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AIR Worldwide Estimates Insured Losses from the Mw6.1 New Zealand Earthquake at Between NZD 5 billion (3.5 billion USD) and NZD 11.5 billion (8 billion USD)

Catastrophe modeling firm AIR Worldwide estimates that industry insured losses from the moment magnitude 6.1 earthquake that struck New Zealand’s South Island near Christchurch on February 22nd (February 21st UTC) will be between NZD $5 billion (3.5 billion USD) and NZD $11.5 billion (8 billion USD). The quake caused extensive damage in the city center and was the second major quake to strike the city in six months.

It is still in the very early aftermath of yesterday’s earthquake that struck near Christchurch on New Zealand’s South Island, and damage assessments are only just beginning after the initial focus on search and rescue. Damage in this city of about 375,000 people is widespread, and aftershocks, of which there have been several, remain a concern. (Note that while seismological agencies are reporting a local (Richter) magnitude of 6.3 for this earthquake, this translates to a moment magnitude (Mw) of 6.1 according to calculations made by the USGS.)

“Christchurch is New Zealand’s second largest city, and while design requirements for new construction are stringent, many historical buildings dominate the central business district, and they are predominately of masonry construction,” said Dr. Arash Nasseri, engineer at AIR Worldwide. “Few have undergone seismic retrofit. Structures may also have been weakened by the magnitude 7.0 earthquake that took place in early September of last year. Although Tuesday’s quake—considered to be part of the aftershock sequence of the September event—was smaller in magnitude, it has been more damaging because it was closer to the center of Christchurch and occurred at such a shallow depth.”

The government of New Zealand has declared a national state of emergency in order to facilitate the coordination of local, national and international rescue and recovery efforts. Hardest hit was the city’s central business district, which remains largely shut down. Rows of masonry buildings crumbled and those buildings still standing will have to be carefully assessed for structural integrity.

According to AIR, the city’s infrastructure has also been hard hit, with many roads and bridges damaged as a result of liquefaction. In the city’s suburbs and surrounding towns, ground failure manifested in the form of liquefaction, lateral spreading and landslides.

“The largest magnitude earthquake to strike New Zealand since modern instrumental record-keeping began was a Mw 7.8 event in 1931, known as the Hawke’s Bay earthquake,” explained Dr. Nasseri. “That disaster prompted the significant revision of New Zealand’s building code that has given the country one of the most stringent in the world today.”

South Island, on which Christchurch is situated, has an active fault zone in the north, which includes a region known as Porters Pass-Amberley Fault Zone and two others, the Alpine fault zone and the Hope fault zone. “Most known historic earthquakes on South Island have occurred in this 200-mile wide collision plate boundary zone,” added Dr. Nasseri. “This area forms the southern part of the collision zone along the Pacific-Australia plate boundary. The Pacific plate subducts under New Zealand’s North Island and terminates under South Island, about 100 miles north of Christchurch. The plate boundary forms another collision zone that extends across South Island.”

Source : AIR Worldwide Press Release

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Fitch Ratings says in a new special report that the improved performance of South African life insurers in H110 was driven by resilient operating performances and capital levels and improved persistency experience, despite the tough operating environment.

“Although the performance of the South African life insurance market was resilient in H110, it continues to face several challenges, which were exacerbated by the recent financial crisis,” says Nicole Gibb, Associate Director in Fitch’s Insurance team. “The industry was affected by negative persistency experience as a result of pressure on consumers’ disposable income, volatile equity markets and reduced consumer spending. Although there are signs that persistency is improving, it remains to be seen whether the improvement will be lasting.”

The report also discusses important trends and regulatory changes which will affect the South African life insurance market. Fitch expects the performance of life insurance companies to gradually improve but predicts that earnings will remain under pressure from reduced disposable incomes and the ongoing tough, albeit improving, South African and global investment market conditions.

Source : Fitch Ratings press Release

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Aon Benfield launched its new report ‘Chile: One Year On’ which highlights how the earthquake tested the reinsurance market and outlines steps for insurers to prepare for future catastrophes.

The Maulé earthquake, which happened on 27 February 2010, demonstrated how the re/insurance system worked effectively and particularly benefited the country’s infrastructure by providing a means for recovery that otherwise would have fallen on the state. Other key findings from the report include:

– Some 95% of the USD8.5bn loss fell to reinsurers. For a comparable US event only 50% would be ceded. The facultative market paid 60% of this figure.
– Chilean excess of loss reinsurance programs initially renewed with increases of 75% or more, but recent increases have now stabilized at around 50%.
– Over 95% of personal lines and 80% of commercial lines claims have been paid and closed. The regulator set a deadline of 30 April 2010 for policyholders to file claims so most were filed two months after the event. This proved to be a very positive step for the insurance industry, particularly in contrast to very drawn out claim settlement process from the Northridge earthquake.
– The size of the Chilean tsunami was small relative to the large magnitude earthquake, particularly in comparison to the 1960 earthquake which produced damage and deaths as far away as Hawaii and Japan.

A strong regulatory system aimed at protecting consumers – coupled with a robust seismic code – can enable countries globally to mitigate damage and economic loss.  The key next steps for the industry to prepare for future catastrophic events are:

– Tsunami research. As a non-modeled peril, insurers need to consider potential tsunami damage in addition to output from catastrophe models’ earthquake analysis.
– Reducing the gap between estimate and actual losses: Modeling firms must work to understand the drivers of model miss.  Improving tools to reduce the gap between estimated and actual losses will build insurers’ confidence in using models as a risk assessment tool.
– Higher quality data: Improving the quality of exposure data will in turn improve the accuracy of the model results.

Paul Felfle, head of Aon Benfield Analytics for Latin America, said: “The Maulé earthquake was the second largest insured earthquake loss after the Northridge event in 1994. It served as a test of the Chilean insurance market, throwing into the spotlight its contingency plans, the regulatory framework, construction codes and ultimately the effectiveness of the reinsurance market. Overall, the system designed to protect the public and insurance companies proved highly effective.”

Stephen Mildenhall, head of Aon Benfield Analytics, added: “From a reinsurance perspective, insurance companies were able to see that their cover not only provided an accretive form of capital, but that, based on current estimated losses, they had purchased sufficient limits to protect their balance sheets and meet their obligations to the insureds of Chile. The lessons learned in Chile can be utilized to prepare for future events both in Chile and in other countries with similar loss potential from natural hazards.”

Source : Aon Benfield Press Release

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Asian insurance giant AIA said Friday its  net profit last year soared more than 50 percent to $2.7 billion, several  months after it raised $20.5 billion in a monster Hong Kong share sale.

New business growth along with currency and investment gains propelled the  Pan-Asian insurer’s results for the fiscal year ended November 30 to 54  percent above its $1.8 billion net profit in 2009.

“Our 2010 results are a significant improvement over 2009 on all key  measures, with excellent growth in profitability,” AIA’s Chief Executive Mark  Tucker said in a statement announcing the firm’s first public results since  its listing in October.

The company said its income from insurance premiums rose 12 percent to  about $13 billion in 2010, a rise partly driven by a general strengthening of  Asian currencies against the US dollar.

AIA said it booked a 22 percent hike in new business to $667 million, up  from $545 million in 2009, with growth across key markets including mainland  China, Malaysia and Thailand.    The firm’s shares closed 5.7 percent higher at HK$22.3 ($2.85) on Friday.

The Asian unit of troubled US insurer American International Group raised  $20.5 billion in October, marking the world’s third-biggest initial public  offering at the time.

AIA’s sale came after Agricultural Bank of China raised $22.1 billion in  Hong Kong last July, beating the previous world record set by Industrial and  Commercial Bank of China, which raised $21.9 billion in 2006.

Some of the cash from AIA’s huge IPO was earmarked for helping its then  parent AIG pay off a $182 billion US government bailout it received at the  height of the global financial crisis.

Once the world’s largest insurer, AIG received the massive government cash  injection after it teetered on the brink of collapse in 2008 and threatened to  take down a number of large banks with it.

On Thursday, AIG reported a $7.8 billion net profit for 2010, largely aided  by asset sales including the AIA offering, after reporting an almost $11  billion net loss in 2009.    AIG, which still owns about one-third of AIA, was forced to look at  floating its Asian unit in Hong Kong after the collapse last June of a  proposed $35.5 billion sale to British insurer Prudential.

Hong Kong, Feb 25, 2011 (AFP)

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A private insurance company nixed a charter  flight secured by Canada to ferry its citizens out of Libya Thursday,  stranding 105 Canadians at the Tripoli airport, the foreign ministry said.

The move left Ottawa scrambling to find a “plan B” and by afternoon a  military jumbo jet was put on standby to go in its place.

Due to the deteriorating security situation in Libya, a charter flight  obtained to evacuate Canadians (from Tripoli) couldn’t obtain insurance, so  we’re now looking to work with our partners on other options,” Lynn Meahan,  spokeswoman for Foreign Affairs Minister Lawrence Cannon, told AFP.

She said a Canadian military C-17 transport aircraft now in Germany was  “put on standby” to go fetch the Canadians once landing rights were secured  from Libya.

Earlier, Cannon spoke with his Italian counterpart, Franco Frattini, during  a stopover in Rome and “they’ve indicated that they’re willing to assist us in  securing landing rights for our military aircrafts (in Tripoli),” Meahan said.

Italy, which controlled Libya from 1911 to 1942, is also its top trade  partner.

Cannon was accompanying Canada’s Governor General David Johnston on a visit  to Kuwait.

He was scheduled to leave for Kuwait later in the day, but his office said  he may stay in Rome to meet the first Canadian evacuees from Tripoli, expected  to arrive as early as Thursday evening.

Meahan also pointed to Canada’s allies evacuating their citizens by ship,  as a secondary option. As well, Ottawa has asked Canadian companies on the  ground, including SNC-Lavalin, Suncor and Shell Canada, to “assist in the  evacuation.”

One-hundred-and-five Canadians were checked in at the Tripoli airport  earlier, awaiting a charter flight that never arrived.

Of the 353 Canadians registered at the Canadian embassy in Libya, 213 have  requested help in leaving the North African country amid a deadly crackdown on  anti-regime protesters.

Another charter flight was still scheduled to depart for Tripoli and pick  up Canadians on Friday, said Meahan, but it is unclear if insurance woes would  also ground that flight.

Ottawa, Feb 24, 2011 (AFP)

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Insurance Australia Group has sought to hose down speculation the recent spate of natural disasters leaves Australia’s largest insurer exposed to a takeover.

Amid speculation that huge losses from the Christchurch earthquakes, the Queensland floods and other catastrophes would force a wave of consolidation through the insurance sector, IAG chief executive Michael Wilkins said yesterday the natural disasters didn’t necessarily turn companies into takeover targets.

“There are a number of factors, not just financial impacts from events, that can potentially drive that,” Mr Wilkins said following IAG’s first-half profit announcement.

“The industry in this part of the world is well capitalised and well protected through reinsurance, and will be able to cope with this event.”

Mr Wilkins’ comments came after Roger Feletto, managing director at corporate advisory firm Greenhill Caliburn, said the natural disasters would put pressure on insurance companies’ balance sheets.

“Maybe this is the year we will see QBE buy IAG,” he said in a presentation at a mergers and acquisition conference in Sydney.

IAG reported a $161 million net profit for the first half of 2010-11, down 51 per cent on the same period of the previous financial year after a surge in personal injury claims in the UK offset improved margins in its key Australian market.

Further losses at the UK operations are expected in the second half of the financial year as “claim farming” by personal injury lawyers inflates the frequency and amount of payouts.

“We remain confident this business can achieve a satisfying return over the longer term,” Mr Wilkins said of the UK operations.

IAG repeated its recently updated guidance for a full-year insurance margin in the range of 8 to 10 per cent.

Hit by floods, storms, bushfires and earthquakes, natural peril costs in the full year are forecast to be $540 million.

The board declared a fully franked interim dividend of 9c per share — up 0.5c on the first half of 2009-10 — with a record date of March 9 and a payment date of April 11.

IAG shares closed 4c or almost 1 per cent lower to $3.63.

Source : Herald Sun

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The Red Crescent, which is the only  humanitarian aid organisation currently on the ground in Libya, is already  overstretched and facing a severe shortage of medical supplies, EU’s  Humanitarian Aid Commissioner Kristalina Georgieva said Thursday.

“What particularly worries us is that with the exception of the local  organisation of the Red Crescent — which is already gasping for breath and  cannot ensure enough medical services, especially in Benghazi — there are  practically no other structures that could join the (humanitarian) action,”  Georgieva told the Bulgarian national radio.

“What we hear is that there is need for medication, that the healthcare  system is overpowered,” she added.    The Red Crescent has managed to mobilise only about 100 local volunteers  working in Benghazi and even fewer in the capital Tripoli, Georgieva said.    The three very small UN representations in Libya — of the UNICEF  children’s fund, the UN development programme and the World Health  Organisation — lack any operating capacity to help any humanitarian effort,  she said.

“So our only hope is to manage to help via the Red Crescent and the Red  Cross as they stand the best chance in these hard circumstances,” Georgieva  said.    The EU has also been trying to move its humanitarian aid workers over the  Libyan border with Egypt, she added, warning of the imminence of a  humanitarian crisis as the situation in Libya “grows more and more serious by  the hour.”

Sofia, Feb 24, 2011 (AFP)

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    Highlights:

    – Secondary impacts from the ground shaking are emerging throughout the region, including cases of fire following earthquake, landslides, and localized liquefaction, as well as flooding.

    – As of Thursday, 24 February, rescue workers have confirmed 98 fatalities with another 226 people still missing.

    – Power, communications, and essential services continue to be disrupted across the region and major problems continue with critical infrastructure in Christchurch, in particular water and sewerage systems.

    – Aftershocks are expected to continue and could lead to further building damage or collapse, and possible further disruption to power, communications, and essential services.

    – RMS is sending a reconnaissance team to assess ground displacements, the scope of building damage, and gather more information on secondary impacts (e.g., liquefaction).

    Damage is considerable in Christchurch, New Zealand’s second largest city, following the powerful earthquake of magnitude 6.3 (moment magnitude, Mw), which occurred near Lyttelton on Tuesday, February 22, 2011. In particular, the central business district (CBD) has experienced a number of collapsed or seriously damaged buildings. Damage assessment in Christchurch is ongoing and assessment was commencing in the city’s suburbs on Thursday.  The damage appears to be more extensive than following the September 2010 earthquake.

    Severe damage is being reported in the town Lyttelton, closest to the earthquake epicenter. There are confirmed reports of landslides at Sumner. Western suburbs, such as Hornsby, appear to have escaped much of the devastation that has affected the central, eastern, and southern parts of the city.

    “Secondary impacts from the ground shaking are emerging throughout the region, including cases of fire following earthquake, landslides, and localized liquefaction, as well as flooding,” said Emily Paterson, associate manager of cat response at RMS.  “There have been numerous reports of liquefaction as a result of this event. Furthermore, the suburb of Bexley, experienced flooding during Tuesday’s earthquake.”

    As of Thursday, power, communications, and essential services continue to be disrupted across the region and major problems continue with critical infrastructure in Christchurch, in particular water and sewerage systems.

    Aftershocks are expected to continue and could lead to further building damage or collapse, and possible further disruption to power, communications and essential services.
    The National Crisis Centre has been activated and a National State of Emergency has been declared in New Zealand as a result of Tuesday’s earthquake. Canterbury Police, as of late Thursday, have confirmed 98 fatalities, and are reporting a further 226 as missing. Officials have serious concerns that the missing have not survived, based on information from police inquires and the likelihood that the missing are within the most severely affected areas of Christchurch.

    The relatively high toll compared to the September 2010 Darfield Earthquake is partly driven by the higher ground motions in Christchurch and the occurrence of the event during peak occupancy hours, as individuals were subject to falling debris or within more susceptible structures (e.g., reinforced concrete versus wood frame structures).

    Source : RMS Press Release

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    Four people were arrested today as part of an investigation into organised crime in the north east region.

    Those arrested are suspected of being involved in conspiracy to commit insurance fraud. This is the culmination of a 12 month investigation and brings to 25 the total number of people arrested so far.

    The four people, all men from Derwentside and Darlington, are currently being questioned at police stations in County Durham.

    The offences being investigated involve fraudulent claims against insurance companies for the recovery, repair, disposal or replacement of vehicles damaged in crashes, plus associated car hire costs.

    Superintendent Rob Coulson said today: “This has been an extensive, protracted investigation into a so-called ‘crash for cash’ scam.

    “We believe this to be organised crime on a large scale, involving more than 300 accidents, averaging around £14,000 per claim. In total, we believe these crimes have resulted in losses of well over £3m to those insurance companies.”

    Supt Coulson added that there was a perception that insurance fraud was a ‘victimless’ crime, but this was far from being the case.

    “Insurance fraud makes victims of everyone who insures a vehicle,” he said.

    “The cost is passed on to law-abiding motorists and has been recently estimated at £44 per driver. We know for a fact that car insurance premiums have increased substantially in the Derwentside area, the indication is well in excess of the national average.

    “Some drivers in Derwentside are struggling to find any companies prepared to insure them.”

    Glen Marr, Director of the Insurance Fraud Bureau, added: “The IFB has been working closely with Durham Constabulary on this investigation and these arrests show the power of a collaborative partnership between police and the insurance industry.

    “Defrauding an insurer is now a high risk activity and the industry is not a soft target for criminals. The message is loud and clear – seek to defraud an insurer and you risk serious repercussions, to include prosecution and seizure of assets.

    “Together with the police, we will continue to find, expose and pursue individuals and gangs involved in this kind of criminal activity.”

    Today’s arrests bring to were part of Operation Sledgehammer, which is the Durham Constabulary initiative to tackle organised crime.

    Deputy Chief Constable Michael Barton said: “We’re determined to ensure that organised criminal networks never gain a stranglehold on our communities.

    “Our message to anyone thinking they can operate a criminal network is clear: we have you in our sights and we will take enforcement action against you.

    “And we will use all the powers available to us through the Proceeds of Crime Act to ensure you don’t profit from your actions, either now or in the future.”

    Source : IFB Press Release

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    IAG said that its New Zealand businesses, which include State and NZI, were rapidly mobilising in response to the destructive 6.3 magnitude earthquake that struck the Christchurch region yesterday.

    IAG Managing Director and CEO, Mr Mike Wilkins said: “Our primary concern is for the people affected by this catastrophe and we are focused on providing assistance to our customers and staff as quickly as possible.”

    “This event is particularly devastating, given the region is still rebuilding following the previous major earthquake, in September 2010.”

    “While still far too early to determine the extent of damage from this latest event, our reinsurance covers mean that the maximum financial impact on the Group would be $40 million,” Mr Wilkins said.

    In the wake of this event, IAG has revised its FY11 insurance margin guidance down to 8%–10% (from 9%–11%) to reflect an increased natural peril cost assumption of $540 million (from $500 million) and the estimated cost of reinstatements in respect of its catastrophe reinsurance cover.

    IAG will be releasing its detailed 1H11 results tomorrow, 24 February 2011.

    Source : IAG Press Release

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    Aon Benfield, the global reinsurance intermediary and capital advisor of Aon Corporation, today announces that Jean-François Walhin will become Chief Executive Officer of its Brussels office effective March 1 this year.

    Jean-François, who is currently Aon Benfield’s Head of Analytics, Benelux, replaces the present Brussels CEO, Bernard Suys, following Bernard’s decision to retire in March 2013.

    Meanwhile, Jürgen Wielandts will assume the role of Head of Analytics for Benelux, focusing on the development of the firm’s analytical skills and capabilities in the region, and ensuring that Aon Benfield continues to deliver innovative service of the highest quality to its Benelux clients.

    Richard Dudley, CEO Aon Benfield Benelux, said: “Bernard has been an incredible presence within Aon Benfield and its predecessor companies, and we are extremely grateful that he will continue to work for Aon Benfield for two more years. We will benefit greatly from his experience during this period, and he will help Jean-François in his transition to Brussels CEO. Jean-François brings immense energy and a broad skillset to the role, all of which will be invaluable in our drive to grow Aon Benfield’s business in the Belgium and Luxembourg markets.”

    Bernard Suys commented: “I have decided to retire from Aon Benfield in March 2013, after a long and thoroughly enjoyable career in the reinsurance broking industry. To ensure an orderly transition, I will be handing over the reins of Brussels CEO to Jean-Francois Walhin in March, but will remain with Aon Benfield for the next two years and will be fully committed to serving my clients during this period. We have an immense amount of talent in both the Brussels and wider Benelux teams, and I know that all our colleagues will continue to give their best efforts in order that the division moves from strength to strength.”

    Jean-François said: “Richard and Bernard have retained and hired the very best people in the industry in order that Aon Benfield can achieve long-term business relationships with our Benelux clients, and I am very proud to take the lead from Bernard and look forward to working with him until his retirement. Through our customised solutions we will continue to deliver the highest quality service to our clients and assist them in managing their capital and earnings volatility. We will advise clients in the fields of mergers and acquisitions, capital markets solutions, and Solvency II compliance with ReMetrica. This is in addition to our leading traditional reinsurance transaction capabilities.”

    Source : Aon Benfield Press Release

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    Fitch Ratings says that the lengthy transition to the new Solvency II regulatory regime for European insurers, signalled by the European Commission’s Omnibus II Directive, will delay the full benefits of Solvency II. However, the transition measures will smooth the changeover from the current Solvency I regime, giving insurers more time to adapt to the new rules. Fitch maintains its view that while there will be winners and losers, Solvency II will be broadly ratings-neutral in aggregate across its portfolio of rated European insurers.

    The harmonised risk-based Solvency II regime will ultimately bring many benefits to European insurance markets, including better risk management for insurers and greater transparency for investors. With Solvency II now unlikely to take full effect until 2023, Fitch expects a long delay before these benefits are fully realised. However, Omnibus II is ratings-positive for smaller insurers and niche players that might have struggled to meet Solvency II without a transition period during which to adapt.

    Fitch believes that the transition period signalled by Omnibus II will reduce the risk of disruption to financial markets. “In the absence of a transition period, Solvency II might have triggered a sudden reallocation of insurers’ corporate debt portfolios into shorter-duration or more highly rated corporate and sovereign debt, because these attract lower capital charges under Solvency II,” says Clara Hughes, Director in Fitch’s Insurance team. “With European insurers holding more than EUR3trn of debt, a sudden mass reallocation of debt portfolios could seriously disrupt financial markets but the transition period now expected will smooth the impact.”

    The special report “Omnibus II Signals Lengthy Transition to Solvency II” is available at Fitch Ratings web site..com.

    Source : Fitch Ratings Press Release

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    Aon Hewitt announced that it ranked first in four major categories including “Total Defined Benefit Plans” and “Total Defined Benefit Participants,” in Plansponsor’s 2010 Defined Benefit Administration Survey.

    Plansponsor magazine recently surveyed providers of defined benefit (DB) recordkeeping services, with 28 providers completing the survey. The questionnaire consisted of approximately 100 separate data points related to providers’ experience and capabilities, including the overall scope of the business, the types of clients and plans served and their product or service capabilities. In addition to ranking first in four categories, Aon Hewitt was in the top three in two other categories.

    Aon Hewitt Ranking

    Rank Category
    1 Total DB Plans
    1 Total DB Participants
    1 Most DB Participants Added

    (from 6/2009-6/2010)
    1 Number of NQDB Plans
    3 Number of Traditional DB Plans
    3 Number of Cash Balance/Hybrid Plans

    “Serving more than 350 plan sponsors and more than 9 million participants, the expectations are high, and our clients count on us to deliver quality service, no matter the complexity of the plans,” said Pat Quenan, defined benefit practice leader at Aon Hewitt. “We’re thrilled to be recognized by PLANSPONSOR as the largest provider of defined benefit administration services, and will continue to work with our clients to enhance our solution for the benefit of their participants.”

    As a combined organization, Aon Hewitt has more than 30 years in the DB administration business and supports more than 1,600 plans across its client base.

    Source : Aon Hewitt Press Release

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    Swiss insurer Zurich Financial Services said  Tuesday it had reached a $1.67 billion deal with Banco Santander to buy 51  percent of the Spanish bank’s insurance and pension business in Latin America.

    The deal will see Zurich acquire the stake in Santander’s life insurance,  pension and general insurance operations in Brazil, Mexico, Chile, Argentina  and Uruguay, the insurer said in a statement.    The two companies also signed a 25-year strategic distribution agreement,  giving Zurich access to Santander’s network of 5,600 branches and an  additional 36 million customers in the region.

    “This alliance with Banco Santander is another milestone in the  implementation of Zurich’s emerging-market strategy… (and) significantly  expands our presence in Latin America with a well-established insurance  business,” Zurich CEO Martin Senn said in the statement.

    Zurich said it expects to pay for the stake mostly using existing cash, and  that it will finance the balance through borrowing. However, it assured  investors that the transaction will have a “minimal impact” on its solvency.    Santander’s Latin American insurance operations posted a net profit of $328  million in 2010, with insurance premiums growing about a third to $1.9 billion  in 2010.

    During the same year, the pension business in Brazil recorded assets under  management of $10.5 billion.    Analysts largely welcomed the deal.    Bank Vontobel noted that the acquisition is “in line with ZFS’ focus to  grow Asian and Latin American operations and improves the growth profile.”    Bank Wegelin’s analysts also assessed that the transaction conforms to the  bank’s strategy of growing in emerging markets.

    Investors however appeared less enthusiastic. In morning trade, the stock  was down 0.59 percent at 268.60 francs, in line with the weak Swiss Market  Index, which was also down 0.99 percent.

    Zurich, Feb 22, 2011 (AFP)

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    The state-backed lender has written to insurance brokers promising to lower the premiums commercial customers pay by 5pc and increase the commission intermediaries receive by 3pc – rising to 5pc, if the value of the premium exceeds £5,000.

    The “Guaranteed to Beat” deal is offered under the company’s NIG brand, which sells insurance protection through brokers. The offer runs throughout March and April and promises to beat quotes from 15 rivals including Ageas, Aviva and RSA, while offering other incentives to brokers such as M&S vouchers and Apple iPads.

    Rivals have attacked the move as a ploy by RBS to increase revenues in its insurance business, which also includes brands such as Churchill and Direct Line, ahead of an expected stock market listing in 2013.

    The banking group, which is 84pc owned by the state after receiving billions of pounds of taxpayer’s money at the height of the financial crisis, has been ordered to sell or float the assets by European regulators.

    Other insurers say the complex nature of commercial insurance products could effect the sale by lumbering RBS with underpriced long-term liabilities. The bank’s insurance business saw profits tumble heavily last year on the back of mounting personal injury claims on motor policies.

    Steve Langan, managing director at RBS rival Hiscox, said: “This is over-the-cliff madness from a taxpayer-owned company. The liability cover that they are proposing to sell can have up to a forty-year tail.

    It’s got a horrible ‘here we go again’ feel about it. It’s fine if you’re selling tins of beans, but this is long-term liability insurance. It can be very toxic for a very long time if you underprice it.”

    In response, NIG admitted that the offer it has made is a “bold” one.

    Dave Parry, NIG’s Director of Sales and Distribution, said: “We’ve made no secret of our desire to grow our share of the SME market and this offer reaffirms our appetite to write more package business.

    This is a bold move, but we know already that our new range of package products is popular with brokers and the profitability and pricing within our preferred trades gives us the scope to do this and provide brokers with even more reasons to partner [with] NIG.

    “We plan to continue using initiatives like this to reinforce our position as a leading package provider.”

    RBS will announce its full-year results this week, with analysts predicting a pre-tax loss of £613m and bad debts of £9bn. That compares with 2009 bad debts of £13.9bn and a loss of £3.6bn.

    Lloyds Banking Group will also reveal its results, with analysts forecasting a pre-tax profit of £1bn and bad debts of £14.3bn.

    In 2009 the bank, which is more than 40pc owned by the state, suffered a loss of £6.3bn and had bad debts totalling £24bn.

    Analysts Nomura said of the results: “We think profitability of traditional UK banking is likely to continue to recover, with margins rising and impairments falling.”

    Nomura also said both banks were “relatively well positioned” to see continuing recovery in profitability.

    Any future profits will face headwinds from the Government’s austerity measures, but will also be helped by continued cost cutting.

    RBS has lost more than 20,000 UK-based staff since its nationalisation and Lloyds has cut thousands of jobs in Britain, as well as several hundred more in Ireland.

    Source : The Telegraph

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    The Quinn Group is expected to renew its efforts to be involved in the buyout of Quinn Insurance, after it was confirmed that no decision on the insurer’s future would be made until after the general election.

    It is understood that the group has commissioned a report from an international accountancy firm, which questions the Financial Regulator’s decision to put Quinn Insurance into administration on March 30 last year.
    The new government is expected to face intensive lobbying to review the decision, which led to the insurer being put on the market.

    The regulator and the administrators have also been urged to reopen Quinn Insurance’s British commercial insurance business, which was shut down by the regulator on the same day the administrators were appointed.
    At the time, the regulator said that the reason behind the move was ‘‘to prevent Quinn Insurance Limited suffering further financial losses from its currently unprofitable UK business’’, but the Quinn Group claims the commercial business was operating profitably.

    A report commissioned by the administrators from EMB, a firm of specialist insurance auditors, suggests that parts of the British business were profitable, although the overall British business was loss making.
    Quinn Insurance had about 250 staff in Enniskillen working on the British commercial business, which had customers including Tesco and building firm Laing O’Rourke.
    However, those jobs are expected to be lost as part of the restructuring of the insurer.

    The sale of Quinn Insurance has reached its final stage, but the administrators confirmed to the firm’s staff last Thursday that no decision would be made until the new government was formed.
    The two final bids are understood to be from a joint venture between Anglo Irish Bank and US firm Liberty Mutual, and from Swiss insurer Zurich.

    The Quinn Group had been in talks with Anglo about a joint bid for the insurer, which it claimed would protect jobs and allow full repayment of the €2.8 billion owed to Anglo by the group and its founder, Sean Quinn. However, it was ruled out of the running late last year, and none of the final bids for the firm involved the group.

    Supporters of Quinn have stepped up their efforts to have the administration and sale process reviewed following the latest delay.

    A meeting took place last Tuesday between groups that support Quinn’s proposal for the company, including a cross-party political group led by Sinn Fe¤ in TD Caoimhghin O’Caoláin.
    The meeting was also attended by representatives of the Quinn Group, members of Cavan Chamber of Commerce, and lobby group Concerned Irish Business.

    They plan to communicate directly with the chief executive of the National Treasury Management Agency (which will fund Anglo’s part of any bid), Central Bank governor Patrick Honohan and Minister for Finance Brian Lenihan. It is understood that members of Cavan County Council will meet the Financial Regulator, Matthew Elderfield, on February 28.

    In the e-mail to staff last week, one of the administrators, Michael McAteer of Grant Thornton, said there were ‘‘a number of matters’’ that could not be finalised until after the election. However, he said he could not go into details of any of the bids, ‘‘as to do so may impede our ability to deliver a very good deal for the company and its staff’’.

    ‘‘I want to stress that the sales process has not been suspended, and that this delay is due to the political climate that the country is currently experiencing, not due to lack of interest on behalf of the bidders,” he said.

    Source : The Post.ie

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    The UK family size could be set to shrink as the cost of bringing up a child spirals to more than £270,000.

    New research from Aviva suggests that parents will spend £271,499 on each child up to the age of 21. As a result, two thirds (66%) of parents say they can’t afford to have more children – even if they want to – due to the impact of the family on their finances. In fact 58% of parents surveyed with only one child said they are not planning to have any more children.

    The Aviva study suggests that some parents will spend, on average, more than £1,000 a month on each of their children.

    The research, which was conducted to support Aviva’s latest life insurance advertising campaign, illustrates clearly the pressure families are under in today’s economic climate. While for many the cost of living is rising, more than half of families (51%) report their children are increasingly demanding expensive items, while a similar number feel the need to ‘keep up with the Joneses’ with the latest fads and trends.

    Statistics show that the average family size has fallen over the last forty years from 2.0 to 1.7 dependent children per family unit. Even though “2.4 children” is often quoted as the average family size, this figure actually harks back to children of women born in 1937.

    One child families have also become more common over the last few decades, accounting for 20% of two-parent families in Britain now, compared to 16% in 1972.

    Louise Colley, head of protection marketing for Aviva says: “When we consider bringing up children, people often think about the big ticket items such as university fees or childcare. But it’s also the smaller things such as school trips and music lessons – plus essentials like food and clothes – that really build up the costs. Even for parents who budget very carefully the financial pressures are tremendous, and as Government benefits are being scaled back, more and more families are feeling the pinch.

    “At Aviva we want to encourage every parent to make sure their family is financially protected in case the worst happens. If a family loses an income through illness – or even worse, death – by having protection in place it can ease the burden and help some of the ‘normal’ things continue for children, such as swimming lessons and the occasional day out. Having the right cover means that for the families affected, it’s one less thing to worry about at a particularly stressful time.”

    Source : Aviva Press Release

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    Aon Benfield is calling for a simplified Internal Model Approval Process (IMAP) for natural catastrophe risk that would encourage insurers to better quantify these exposures under Solvency II.

    Under the current Solvency II framework, insurers have the option to use either a standardized scenario approach or develop a partial internal model for natural hazard risks.  The latter would allow re/insurers to benefit from the higher quality data used in the vendor models to calculate their natural catastrophe exposures.  This should in turn be the logical foundation for the corresponding solvency capital requirements.

    However, a partial internal model approval process can be costly and onerous for both regulators and re/insurers.  Under the current QIS 5 rules this could lead to some re/insurers, particularly smaller companies without the resources, to adhere to the simplified Standard Formula approach – despite resulting in misleading capital requirements. This is because the Standard Formula fails to account for catastrophe model improvements over the past 15 years, which include greater location granularity and increased differentiation by occupancy or construction.

    Aon Benfield is lobbying the European Insurance and Occupational Pensions Authority (EIOPA) for a change to the current process, which would allow more re/insurers to realize the benefits of a partial internal model.

    The tests for natural catastrophe internal model approval would still apply but the firm is proposing a simplified approval process focused on data quality, data benchmarking and the internal process.  It would be more efficient for the catastrophe model vendors to provide information to regulators once to validate the model assumptions and technology, rather than many insurers undertaking this process.

    Standardized documents from the model vendors, included in the overall approval submission, would outline how the design and parameterization of the natural catastrophe model meet the requirements of Solvency II.  This would allow insurance companies to focus purely on input data requirements and providing the regulator with information on how the chosen model is applicable to their business.

    The proposal is in line with the request from the European Commission to EIOPA to simplify the Solvency II requirements, which could lead to a win-win situation for regulators and the industry.

    Paul Miller, head of international catastrophe management at Aon Benfield Analytics, said: “The use of CRESTA zone data in exposure calculations was common 15 years ago, but now most insurers and reinsurers use far more detailed data. The Solvency II Standard Formula does not recognize this evolution so re/insurers receive a higher risk profile and more onerous capital requirements. Our new proposal to EIOPA allows for effective risk management and more appropriate choices for reinsurance strategies.”

    Marc Beckers, head of Aon Benfield Analytics for Europe, Middle East & Africa, added: “We’ve been working with clients and regulators to devise the best way for insurers and reinsurers to better understand their risks, justify their views to regulators and reap the benefits of a partial internal model. In addition to these goals, the proposed simplified approach will ensure a level playing field between smaller and larger insurers under Solvency II and allow significant cost savings for both the insurance industry and the supervisory bodies. The next step is for EIOPA to liaise with the model vendors on how this can effectively work in practice.”

    Source : Aon Benfield Press Release

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    Swiss Re has obtained another USD 305 million in protection through the Successor X Ltd. catastrophe bond programme, covering North Atlantic hurricane and California earthquake risks. The transaction is the fourth time that Swiss Re has used the Successor X programme to transfer specific risks into the capital markets, freeing up capacity to allow the company to take on more risks from clients.

    Swiss Re has entered into a transaction with Successor X to receive up to USD 305 million of payments in the event of natural catastrophes such as North Atlantic hurricane and California earthquake. The transaction covers a three-year risk period, ending in February 2014. This transaction is the fourth takedown of the Successor X programme, after a first bond for USD 150 million in December 2009, a second for USD 120 million in March 2010 and a third for USD 170 million in December 2010.

    Martin Bisping, Swiss Re’s Head of Non-Life Risk Transformation, says:
    “Successor’s flexible shelf programme enables us to quickly move on favourable market conditions and secure multi-year protection at attractive terms. Continued price convergence with reinsurance is encouraging and an important driver to further grow the ILS market.”

    This transaction, combined with prior Successor programmes, have allowed Swiss Re to obtain approximately USD 2.3 billion of protection, demonstrating the company’s expertise in transferring natural catastrophe risk to the capital markets.
    “Our corporate hedging strategy focuses on ILS which has proven to be a very efficient and flexible way to manage our risk capital and increase the stability of our earnings,” says Matthias Weber, Swiss Re’s Head of the Property and Specialty Division. “Our extensive experience in structuring ILS transactions for ourselves means we are ideally placed to support clients in developing similar solutions for their risk management.”

    The California earthquake trigger is parametric while North Atlantic hurricane has a PCS-based trigger. Proceeds of the Series 2011-2 Class IV-E3 notes will be invested in International Bank for Reconstruction and Development (“IBRD”) notes while proceeds of the Series 2011-2 Class IV-AL3 Notes will be invested in treasury money market funds.

    Class Notional amount Term Rating
    Class IV-E3 USD 165 m 3 years B (sf)
    S&P
    Class IV-AL3 USD 140 m 3 years Not rated

    Swiss Re Capital Markets acted as sole manager and book-runner on the note issuance. Risk modelling and analysis were performed by EQECAT, Inc.
    The Successor X notes were sold in a private placement pursuant to Rule 144A of the US Securities Act of 1933, as amended, (the Securities Act) and have not been registered under the Securities Act or any state securities laws; they may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.

    Source : Swiss Re Press Release

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    The Australian Lawyers Alliance (ALA) said insurance contracts with homeowners are required to provide prescribed coverage under the Insurance Contracts Act.

    “Prescribed coverage includes flood,” said ALA Queensland President Adam Tayler.

    “If an insurer does not provide that coverage under a contract and they want to avoid paying they must prove that, prior to the contract being entered into, the homeowner was advised that the policy did not include coverage for flood,” he said.

    “If they cannot prove that they must pay.”

    Mr Tayler said the definition of “flood” was not restricted to riverine or storm flooding.

    He said ALA members are reporting that clients are getting standard short letters denying claims in situations where they thought they had coverage.

    “This behaviour is reprehensible and needs to be stopped,” Mr Tayler said.

    He said the ALA’s members were committed to supporting legal clinics in flood-affected areas in Queensland to ensure that as many people as possible were able to exercise their legal rights to ensure that insurers were required to make good on their promises.

    “These legal clinics are planned to roll out over the next few weeks if insurers continued to attempt to thumb their noses at those who trusted in their policies, but have lost everything,” Mr Tayler said.

    The first clinic is being planned for Rockhampton and details likely to be finalised in the next few days, an ALA statement said.

    More than 340 lawyers and academics are attending the ALA Queensland meeting on the Sunshine Coast this weekend.

    Source : News.com.au

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