Category Archives: World Insurance

First Private Insurer Started Business In Myanmar

Posted on June 14, 2013 by
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mayanmar-insurance-market

International Kanbawza (IKBZ) Insurance Company, one of the five insurance companies granted licenses to operate in Myanmar in line with its financial reform policy, has started its services in Yangon, becoming the first private company of its kind to operate in the country.

The IKBZ would provide international standard insurance services and implement micro-finance insurance that can support the state’s poverty alleviation scheme.

The other four private insurance companies that were granted licenses are Grand Guardian, Aung Thitsar Oo, Citizen Business Insurance Public Ltd and Aung Myint Moh Min. They are allowed to run life insurance, fire insurance, vehicle insurance and cash safety insurance businesses.

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Aon Global Risk Management Survey Highlights ‘Top 10’ Risks For 2013 & 2016

Posted on April 25, 2013 by
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Aon

Risk leaders are struggling to identify and manage the major risks facing their organizations, according to the Biannual Aon Global Risk Management Survey released by Aon Risk Solutions, the global risk management business of Aon Plc.

The report identifies the top ten risks as well as hidden risks facing organizations today, illustrating the importance of no longer evaluating risk in isolation but considering the relation of risks to establish and maintain a successful risk management programme.

The survey identified the following as the top ten risks for 2013 and where they were expected to be ranked in 2016 :

Serial No. Risks Ranked in 2013 Expected to be ranked in 2016
1 Economic slowdown/slow recovery 1 1
2 Regulatory/legislative changes 2 2
3 Competition 3 3
4 Damage to reputation/brand 4 8
5 Failure to attract/retain top talent 5 5
6 Failure to innovate/customer needs 6 4
7 Business Interruption 7 11
8 Commodity price risk 8 7
9 Cash flow/liquidity risk 9 10
10 Political risk/uncertainty 10 6

 

Aon says that the survey points to a significant decline in risk readiness among many of the survey respondents. On average, reported readiness for the top ten risks dropped a material 7% (from 66% to 59%) from the 2011 survey and reported loss of income increased 14%.

Of the 28 industries defined in the report, only three industries – pharmaceutical and biotechnology, non-aviation transportation manufacturing and agribusiness s- reported the same or improved levels of readiness this year.

Aon said that one possible explanation of the decline in risk readiness could be that the prolonged economic recovery has strained organization’s resources, thus hampering the abilities to mitigate many of these risks.

The survey revealed despite diverse geographies, companies across the globe shared surprisingly similar views on the risks that we are facing today whether or not they feel prepared.

Aon also reported that number of respondents to its latest survey jumped to more than 1,400 – a 47% increase from its 2011 survey. This indicates that companies continue to have a higher level of attentiveness to risk management.

The 2013 survey ranked the top 50 risks companies face, focusing on the top ten risks in 2013 and how they may change in 2016.

Economic slowdown/slow recovery, regulatory/legislative changes and increasing competition are not surprisingly the top three risks in 2013 and 2016. These risks takes top spots on the risk rankings for the surveys five main regions, which includes Asia Pacific, Middle East and Africa, Europe, Latin America and North America. These same risks are also among the top risks for 24 of the 28 industries surveyed. This ranking reflects the systemic nature of these risks and high interdependence of global economic activity.

Political risk/uncertainties broke into the top ten risks for the first time in 2013. Due to the increasing civil wars and social and political conflicts around the world, this risk is projected to move up to number 6 in the 2016 survey.

Weather/natural disasters, while not far off the radar at a current ranking of number 16, is also projected to jump into the top ten list at number 9, given the unusual climate pattern worldwide and an unprecedented increase in natural disasters and weather events.

Finally the survey found that failure to innovate/meet customer needs is an increasing priority, projected to jump from number 6 to number 4 in the next three years.

Business interruption is expected to drop out of the top ten risks due to company’s efforts to improve business recovery planning.

The 2013 Aon Global Risk Management Survey also uncovered several significant risks to watch, as these are perceived to be underrated risks. They include computer crimes/hacking/viruses/malicious codes; counter party credit risk; loss of intellectual property/data; social media and pension scheme funding.

As part of the board’s responsibility to endorse and monitor strategy, directors should gain an intimate understanding of the major strategic risks, possible scenarios and how the appropriate strategy allows the exploration of uncertainties and mitigation of strategic risks.

Given the results of Aon’s 2013 Global Risk Management Survey, developing capabilities for strategic risk management by top management teams and boards should be an important priority in these uncertain times.

Source: Business Insurance

Categories: World Insurance

ILS Market Share Of Catastrophe Reinsurance Could Double By 2017: Report

Posted on April 25, 2013 by
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Insurance linked securities

The insurance-linked securities, catastrophe bonds and collateralized reinsurance sector’s share of the global non-life catastrophe reinsurance market is set to double by 2017, according to insights contained in a report on the ILS market published by clearpath analysis. The report is titled Insurance-Linked Securities for Institutional Investors 2013, features insights from professionals within the ILS and collateralized reinsurance space.

The report features a broad cross-section of participants from the ILS space, including but not limited to investors, ILS investment managers, investment managers from pension funds, structuring specialists from reinsurance brokers, risk analytics professionals from reinsurers, people working on the administrative side of ILS and investment consultants. As such it contains up to the minute insights and thinking on the ILS market.

The report says that institutional investors hunt for yield continues, in the currently uncertain and difficult economic climate, and uncorrelated alternatives such as insurance-linked securities continue to become ever more desirable as a result.

The Eurekahedge ILS advisors insurance-linked securities fund index has returned a very healthy 2%+ already in 2013, helping to demonstrate the attraction that the ILS asset class now holds.

The report discusses trends in the catastrophe bond and ILS market, which had a near record year in 2012, and also looks at the effects traditional reinsurance such as the struggle reinsurers have faced in raising, or even maintaining, some traditional reinsurance rates. With many reinsurance programmes coming up for renewal and a new search of third-party ILS capital looking to access the reinsurance business the report discusses industry expert opinions which suggests that the size of the ILS markets share of catastrophe reinsurance could double by 2017.

The current market for non-life catastrophe reinsurance capacity is about $180 billion; essentially the total capacity purchased in the reinsurance industry by primary insurance companies. Of this, the pure non-life cat bond market is roughly $14 billion, but at to that the $15 billion collateralized insurance market and it brings the total close to $30 billion. This number is expected to grow considerably over the next 5-10 years and as a result up to a third of the entire market around $50-60 billion of capacity, may be provided by investors by 2017.

The collateralized and ILS market looks to have grown by around 29% in less than one year. If that sort of growth rate continues then we could easily see $50-60 billion, or more, of non-traditional reinsurance capacity in the global property catastrophe reinsurance market by 2017.

The trend for third-party investor capital to flow into the reinsurance market shows no sign of letting up either.

There is no question that there is interest from investors to bring more capital to catastrophe risk as investors are searching for assets that are not correlated to stocks or bonds.

There is increasing trend for this capital to be deployed in private reinsurance transactions in recent years. Activity in the private transaction market has picked up noticeably since the financial crisis in 2008 as insurers are more sensitive to the embedded credit risk in a traditional reinsurance transaction.

The report says that reinsurance has a potential to become a real source of long-term investment yield for capital markets investors. The market will be profitable because the insurance market depends on catastrophe reinsurance; and no other line requires similar levels of capital to stay afloat. Not only this, large losses trigger capital shortages which are followed by premiums, price increases and capital influx. For these reasons, catastrophe reinsurance in general is unlikely to follow the fate of other reinsurance lines which have remained in deficit in years.

The number of state-backed insurers that have come to market recently has increased, which is intriguing especially from an administrator’s perspective.

It is interesting to see what areas of the industry are attracted to the ILS market and who utilizes the products and this will hopefully lead to further new cedants entering the market, said the report.

The report suggests that 2013 may be as positive as 2012, or even perhaps more positive, in terms of deal-flow, issuance of ILS and cat bonds and growth of collateralized reinsurance.

2013 is currently on pace to exceed 2012 as sponsors continue to embrace the effectiveness of capital markets-based protection in their risk management programmes. Conservative institutional asset managers, the custodians of trillions of dollars of investable assets, have largely accepted catastrophe risk as a component of mainstream investment strategy.

This is a really big deal. Some of these large institutional asset managers have recently added insurance as an asset class that they are targeting. Some of these large institutional asset managers have hired internal specialists to do diligence on the ILS and catastrophe risk space and are involved in investigations into the best way to deploy capital into the space. This is where the potential for real growth lies, not a slow trickle of additional capital but in years to come a veritable flood if these conservative asset managers maintain their interest in the space and it proves attractive over the longer term.

The report sensibly notes that while ILS and reinsurance are currently extremely attractive asset classes, investors really need to ensure they understand the risks associated with them as alternatives.

Investing is difficult business – even for professionals. When one is confronted with a myriad of choices, there is a tendency to default towards certain key metrics when comparing multiple products all seemingly operating in the same space. Thus, it is vital for investors to have a full risk distribution of potential outcomes for the investments being contemplated. It is essential that investors do their homework on the sector, analyzing the space so that they understand the structures and costs associated with accessing the market as an investor. Hence, investors tend to perform due diligence on investment options for months and sometimes years before allocating capital into ILS.

There are many risk considerations to be made when investing in ILS. The different types of risks embedded in the sector require a combination of insurance, structured finance and trading expertise as material inflow of capital into sector has caused some volatility in generating mark to market gains for existing investors.

Source: Business Insurance

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Towers Watson Releases Terrorism, Political Violence Predictive Model

Posted on April 24, 2013 by
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Towers-Watson-PolicyMantra

Towers Watson & Co has released a predictive model that assesses risks from terrorism and political violence.

Sunstone was unveiled during the 2013 Risk & Insurance Management Society Inc.’s conference and exhibition in Los Angeles.

The model can predict a broad range of attack types, and way the threat of various kinds of attacks based on a company’s locations and risk appetite.

The technology also can predict the potential cost severity of life workers compensation and life insurance claims related to terrorism or political violence, Towers Watson said.

There is recognition that, understandably, after 9/11, there was a focus on large-scale urban Jihadi terrorism, Towers Watson crisis management group said.

However, many of the larger claims in this class in the last five years have actually come from emerging market areas like North Africa or Southeast Asia, and from events that sit more at the political violence end of the spectrum.

Sunstone will be available to Tower Watson clients or can be licensed to customers, the company said.

Source: Business Insurance

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AIR Worldwide Analyses Potential Impact of Tropical Cyclone Rusty

Posted on March 1, 2013 by
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Cyclone

Catastrophe modeling firm AIR Worldwide has described tropical cyclone Rusty as having grown rapidly in intensity since its formation on Saturday.

Although it is not expected to directly impact Port Hedland, Australia’s largest port for shipping iron ore, it is still a dangerous tropical storm.

AIR said that even though Rusty is a category 4 storm by the Australian system of cyclone classification (approximately equivalent to category 3-4 storm on the U.S.A. Saffir-Simpson scale, significant insured losses are not expected from this event, primarily because of the region’s stringent building codes.

AIR described the storm system as huge, powerful and very slow moving, as it approaches the Pilbara coast in Western Australia.

AIR also said very destructive 10 minute sustained winds of up to 165 kph (approximately 103 mph) with gusts near 200 kph (approximately 125 mph) will hit the coast before the eye of the storm makes landfall to the east of port Hedland. Even though port Hedland is expected to be on the right hand side of the storm, because of the clockwise rotation of cyclones in the southern hemisphere, it will be on the weak wind side.

AIR also pointed out that the slow movement is a concern from a flooding standpoint, as satellite derived rainfall estimates over open water have been on the order of 200-300 mm (7.8 to 11.7 inches). Thus, as well as wind damage, the heavy rain associated with the storm is likely to cause flooding as the system proceeds inland.

Also, Rusty’s intensity, size and slow movement will also likely lead to a dangerous tide and damaging waves resulting in coastal flooding. Port Hedland in particular is vulnerable to storm surge, even a weak to moderate cyclone close to high tide can cause significant inundation, such as that was experienced in 1939.

According to AIR, Australia’s cyclone season runs from mid December to April and peaks in February. Tropical cyclones tend to occur far more frequently near the northern half of the continent, and the Pilbara coast is impacted more than any other part of Australia, experiencing an average of about one cyclone every two years.

Since 2010, Port Hedland has experienced gale-force winds from 49 cyclones, seven of which caused destructive gusts in excess of 170 km/h (106 mph).

Cyclone Joan produced the strongest gusts ever recorded at Port Hedland 200 km/h (130 mph) in 1975.

AIR also added that because it experiences so many tropical cyclones, the area is well prepared to cope with them through stringent building codes and effective response plans.

Australian building standards divide the country into four wind speed zones, of which region D covers this small portion of the western coastline where stronger storms typically impact most frequently.

The most destructive tropical cyclone to strike the area since Joan in 1975 was George, which delivered wind gusts estimated to have reached around 200 km/h (125 mph) in March 2007.

In the Port Hedland area most residential and commercial structures performed well, and structural damage was sustained by fewer than 2 % of buildings, most of which proved to have weaknesses due to poor maintenance.

Most of Australia’s residential buildings are single family home, either wood frame or masonry, with many having brick veneer. Residential roofing is typical metal, and is the principal source of wind damage in many cases.

Port Hedland has a number of trailer (caravan) parks for visitors and residents, and these are particularly vulnerable to damage.

According to AIR, the commercial and industrial building stock in Australia is predominantly concrete and steel, with concrete making up about 60 % of commercial/ industrial stock across the country. Prior to most storms on the western Australia coast, these facilities usually secure their structures and contents from damage. However, commercial and industrial building constructed of light metal framing will be the most susceptible to significant wind damage.

AIR concluded saying that as damage to structures along the coast and well inland caused by its high winds, tropical cyclone Rusty’s slow progress and unusually heavy rains will lead to flooding inland along major river systems. Flood warnings have been issued for De Grey River catchment and West Kimberley, including Cape Leveque.

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HSBC’s Stake Sale in Ping An Insurance Cleared by Regulators

Posted on February 5, 2013 by
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HSBC Ping An

HSBC holding’s $7.4 billion sale of stake in Ping An Insurance to Thai billionaire Dhanin Chearavanont’s Charoen Pokphand group was cleared by regulators, helping Europe’s largest bank by market value revive earnings.

The payment was made in cash after China insurance Regulatory Commission approved the sale of 976.1 million Hong-Kong traded shares in the nation’s second largest insurer.

The transaction will generate a $2.6 billion profit for HSBC, bolstering its efforts to improve profitability hurt by US probes of money laundering and compensation claims from UK clients.

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7% Probability of High Insured Catastrophe Losses in Any Year: AIR Worldwide

Posted on January 18, 2013 by
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Catastrophe

There is a nearly 7% probability that the insurance industry will experience losses from natural catastrophes in excess of $110 billion in any given year, according to research by catastrophe modeling firm AIR Worldwide Corp.

In 2011, global insured losses from natural catastrophes including the Tohoku earthquake and Tsunami in Japan, flooding in Thailand, earthquakes in New Zealand and thunderstorms in U.S.A. crossed $110 billion, making it the second most costly year ever for insured natural disasters.

As per AIR, many in the industry were surprised at the aggregation of the losses in 2011, especially when there was no major U.S. hurricane. But AIR’s models incorporate year’s hypothetical losses much greater than those experienced in 2011.

AIR also said that despite the significance of the toll in 2011, insured losses fell well within the range for which global insurers and reinsurers should be prepared.

According to AIR, the average annual loss from natural catastrophes is around $59 billion –roughly the amount recorded in 2012 when insured losses stood around $58 billion.

As per AIR, taking the comprehensive view of catastrophe risk worldwide, the 100-year return period loss, or one percent exceedance probability loss, is just over $200 billion.

Source: Business Insurance

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Property & Casualty Insurers to See Premium Growth in 2013: Deloitte

Posted on January 11, 2013 by
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motor and property insurance

Property & casualty insurers will see premium growth in 2013, but ample challenges remain, said a report by Deloitte L.L.P. ‘2013 Property & Casualty Insurance Industry Outlook’.

The report said that burgeoning economic recovery will translate into top-line growth for insurers as demand for insurance increases and premiums also rise in middle single-digits.

The report also cited that soft market for the insurance may be over, but the hardening of the market is likely to remain modest. While premium rates and overall volume are on track to rise this year, organic growth will not necessarily be quick – or high – enough to satisfy shareholders looking for a greater return on equity in a competitive capital market.

Insurance companies may look for mergers and acquisitions to boost their organic growth, said report.

Major transformational deals in U.S.A. are less likely than bolt-on acquisitions of additional distribution channels, business lines and geographic outlets both in and outside the country. However, rising stock market, improved pricing conditions and pent-up demand could prompt P&C insurers looking to their scope to intensify M&A efforts, potentially driving up the volume and value of deals, states report.

Citing the responses from focus groups convened in the summer of 2012 on behalf of Deloitte’s center for Financial Services, the report also predicts that some commercial insurers will begin to alter their distribution models by sidestepping intermediaries and selling commercial policies direct to small businesses.

These focus groups made clear that agents and brokers can no longer take it for granted that small businesses will continue to buy commercial insurance through an intermediary unless they can demonstrate the value they bring beyond marketing a risk and handling minor service issues, the report stated.

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AIG Marks End of Era with $6.45 bn AIA Stake Sale

Posted on December 18, 2012 by
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AIG

American International Group (AIG) has raised $6.45 billion by selling its remaining stake in AIA Group Ltd in Asia’s second largest block sale ever; exiting a business the U.S.A. insurer started nearly 100 years ago.

AIG priced its 13.69% stake or 1.65 billion shares at HK $330 per share.

The sale marks the end of an era for AIG in Asia and its Chief Executive Robert Benmosche, who took AIA public in Hong Kong in the world’s third biggest IPO two years ago.

AIG was forced to sell parts of its massive business, including AIA, after U.S. government bailed out the company in 2008 as it was on the verge of collapse. The government ultimately spent $182 billion on the rescue.

Share of AIA has risen about 61% since the $20.5 billion IPO in 2010 and has become a top choice of fund managers looking to benefit from growing wealth in Asia and booming demand for insurance and other financial products.

The block offering comes one week after lockup on the shares expired, adding to two other rounds of AIA share sales in September and March that had raised about $ 8 billion in total.

The short time frame in which the placing was completed demonstrates the strength of investor support for AIA and its growth prospects.

AIG is expecting to use the net proceeds from the AIA sale for general corporate purposes.

Deutsche bank AG and Goldman Sacks group were hired as joint global coordinators for the offering, with Citigroup Inc, JP Morgan Chase & Co and Morgan Stanley also acting as book runners.

AIG’s exit from AIA has comes at a time when Asia’s insurance industry is growing, attracting buyers hoping to tap into the expansion.

The exit has also forced AIG to strike out on its own in Asia, where it is focusing its attention on China. Betting on China AIG is using a small part of its funds, putting on a long-story. AIG became the biggest cornerstone investor in the $3.6 billion IPO of People’s Insurance Company of China, also inking a joint venture to sell life insurance in the world’s second largest economy.

AIG’s business started in Shanghai in 1919 under U.S.A. entrepreneur C.V. Starr, with AIA eventually becoming the name of its regional operations. 20 years later, Starr temporarily relocated to the U.S.A. to avoid instability in Asia, and following World War II and decided to run his U.S. businesses from New York. They came to be known as AIG.

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Reinsurers Have Enough Capital to Handle Sandy Losses: S&P

Posted on November 15, 2012 by
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hurricane sandyIn a report, Standard & Poor’s, has said that while the extent of insured losses resulting from Superstorm Sandy remains unknown, global reinsurers likely have sufficient capital to handle the losses.

Standard & Poor’s Ratings services believes that the reinsurance sector’s strong capital and very strong earnings thus far in 2012 will allow it to withstand losses well outside the range of current estimates.

As per Standard & Poor’s estimates, the insured losses from Sandy would have to exceed $50 billion to start materially eroding the sector’s capital base.

But Standard & Poor’s said that if the expectations of capital regeneration are not met, ratings for some individual reinsurers could come under pressure.

Moreover, the report also said that the uncertainty surrounding loss figures is not likely to abate any time soon.

Coverage from various insurance products will raise questions about how much reinsurers are on the hook to pay.

The report also said that the debate about wind versus flood damage that characterized the wake of hurricane Katrina in 2005 will likely reappear following Sandy.

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