, Terry Whittaker said: “Patrick brings not only extensive underwriting and management experience, but also provides an essential continental European perspective at executive level, which we believe is key to expanding our business proposition to benefit both brokers and clients”.

Steven Burns, Chief Executive Officer, QBE European Operations, added: “The profitable growth and diversification of our continental European business is a critical aspect of our strategy for the next five years. We are delighted that Patrick has agreed to join QBE to accelerate the development of this business”.

Source : QBE

EIOPA : Eurozone debt crisis biggest threat to insurers

Industry News

Jul 27, 2011

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EIOPA is warning insurers about the Eurozone sovereign debt being their biggest threat. The risk related to their government bond holdings could suffer losses.

“The progress towards sustainable debt levels for sovereigns, both in Europe and globally, will determine whether these risks materialise to adversely impact the financial situation of (insurers),” EIOPA said on Thursday in a twice-yearly review of the sector’s financial stability.

The risk of insurers taking a hit on their holdings of Eurozone sovereign debt has increased in the last six months, and is expected to grow again between now and the end of the year, EIOPA said, citing feedback from national insurance regulators.

Yields on bonds issued by small Eurozone nations Greece, Ireland and Portugal have soared amid concerns they might default on their debt, raising fears over the creditworthiness of larger but also critically indebted Spain and Italy.

Analysts have said major listed insurers are protected by their limited holdings of Greek, Irish and Portuguese debt, but some would face big losses in the event of a Spanish or Italian default.

Italy’s Generali, Europe’s third-biggest insurer, has among the biggest gross exposures to risky Eurozone sovereign debt, with holdings of 59.5 billion euros, according to analysts at Barclays Capital.

An EIOPA stress test of European insurers aimed at gauging their resilience to economic shocks, published on Monday, has been criticised as too lenient because it did not model the impact of a sovereign default.

European insurers have built up their financial strength, improving their ability to withstand investment losses, but spreads on the credit default swaps of several insurers have remained at high levels since the start of the sovereign debt crisis, EIOPA said.

Insurers face additional threats from defaults on corporate and household debt, and could struggle to meet guaranteed returns promised to policyholders if interest rates remain at current low levels for a prolonged period, the regulator added.

Source : Reuters

AXA Assistance : Honda’s tender in Ireland won

Industry News

Jul 27, 2011

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AXA Assistance has won Honda’s tender in Ireland. The contract will cover every assistance need related to the purchase of a new Honda vehicle for a three-year period. This service will apply to the remaining warranty time of vehicles purchased during the last three years.

This partnership will cover 7 500 vehicles including best cars of the year Jazz and Accord models. Other extended warranty projects are being studied, in particular an administrative assistance in the event of a claim.

AXA Assistance assists in more than 20 European countries, two major international automakers present in the electrical car market.

In 2010, the Automotive business line accounts for 36.3% of sales of AXA Assistance in the world, more than 3 million cases handled.

BGL Group : changes at the top

Social

Jul 25, 2011

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BGL Group has appointed Kal Atwal and Martin Overton to the main Board as part of a restructure that establishes four operating groups. The changes come as the company gears up for the next phase of its growth

Kal Atwal, who joined BGL in 2001, is promoted to Group Director, Brand-led Businesses and has Board responsibility for Bennetts, bike insurance, and Courtanet, the recently acquired French aggregator business. In addition, Kal will head-up important new business ventures identified by the Group in 2012.

Kal will also have strategic marketing oversight for comparethemarket to ensure it continues to deliver the quality of marketing that has underpinned its dramatic growth over the last few years.

Martin Overton becomes Group Director, Legal Services. This operating group comprises ACM, the Claims Management division and Board responsibility for BGL’s relationship with Minster Law.

Paul Galligan, previously Director for Bennetts, will replace Kal as Managing Director of comparethemarket. Paul has driven significant growth for the Bennetts brand and his success means that he is well placed to lead comparethemarket as it continues to challenge the dynamics of the aggregator market through its new Rewards programme. All three new appointments will report in to BGL’s Group Chief Operating Officer, Matthew Donaldson.

The fourth operating group, Intermediated Businesses, will consist of Junction, Frontline and Fusion. It will enable BGL to provide real focus on these divisions as they look to identify further growth opportunities. A Group Director for Intermediated Businesses will be appointed in the coming months.

Peter Winslow, BGL Chief Executive says: “I am delighted to announce these Board appointments and to see Kal and Martin join my board room colleagues at this very important time in the next phase of our development of BGL. We have enjoyed significant growth in recent years and will be reporting profit growth once again for the year ended 30 June. We are keen to maintain and increase that momentum to take the company to the next level, each of our divisions has experienced significant successes in their own right and the growth of our board now reflects this.”

Peter continued: “It is particularly pleasing for me personally to see Kal’s and Martin’s contribution rewarded in this way and I am certain they have much to offer in the future to help us achieve the ambitious plans we have for BGL.”

The changes are with effect of 1 September 2011.

Source : BGL Group

Bollington Underwriting : expands CompuQuote facility with exclusive Aviva tie-up

Market

Jul 25, 2011

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Bollington Underwriting has secured an agreement with Aviva to relaunch its exclusive Self Drive Hire facility for hirers.

The new facility is administered by Bollington Underwriting’s CompuQuote system, providing hirers with access to highly competitive and comprehensive insurance cover underwritten by Aviva. The CompuQuote system allows brokers to quickly obtain quotations online.

The system also offers Self Drive Hire companies the ability to produce their own hire agreements, so providing hire companies with all the tools they need to book vehicles in and out and invoice their customers. Clients have a choice of daily or annually rated policies – the latter generally being for larger fleets – and the system also offers vehicle look-up for ABI Car Group and automatic overnight Motor Insurance Database updates.

Bollington Underwriting managing director Chris Patterson said: “Self Drive Hire has become an increasingly challenging class of insurance to place in recent years, which is why much effort has been spent on providing a facility that is robust and flexible enough to be able to meet these challenges. We are extremely pleased with the results and to now be able to offer this improved facility to brokers. Bollington has almost 40 years experience in the commercial vehicle sector and applying this know-how in conjunction with Aviva we believe has produced a compelling proposition for brokers.”

Bollington has also recently released new schemes for other wheels-based risks including taxi, courier and motor trade available on a wholesale basis.

Source : Bollington Underwriting

AIR Worldwide : expands suite of Atlantic Basinwide Tropical Cyclone models

Industry News

Jul 25, 2011

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Catastrophe risk modeling firm AIR Worldwide has released the Central America tropical cyclone model. The new model covers Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama. The model captures the combined effects of wind and precipitation-induced flooding to provide a complete and scientifically robust view of Central American tropical cyclone risk.

“AIR has undertaken a concentrated effort to serve the needs of the expanding insurance market in Central America,” said Dr. Jayanta Guin, senior vice president of research and modeling at AIR Worldwide. “The AIR tropical cyclone model for Central America leverages the same basinwide catalog of simulated storms as AIR’s models for the United States, Mexico, the Gulf of Mexico, and the Caribbean to enable more accurate analysis of policies and portfolios spanning multiple countries in this region.”

A tropical cyclone produces strong winds and heavy rain and, depending on its location and strength, is referred to as a hurricane, typhoon, tropical storm, or tropical depression. While tropical cyclone wind is a well recognized source of damage, tropical cyclones in this region—even those with relatively low wind speeds—can also be accompanied by significant flooding, which is typically covered under both residential and commercial insurance policies. Since precipitation from tropical cyclones can penetrate hundreds of kilometers inland, weak storms that affect vast areas and generate substantial rainfall have the potential to produce significant insured losses.

The AIR model’s flood component incorporates high-resolution elevation and soil data to simulate tropical cyclone-induced flooding. The impact of flooding is estimated using the accumulated runoff, which is based on total precipitation produced by a simulated storm, topography, elevation, and the ability of local soils to absorb water.

Separate wind and flood damage functions have been incorporated for a wide range of occupancies and construction types, as well as contents and time-element coverage. AIR’s damage functions account for storm duration to reflect the increased damage that results from prolonged exposure to wind and rainfall and have been validated using detailed claims data.

Hurricane Mitch (1998), which was a very slow-moving storm that dropped historic amounts of rainfall in Honduras, Guatemala, and Nicaragua, exemplifies the high proportion of flood damage that may result from a tropical cyclone.

AIR’s Caribbean tropical cyclone model was also updated to provide comprehensive coverage of the Caribbean. The 28 territories included in the model are Anguilla, Antigua and Barbuda, Aruba, the Bahamas, Barbados, Bermuda, the British Virgin Islands, the Cayman Islands, Cuba, Dominica, the Dominican Republic, Grenada, Guadeloupe, Haiti, Jamaica, Martinique, Montserrat, the Netherlands Antilles, Puerto Rico, St. Barts, St. Kitts and Nevis, St. Lucia, St. Maarten, St. Martin, St. Vincent and the Grenadines, Trinidad and Tobago, the Turks and Caicos Islands, and the U.S. Virgin Islands.

The tropical cyclone model for the Caribbean incorporates the latest land use and land cover data available on a high-resolution, 1-kilometer grid. The peer-reviewed model also features a precipitation module for modeling tropical cyclone–induced flooding for all islands in the Caribbean.

“Tropical cyclones in the Caribbean—even those with relatively low wind speeds—can be accompanied by significant flooding, exacerbated by the inland mountains that characterize many islands in the region,” continued Dr. Guin. “Hurricane David [1979] is an important example of a multibillion-dollar loss for which flood losses exceeded wind losses.”

In both the Central America and Caribbean models, AIR employs a component-based approach to help insurers, reinsurers, brokers, and risk managers to better assess the catastrophe risk to industrial facilities. The approach determines the overall damageability of various kinds of industrial facilities based on the damageability of the various assets that compose different types of plants. For example, components such as flares or cooling towers may sustain fairly significant damage at a wind speed where pumps, transformers, or anchored tanks may remain almost unscathed.

Source : AIR Worldwide

Ecclesiastical : awarded recommended status by Which?

Communication

Jul 25, 2011

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Which? has awarded insurer Ecclesiastical Recommended Provider status for its home insurance cover and customer service.

The recommendation means that Ecclesiastical’s home insurance has been judged by Which? experts to be a quality insurance product backed by above average customer service. Strong positive feedback from Which? members who bought Ecclesiastical’s home insurance was a deciding factor.

Dave Simms, head of direct home insurance at Ecclesiastical said: “We take great pride in the quality of our insurance and the care we take in dealing with our customers. To have such a prestigious consumer champion as Which? acknowledge that is the icing on the cake for the Ecclesiastical team.

“We spend a lot of time listening to our customers and adjusting our product to ensure we’re always offering the best possible protection and first class service. Winning recommended status means we’ve been doing the right thing and that’s great news for us.”

Ecclesiastical’s home insurance product has also been awarded a five star rating from independent financial research company Defaqto, the company’s highest possible rating.

A survey of customers conducted by Ecclesiastical direct home insurance in 2010, in accordance with Institute of Customer Service guidelines, showed the insurer was providing customer service of standard comparable with John Lewis and Waitrose.

Fitch Ratings : Lloyd’s of London’s IFS Rating at ‘A+’ affirmed

Industry News

Jul 25, 2011

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Fitch Ratings has affirmed Lloyd’s of London’s IFS rating at ‘A+’. Fitch has also affirmed the Society of Lloyd’s Long-term Issuer Default Rating (IDR) at ‘A’ and Lloyd’s Reinsurance Company (China) Ltd’s IFS rating at ‘A+’. All three ratings have Stable Outlooks. Fitch has additionally affirmed Lloyd’s subordinated debt issues at ‘BBB+’, as detailed at the end of this comment.

The rating affirmation reflects the strong financial profile of Lloyd’s, which has successfully withstood the unprecedented catastrophe losses sustained by the insurance industry during Q111. The rating action also reflects Fitch’s expectations that Lloyd’s will remain profitable in 2011, despite the Q111 catastrophe events. The agency forecasts a pre-tax profit of GBP575m, but notes that this figure relies primarily on investment income and assumes that catastrophe losses through the remainder of 2011 revert to more normal levels. Lloyd’s strong capital position and the conservative allocation of both several and mutual assets are also viewed as positive rating factors.

While Fitch expects lower premium pricing and reduced levels of investment income to create further earnings pressure in 2011, the agency believes that Lloyds’ strong capital will help to mitigate the effects of any earnings volatility. This expectation is reflected by the Stable Outlook.

“While Fitch anticipates that Lloyds’ results will be weaker for the 2011 financial year, it believes that the market will remain profitable,” says Martyn Street, Director in Fitch’s Insurance Group. “The agency continues to view Lloyd’s earnings resilience to events such as those that occurred at the start of 2011 as the primary driver for Lloyd’s rating,” Street added.

The historical volatility of Lloyd’s results has been driven by its substantial exposure to catastrophe events, which has resulted in higher-than-industry-average losses in years of significant catastrophe activity. Fitch continues to view the work of Lloyds’ Performance Management Directorate (PMD), which reviews and controls the performance of individual syndicates, as being a key mechanism in improving the stability of earnings at Lloyd’s in the medium term.

A marked decline in the level of reported profitability, erosion of capital, including central fund assets, and poor performance relative to peers could lead to a downgrade.

Key drivers for an upgrade would be a reduced level of earnings volatility versus peers, in the wake of a large catastrophe event, or evidence of earnings resilience during a prolonged period of increased attritional losses and lower premium pricing conditions.

Market participants at Lloyd’s collectively underwrote GBP22.6bn of gross written premiums (GWP) in 2010, a y-o-y increase of 3% and profit before tax (PBT) of GBP2.2bn, a y-o-y decrease of 43%. Lloyd’s has a global franchise and operates in over 200 countries and territories. It is a leading market for reinsurance and specialist property, casualty, marine, energy and aviation insurance.

The subordinated debt ratings are as follows:

GBP300m 6.875% per annum subordinated debt with final maturity in November 2025, callable from November 2015, affirmed at ‘BBB+’

EUR253m 5.625% per annum subordinated debt with final maturity in November 2024, callable from November 2014, affirmed at ‘BBB+’

GBP419m 7.421% per annum perpetual subordinated debt, callable in 2017, affirmed at ‘BBB+’

Source : Fitch Ratings

USA : ratings drop should not hurt insurers

International

Jul 24, 2011

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Four AAA rated life insurers may hold on to their status, provided that the US Government bond rating does not fall by more than one unit.

Strong balance sheets and underwriting skills have been a leg up for top-rated insurers New York Life Insurance Co., Northwestern Mutual Life Insurance Co., Teachers Insurance & Annuity Association of America and United Services Automobile Association, Moody’s Investors Service wrote in a report last week.

The four insurers’ ratings are tied to those of the United States because most of their business is based in this country, and the majority of their investments are tied to domestic issuers.

If the United States’ sovereign-debt rating is confirmed at Aaa or cut by just one notch to Aa1, the insurers are likely to hold on to their ratings. But if the government bond rating falls to Aa2 or further, the life insurers’ ratings could fall accordingly, Moody’s wrote.

Although life insurers are investors in government bonds, this will be only one consideration behind cutting ratings for carriers if the United States is downgraded, said Joel Levine, senior vice president at Moody’s. “The impact isn’t so much that the insurers are holding government bonds; it’s more the macro environmental factors that lead to a multinotch downgrade,” he said.

High unemployment and large deficits are generally bad news for life insurers.

Rising taxes for individuals would cut disposable income and make customers less willing to buy life insurance, while rising unemployment doesn’t augur well for sales of group insurance coverage, Mr. Levine said.

Source : Investment News

Holidays : LV= releases their Cost of a Child Report for 2011

Good to know

Jul 22, 2011

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As the end of the school year approaches, the Cost of a Child Report from protection specialist LV= calculates that UK parents are set to spend £8.6 billion over the summer break on childcare (£3.2 billion) and entertainment (£5.4 billion). Earlier this year, a report by LV= found that on average, parents will spend £210,000in total to raise a child from birth to age 21.

The summer holidays can be a daunting prospect for many parents with an average of 42 days break from school. Parents will be spending an average of £110 per child per week, £660 per child over the entire summer break (£414 on entertainment costs and £246 on childcare). Nearly half of UK parents (49%) say they will need to pay for childcare during the summer break and a massive 93% will be spending extra on entertainment.

The pressure is on for parents as over a third (38%) state that the costs associated with school holidays this year are unaffordable. To combat these rising costs, one in ten (10%) of all parents will be relying on family, including grandparents, to look after their children for free.

Holidays abroad…not anymore

LV=’s Cost of a Child Report 2011 found that parents spend a total of £14,052 on holidays for their child from birth to the age of 21 (an increase of 6.4% from 2010)^[4]. Many families will want to seek out the summer sun over the long school holidays but unfortunately many will not be going abroad. Over half of all parents with children under the age of 18 years (55%) said that this year they will not be taking any holidays abroad. Nearly a third (29%) of families will not even be having a break in the UK. The days of several holidays abroad is a distant memory, with three quarters (74%) of those planning to travel abroad this year, taking one trip all year.

Low-cost activities

Although parents are continuing to make cut backs, they have become more creative in keeping the school holidays fun for their children. Financially savvy mums and dads are making the most of current discount offers with over half (59%) using them to reduce the costs of entertainment for their children and a further two thirds (62%) are planning to make the most of low cost of free activities, such as museums and parks. Two thirds of parents (63%) will be making use of activities in the home by encouraging their children to enjoy cooking, arts and crafts.

Mark Jones, LV= head of protection said: “Understandably, many parents will be worried about how they can afford to meet the costs of childcare and keeping the kids entertained over the summer holiday period. It would seem that for many, sun, sea and sand on a holiday abroad is not on the cards this year, and instead it’s the local park, pool and Peppa Pig on DVD. Many parents look to set to be resourceful this summer; making use of special offers and discounts; and relying on extended family such as grandparents to help out with childcare.

“Many families will be looking at short-term measures to stretch the budget and try to save money in some areas to spend in others. Yet it’s important to keep the bigger picture in mind. For instance, cancelling insurance policies or cutting back on long-term savings could have a huge impact on a families finances if a parent were suddenly unable to work due to accident, illness or unexpected job loss. With 14% of parents saying they have recently made cuts specifically to their life, health, or unemployment insurance people could be leaving themselves and their families unprotected.”

Source : LV=

Europe : euro zone agrees Greek rescue plan

International

Jul 22, 2011

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German government bonds fell early on Friday and peripheral bonds were seen rising after euro zone leaders agreed on a second rescue package for Greece but uncertainty remained over some details and whether it would solve long-term deficit problems.

An emergency summit of leaders of the 17-nation currency area on Thursday pledged to conduct a second bailout of Greece with an extra 109 billion euros ($157 billion) of government money, plus a contribution by private sector bondholders estimated to total as much as 50 billion euros by mid-2014.

The German Bund future FGBlc1 fell 20 ticks on the day to 126.81.

“On the surface it looks okay, peripheral-supportive,” said a London trader. But he added: “I still think there are fundamental problems in peripherals.”

The crisis plan also included giving broader powers to the euro zone financial rescue plan and analysts sought details on whether this meant any changes to the EFSF’s size.

“Possibly the most disappointing aspect is that there is no specific reference to upsizing of the EFSF,” said Barclay Capital strategists in a note.

Investors would now scrutinize any comments by rating agencies to see whether they would downgrade Greece’s ratings to so-called selective default. Rating agencies have played hard ball throughout the crisis and have said that they would see most private sector involvement in a Greek rescue plan as coerceive and therefore worthy of such a rating.

Some analysts expected market reaction to a downgrade to selective default to be muted, given that markets and peripheral bond yields were already largely pricing some for of Greek debt restructuring.

Source : Reuters

Legal : Sony insurer will go to court to deny data breach coverage

Legal

Jul 22, 2011

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One of Sony Corp’s insurers has asked a court to declare that it does not have to pay to defend the media and electronics conglomerate from mounting legal claims related to a massive data breach earlier this year.

The dispute comes as demand soars for “cyberinsurance,” with companies seeking to protect themselves against customer claims and associated costs for data and identity theft.

How to write such policies has become a huge subject of debate in the insurance industry.

Zurich American Insurance Co asked a New York state court in documents filed late on Wednesday to rule it does not have to defend or indemnify Sony against any claims “asserted in the class-action lawsuits, miscellaneous claims, or potential future actions instituted by any state attorney general.”

A Sony spokesman in Tokyo said his company does not comment on pending litigation.

Zurich American, a unit of Zurich Financial Services, also sued units of Mitsui Sumitomo Insurance, AIG and ACE Ltd, asking the court to clarify their responsibilities under various insurance policies they had written for Sony.

“Zurich doesn’t think there’s coverage, but to the extent there may be a duty to defend it wants to make sure all of the insurers with a potential duty to defend are contributing,” said Richard Bortnick, an attorney at Cozen O’Connor and publisher of the digital law blog CyberInquirer.

Bortnick, who is not involved in the case, said that while Sony may be able to claim there was property damage as a result of the data breach, Zurich is likely to argue that the sort of general liability insurance it wrote for Sony was never intended to cover digital attacks.

AIG declined to comment, and Mitsui Sumitomo could not immediately be reached.

In April, hackers accessed personal data for more than 100 million users of Sony’s online video games. Sony has said it could not rule out that some 12.3 million credit card numbers had been obtained during the hacking.

In May, Sony said it was looking to its insurers to help pay for its massive data breach.

Sony has said it expects the hacking to drag down operating profit by 14 billion yen ($178 million) in the current financial year, including costs for boosting security measures. The company said the figure does not include potential compensation.

Source : Reuters

Junction : new 5 year affinity partnership with M&S Money

Communication

Jul 21, 2011

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Junction, insurance affinity specialist, has announced the extension of its partnership with M&S Money following a competitive tender process. Junction has been working with M&S Money since 2004 and the new agreement will see the brand partnering with Junction for at least a further five years.

M&S Money already has a strong market position in the motor insurance space. The new agreement will involve Junction using its technology expertise and strong insurer relationships to develop the brand’s customer proposition even further. The next phase of the partnership will grow customer numbers under an innovative, joint business framework and collaborative marketing approach.

Peter Thompson, Managing Director of Junction, said: “M&S Money prides itself on the high level of trust and loyalty that it has built with its customers. We are delighted that it continues to believe in Junction’s ability to deliver such high standards of customer service. Since we began working with M&S Money, insurance customer numbers and profitability have grown significantly. To keep the brand at the forefront of the market we must consistently find new ways to exceed customers’ expectations. We already have exciting new initiatives in the pipeline to drive further growth.”

Associate Director at Junction for M&S Money, Sherry Pestonji, headed up the tender process and added: “The success of the M&S Money/Junction relationship so far is the result of the team’s ability to work in collaboration to jointly develop market leading insurance offerings. The next phase of the partnership will see this evolve even further with the development of exciting new technology and e-commerce initiatives that match M&S Money customers’ high standards.”

Colin Kersley, CEO of M&S Money, commented: “Junction has already delivered a high level of success for M&S Money and its customers and clearly understands the requirements of the brand. In a competitive and volatile market we have confidence in Junction’s ability to continue driving the growth of M&S motor insurance and look forward to developing our strong partnership even further. “

The next phase of the partnership will commence from January 2012.

Source : Junction

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