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EC News (17th August 2017)

August 17, 2017

Round-up of the weekly news and developments from the global insurance market with stories from Liberty Specialty Market, Novae, Prudential and more. 

Matthew Moore to take over the running of Liberty Specialty Market

President and managing director of Liberty Specialty Market (LSM), Nick Metcalf has handed over the running of the firm to LSM’s current CUO, Matthew Moore.

The plans for the handover have been in place for several years.

Moore joined LSM in 2002 as a political risk underwriter. He was later appointed to active underwriter of Liberty’s 4472 Syndicate, and then took on his current role as CUO when LSM was originally formed in 2014 by merging Liberty Syndicate’ business with that of Liberty’s London market insurance company.

Commenting on the handover, Matthew Moore said: “I am delighted to be leading LSM in its next phase of evolution. I believe that LSM is uniquely placed to take advantage of the opportunities presented by the innovation taking place in the London market, and it is a privilege to be leading LSM at this exciting time.

He added: “I look forward to engaging with our clients in my new role and to helping them to prosper. I would like to pay tribute to Nick’s leadership of LSM over the past 10 years and to the guidance and support he has provided to me personally as I look to lead on from the excellent position in which LSM now finds itself.”

Nick Metcalf said: “Matthew is uniquely placed to lead LSM in the future and I am absolutely delighted to be handing over the reins to such a talented market leader. I have enjoyed leading LSM through a very successful period and wish Matthew and the leadership team every success in the future.”

Chris Peirce, President of Liberty Mutual’s Global Specialty Strategic Business Unit, said: “I want to thank Nick for leading LSM through a very successful period and to wish Matthew and his leadership team every success in the future. Matthew is well known and respected in the industry, and has a deserved reputation for smart thinking and business building.”

Novae appoints Beazley operations head of COO

Novae has announced the appointment of Adam Cragg as group chief operating officer.

Cragg joins from the Lloyd's insurer, Beazley where he worked since 2008. Whilst working at Beazley he held numerous positions, starting as business technology manager and most recently serving as head of operations for UK and rest of the world where he was responsible for managing operational services across eight global offices.

In his new position, Cragg will report to Chief Executive Officer, Matthew Fosh.

Commenting on the recent appointment, Fosh said: “I am delighted to welcome Adam to the team. He brings a wealth of technological and operational expertise to Novae and an exceptional track record. He is a key addition to the senior executive team and his knowledge, skills and experience will add enormous value to the Group."

Prudential merges with M&G to save £145mn a year

International financial services group, Prudential, is due to merge its UK life insurance business with fund group M&G, expecting to save £145mn a year. The combined group, M&G Prudential, is set to manage £332bn of assets for 6 million clients.

The merger comes in a bid to shift Prudential’s life insurance business away from annuities market, after announcing earlier this year that it would no longer write new annuities. Reports in July this year stated it was seeking to sell a £10bn back book of annuities. The news was revealed as Prudential unveiled half year results, with profits up 5 percent, the shares edged 10p lower to £18.32.

Prudential already owns M&G after purchasing the fund group in 1999; however the two UK operations were run separately. Merging the two businesses together will total around £250mn.

Eamonn Flanagan, Shore Capital analyst has said the merger made “enormous sense to us, enabling the group to drive out costs and to deliver unified proposition to the market.”

With its Optimal Income fund, one of the largest in the UK at £19.2bn, M&G has gained a strong presence in the UK bond fund market. On the other hand, the performance of the business has recently suffered, with the fund being in the bottom half of its sector over the last 3 years with a return of 12.5 percent.

The major line business in the UK for Prudential is its range of with-profits funds which aim to “smooth” return for investors by retaining some of the returns in the better years to cover the pay outs in the years when performance is weaker.

Prudential’s PruFunds with-profits range housed £24.7bn of assets at the end of 2016.

The news of the merger has inflamed further speculation that Prudential will seek to spin off its UK operations from its UK and Asia business, or pursue a sale.

Equity Analyst at Hargreaves Lansdown, Nicholas Hyett said: “There has been speculation for some time that Prudential might seek to split its mature UK business from the rapidly growing US and Asian operations.” 

He added “That makes the decision to merge the UK life and M&G asset management businesses into a single operation, M&G Prudential, a significant one. The combined business would bear remarkable resemblance to several other UK life businesses, and the success of the defined contribution pension scheme-focused PruFund would seem to provide a model for a viable stand-alone future.”

“There’s no need to get rid of UK business, but todays move would make it a lot simpler.”

Partner at Cavendish Corporate Finance, Peter Gray has said the move was in response to the pressures placed on asset management groups by increasing popularity of cheap “passive funds,” saying “the merger reflects the continued trend of consolidation in the industry as firms seek to lower costs in the face of margin pressure precipitated by increasing popularity of tracker funds.”

The merger will bring new appointments within the businesses. The current chief executive for Prudential UK, John Foley, will become chief executive of the merged business. Anne Richards will remain in her position as chief executive of M&G. At the same time Anne and Claire Bousfield, chief executive of insurance for Prudential UK, will both become deputy chief executives of M&G Prudential. 

Schinnerer Group strike agreement to acquire ICAT

One of the largest experienced underwriting managers of specialty insurance programs, The Schinnerer Group has entered into an agreement to acquire international catastrophe insurance managers, LLC (ICAT), from the Praline Group.

The managing agent for property catastrophe insurance, ICAT, has its headquarters based in Colorado, operating in all US states through agents and wholesale brokers.

The terms of the deal have not yet been disclosed, however, the transaction is estimated to finalise in the third quarter of this year, with ICAT retaining its strong relationship with Syndicate 4242 at Lloyd’s of London, its associated Special Purpose Arrangement 6123 and numerous other leading carriers.

Boulder Claims is ICAT’s claims and third party administrator and with the capabilities provided is expected to intensify the services to Schinnerer’s clients in the future.

CEO of the Shinnerer Group, Christopher Schaper has said the insurance market for catastrophe-exposed small commercial property is underserved with opportunity for expansion adding that ICAT’s highly automated and efficient underwriting platform will deliver “integrated and seamless value,” complementing Schinnerer’s existing services and solutions for middle market, small commercial and residential clients.

CEO of ICAT, Gregory Butler said; “We are excited about the strategic value for our customers and the additional opportunities for the ICAT team by joining The Schinnerer Group. The success we have achieved over the past few years reflects our passion to deliver industry-leading products and solutions to homeowners and business owners around the country.

“Not only does this focus remain unchanged, but our new relationship with Schinnerer allows us to continue providing our broker relationships with a growing suite of innovative solutions for their customers’ catastrophe needs.”

Chairman of Praline, Bruce Schnitzer, commented; “We are confident that ICAT will fit well with the Schinnerer organisation as both have a proud history of growth and disciplined underwriting that has produced excellent results for a stable group of capacity providers.

“We have the highest regard for the ICAT leadership team and staff, who have been wonderful partners with us over the seven years of our joint ownership.

“And, we are very much looking forward to continuing the long-standing strategic relationship between ICAT and our Syndicate 4242 at Lloyd’s.”

Generali's London hull account hits the rocks

Italian insurance giant, Generali is ceasing to write marine hull insurance in London, in a powerful signal about the alarming state of the current market.

Generali is one of the world’s top underwriters but has found profitable business a challenge to come by in the heart of the global hull and machinery market.

Generali has not made any comments on the actions however multiple sources have confirmed to TradeWinds that the company has made a strategic decision to quit the UK hull market and is ­reassigning staff, so the withdrawal appears permanent.

Hull cover will continue to be written in Italy but seems likely to be scaled back as Generali appears sufficiently disillusioned with the sector to quit the London market.

The move comes as the Lloyd’s of London market reports updated statistics on the development of hull business began ringing alarm bells.

The ‘T’ risk code triangulation shows that there has been a very large increase in loss ratios for the 2016 underwriting year and through the first half of 2017.

The incurred loss ratio has leapt from below 50 percent at the turn of the year to 65 percent at the end of the first quarter and 82 percent at the half-year.

This is the most severe deterioration that underwriters can recall, apart from 2011, the policy year of the Costa Concordia cruise ship disaster, when the loss ratio stood at 89 percent at 18 months development and a current figure of more than 112 percent.

“A 17 percent deterioration over a quarter is pretty well unprecedented,” a leading underwriter told TradeWinds. “You might expect 8 percent or 10 percent. Managements will be getting their microscopes out to take a close look at what’s happening.”

Hull business takes up to four years to develop fully, so there are plenty of incurred but not reported claims yet to be added to the 2016 account. It will be no surprise if the loss ratio ends above 100 percent.

A loss ratio of about 85 percent amounts to break-even, so it is clear that Lloyd’s is due to experience a big loss on hull business in 2016, after earlier losses on the 2015 and 2014 underwriting years, for which the loss ratios currently stand at more than 90 percent.

However, the 2013 year is looking profitable, with a loss ratio of just over 76 percent at the 18th quarter.

The ‘T’ risk code covers marine hull business written at Lloyd’s and is regarded as possibly the best indicator of how the hull market is performing.

Trieste-based Generali, which has been active in the London market for more than half a cen­tury, has written a share of the hull insurance on some of the most high-profile shipping losses of ­recent years.

It had a 3.34 percent share of the hull and increased value cover on the 114,000-gross-ton (gt) Costa Concordia (built 2006) which became a total loss after capsizing in January 2012, so would have paid out about $17mn on this loss.

Generali also had more than a 30 percent share of the hull risk on the 26,900-gt passenger ferry Norman Atlantic (built 2009), devastated by fire in 2014. It had a share of the ­insurance on the 171,000-dwt bulker Alexandros T (built 1989), which broke up off South Africa, and was part of the war-risks ­insurance consortium that covered the 319,000-dwt tanker Samho Dream (built 2002), hijacked in 2010 by Somali pirates and held for six months until ­released after payment of a hefty ransom.

Generali ranks as among the world’s top 10 insurance groups and by some measures is the third-largest. Italy has about a 4 percent share of the world hull market — well behind the UK with up to one-quarter and the Nordic countries with about 10 percent, three-­quarters of which is Norwegian.

International growth plans for GIC Re to include Lloyd’s syndicate

General Insurance Corporation (GIC Re), India’s state-backed reinsurance company, filed an Initial Public Offering (IPO) with the Securities and Exchange Board of India. This IPO has been filed with a plan in mind to diversify its revenue base into life insurance and expand the business lines throughout the global market including space and cyber security.

The IPO constitutes 14.22 percent of the firm’s post-offer paid-up equity share capital and is expected to hit the market around October or November this year, potentially raising upwards of $1bn to help fund the firms growth.

Currently, non-life insurance business accounts for approximately 95 percent of the firm’s total premium ceded in Fiscal 2017, however, the carrier aims to rebalance its underwriting lines through moving into the underexplored life segment.

In the prospectus, GIC Re said: “We believe that the Indian life insurance market offers a growth opportunity for us due to its high growth rate primarily driven by low penetration levels. We intend to market reinsurance of life products to all participants in the Indian life insurance market.

“In particular, we are looking to create customised products for domestic life insurance companies to expand our business.”

The firm also hopes to cross into the international life reinsurance segment through building on overseas relationships in SAARC (South East Asia, Latin America, Africa and China.)

In Fiscal 2017, GIC Re’s overseas reinsurance underwriting represented 30.53 percent of its total gross premiums on a restated consolidated basis – the firm now aims to “achieve a balance of international and India business in terms of premiums” with ambitious growth plans internationally.

GIC Re’s ambitious international growth plans include establishing a Lloyd’s of London syndicate, accepting more U.S. insurance related risks, setting up offices in China, Brazil, and Bangladesh, and expanding Latin America business.

The carrier also hopes to convert its Moscow office into a subsidiary and build a strategic relationship for business in Myanmar.

The IPO listing signals recognition of the need for international capital influx and diversification to achieve expansion plans and to be in a stronger position to service the government’s insurance schemes to safeguard and catalyse the country’s booming economic growth.

Charles Taylor acquires Criterion Adjusters

Charles Taylor Adjusting (CTA) has acquired UK-based Criterion Adjusters. The acquisition comprises Criterion Surveyors, a high net worth-focused pre-risk survey business, and Criterion Claims Management, a specialist claims firm.

Charles Taylor, a loss adjusting business, revealed the deal is a representation of their strategy to continue to grow and develop its global third party administrator (TPA) capabilities in order to increase its presence in specialist property and casualty loss adjusting markets.

Following the transaction, high net worth loss adjuster Criterion will continue to trade under its existing brand name and will be led by its current management team.

Criterion Adjusters’ CEO, Chris Monks, and Operations Director, James Long both join Charles Taylor Adjusting in their existing respective roles, reporting to CTA’s Managing Director of Technical and Special Risks, Andrew Jackson.

Commenting on the acquisition, Chief Executive Officer at CTA, Damian Ely said: "The acquisition is part of our strategy to diversify our loss adjusting business into closely-related, specialist P&C markets.”

He added: “We have established a UK construction and engineering capability which is developing well, we are expanding our UK property and professional indemnity teams and growing our global cyber-liability adjusting capabilities. We are also building our P&C team across the USA and extending our reach across Latin America."

Monks added: "Charles Taylor Adjusting is the ideal home for Criterion Adjusters. CTA has a tremendous reputation for delivering specialist, highly technical loss adjusting services which mirror our service and expertise-driven approach. The strength of CTA’s brand, its global network and high quality technology and support services will give us the structure, support and autonomy to grow our business in the HNW loss adjusting market."

Group CEO of Charles Taylor, David Marock added: "I am excited that Criterion Adjusters has become part of the Charles Taylor Group, bringing new HNW adjusting and surveying capabilities and adding to our growing TPA businesses. We are focused on building a larger, more capable, more profitable professional services business.

"This acquisition marks another important step forward in our strategy to grow by developing new professional service business lines, which are closely-related to our core business, both organically and through carefully targeted acquisitions and investments."

Towergate Underwriting launches its international MGA

Towergate Underwriting, part of the newly formed diversified insurance company, The Ardonagh Group, has taken another landmark step as it launches the first business in its new international MGA -FRAM.

FRAM, which means “to move forward” in the Scandinavian languages, will operate in Norway, Denmark, Sweden and Finland. It will focus on underwriting local commercial business under one underwriting team specialising in property, casualty, financial lines, engineering and energy classes.

It will be led by Managing Director Tom Færøvik who joined Towergate earlier this year. Tom Færøvik has 35 years’ experience in the insurance market with his most recent position being general manager for Catlin Insurance in the Nordic region.

Joining Tom Færøvik is Senior Property and Construction Underwriter, Michael Lindbo who is based in Denmark along with financial lines manager, Christian Miller, based in Stockholm and Casualty Manager, Trond Haugen based in Oslo.

Commenting on today’s launch, Derek Henry, group carrier relations director, who led the project for Towergate Underwriting, said: “It is the realisation of a strategy we have been working towards since our change in ownership, and the culmination of huge team effort. 

He added: “We are really excited to see it come to fruition and I look forward to the business being a big success.”

Paul Dilley, CEO of Towergate Underwriting, said the establishment of FRAM represented a significant milestone in the journey to becoming an international underwriting business - one that is only further enhanced by the international reach of its sister companies within The Ardonagh Group. He added that “FRAM shows the strength that we have as a business to deliver new opportunities and is a clear statement of intent on our future international strategy.”

“Tom and the team have in-depth technical and local knowledge and expertise that is second to none, and we’re confident this will drive great success for our new Scandinavian business.”

Mapfre taps Argo Lloyd’s underwriter for UK energy portfolio

Mapfre Global Risks has appointed Kieran Wilson as energy underwriter as part of its international growth strategy in London.

Mapfre Global Risks specialise in insurance solutions for multinationals.

In his new role based in London, Wilson will report to Senior Energy Underwriter, Andre Malcom and will be responsible for underwriting oil and gas risks and servicing MGR’s energy portfolio. 

Wilson most recently worked at Argo Global Syndicate 1200 at Lloyd’s as an onshore energy underwriter. Prior to that, he worked for 8 years at the now merged StarStone, Torus and Broadgate Syndicates at Lloyd’s.

Greg Harris, MGR UK director, said: "Kieran’s hire is part of our ‘specialty lines’ strategy for London, developing international portfolios of business in specific sectors. He is an experienced oil and gas underwriter with strong broker relationships and will assist Andrew Malcolm in continuing to build MGR’s energy account in London."

Wilson added: "I am delighted to be joining MGR, and I look forward to being part of this rapidly expanding, client-focused business with its strong focus on international growth, from the heart of the London insurance market."