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EC News (14th September 2017)

September 14, 2017

Round-up of the weekly news and developments from the global insurance market with stories from Mapfre Global Risks, AmTrust, Marsh and more.

Hurricane Irma insured loss pegged at $25bn: KCC

(Re)insurers are likely to absorb $25bn of insured losses from Hurricane Irma, according to the latest estimates from Karen Clark & Company (KCC).

In a flash bulletin published on 13 September, the firm said the forecasts comprises of $18bn of claims in the US and $7bn in the Caribbean.

Estimates include losses to buildings, other insured structures, contents, business interruption, and autos. However, KCC noted that the projections exclude losses covered by crop insurers and the National Flood Insurance Program (NFIP).

Of the forecasted $18bn of insured losses in the US, the catastrophe modelling firm said that the majority stems from Florida, followed by Georgia, South Carolina and Alabama.

Hurricane Irma formed as a tropical storm on 30 August in the eastern Atlantic, quickly intensifying into to a Category 5 hurricane on 5 September when it passed over the northern Leeward Islands, making it one of the most powerful Atlantic hurricanes on record.

Irma then destructed parts of Barbuda, St. Martin, and the British Virgin Islands before moving north of Puerto Rico and tracking close to Turks and Caicos.

Irma remained a Category 5 storm until 8 September, when wind speeds began to weaken as Irma made landfall in Cuba, after which the storm began to head towards Florida.

On 7 September, the National Hurricane Center (NHC) projected a Florida landfall near downtown Miami as a strong Category 4 hurricane. Had the hurricane stayed on track and not shifted and abated, KCC highlighted that insured losses could have $150bn, chiefly driven by strong winds.

Irma was downgraded to a Category 3 storm before turning north towards Florida on 10 September.

The storm initially made landfall across Cudjoe Key, with the Keys area seeing the most destruction due to experiencing the full force of 130 mph winds along with significant flooding. Irma then made a second landfall in the US at Marco Island a little after 15:00 local time with wind speeds of 115 mph.

KCC said that because Irma weakened significantly after crossing Cudjoe Key and before impacting the southwestern coast, the storm surge was much less significant in Naples, Fort Myers, and Tampa than has been initially feared.

“Even the wind damage turned out to be relatively minor after the second landfall due to the rapid storm decay. Direct wind impacts were mostly limited to mobile homes, light structures, signage, and spotty roof and window damage. Except for in the Keys, major structural damage for the most part was caused by falling trees,” the company said.

Nonetheless, the majority of Florida was impacted by the storm, with hurricane force winds extended 80 miles from the storm centre meaning that minor wind damage also occurred in Georgia, Alabama, and South Carolina along with inland flooding.

Meanwhile, on 11 September, AIR released a revised estimate that Irma insured losses in the US alone could range between $20bn and $40bn based on the NHC’s forecast for the hurricane at 17:00 Eastern Time on 10 September. It noted that these estimates do not include losses paid out by the NFIP, losses to inland marine, marine cargo and hull and pleasure boats and losses to infrastructure.

Ogden reforms could save (re)insurers up to £2.5bn: EY

The UK government’s proposed legislation to change the way the Ogden discount rate is calculated could save (re)insurers up to £2.5bn, Ernst & Young (EY) has estimated.

On 7 September, the Ministry of Justice (MoJ) announced that the draft reforms would result in a rate of between 0 percent and 1 percent. This compares to the initial reduction in the Ogden discount rate from 2.5 percent to -0.75 percent in February.

The proposals come after months of lobbying from the (re)insurance industry, with the government launching a consultation in March.

Under the bill, which has yet to be approved by parliament and are unlikely to take effect for several months, the Ogden rate will be set using what the government calls “low risk” investments, rather than “very low risk” investments.

Furthermore, the rate would be reviewed every three years by the government actuary and an independent panel of experts.

“We think that motor and liability insurers will welcome the revised proposals – not only because of the cost impact, but also because of the promise to build in a three-year review process which will hopefully avoid the impact of large rises going forward,” remarked EY partner Tony Sault.

Earlier this year, EY has calculated that a -0.75 percent Ogden rate, which has been in force since 20 March, would cost the industry an additional £3.5bn and add 6.5 percent to customer premiums.

Sault continued: “We believe the new proposals, which the Government expects to imply a real rate of 0 percent to 1 percent, will have a significant impact on these costs. A revision to 0 percent could reduce these costs by one-third meaning reserve releases of £1.2bn, while a change to 1 percent could reduce this by two thirds, meaning up to £2.5bn could be saved by insurers and reinsurers compared to their current booked position.”

“We would also expect the recent rise in premiums to level off in anticipation of the new legislation, and ultimately premiums could fall between 2 percent and 4 percent, saving up to £21 on the average premium to the consumer,” he concluded.

Mapfre Global Risks enters London aviation market with Willis hire

Mapfre Global Risks (MGR) has entered the London aviation market with the appointment of Oscar Becerra from Willis as aviation underwriter.

In addition to Willis, Becerra also previously worked for Aon Mexico, where he served as a reinsurance broker and aviation department manager.

In his new role, Becerra will work closely with MGR’s aviation team in Madrid, which already underwrites aviation risks. He will report to MGR UK director, Greg Harris.

Harris said that Becerra’s hire was part of a MGR’s speciality lines expansion strategy in London, which involves developing international portfolios of business in specific sectors.

“[Becerra] is an experienced aviation broker of 17 years standing and he will use his experience and expertise to bring a fresh approach to aviation underwriting in London,” remarked Harris.

Meanwhile, Becerra said: “Moving from broking to underwriting is a big move, but with the backing of MGR, and the team in Madrid, I am confident we can build a world-class business with a fresh partnership-based approach that will hopefully appeal to brokers and clients alike.”

AmTrust at Lloyd’s looks to combine syndicates

AmTrust at Lloyd’s has applied to Lloyd’s for approval to combine its three fully aligned non-life Lloyd’s syndicates under management.

The carrier said that it has submitted a Syndicate Business Forecast (SBF) to Lloyd's for business written by syndicates 1206, 5820 and 1861 to be consolidated into a single Syndicate 1861 for the 2018 year of account.

Subject to Lloyd’s approval, the enlarged Syndicate 1861 would have underwriting capacity of over £500mn, with Christopher Jarvis continuing as active underwriter. Meanwhile Bruce Whitmee, currently active underwriter of Syndicate 5820, will become head of consumer products and will report to Jarvis.

AmTrust gained ownership of Syndicate 1206 and 5820 through its acquisition of Sagicor and ANV respectively.

AmTrust at Lloyd’s CUO Mike Sibthorpe said that the merger of the syndicates will in part enable operational and service improvements.

“AmTrust at Lloyd’s is one of a small number of Lloyd’s agencies able to underwrite in all of the key Lloyd’s classes, through Syndicate 1861 for general insurance and Syndicate 44 for Life assurance”, remarked Sibthorpe.

“Streamlining our operating model allows us to focus our efforts on identifying opportunities to optimise our portfolio; building on our underwriting strengths,” he concluded.

AmTrust at Lloyd's CEO Peter Dewey added: "Our proposed new syndicate structure is a major step towards our commitment to building a best-in-class Lloyd's platform, simplifying the operation of the business and generating profitable growth and attractive returns for our business and AmTrust shareholders."

Marsh unveils new global management structure

Recently instated Marsh president and CEO John Doyle has announced a realignment of the broker's global structure, including new appointments to its executive management team and regrouping units.

As part of the restructure, a new global risk and digital division has been formed, bringing together small business and personal product lines with consulting practices and analytics, digital and data products. It will be led by John Drzik, who has been appointed president of the unit and will report to Doyle.

Marsh has also created a global placement and specialties division, which combines industry and practice specialties with insurance placement activities, which include retail and specialty, wholesale and portfolio solutions. Global specialties encompasses aviation, construction, credit, energy, marine, private equity, infrastructure and merger and acquisitions.

Dean Klisura has been named president of the division and will also report to Doyle. Like Drzik, he will also join the broker’s executive committee.

Marsh’s new management structure includes the addition of Marsh International, which will operate under Flavio Piccolomini as president. Piccolomini, who will continue to serve as CEO of Marsh Continental Europe on an interim basis, also joins the executive committee.

Marsh International comprises operations in Africa, Asia, Continental Europe, Latin America and the Caribbean, Middle East and North Africa, Pacific, and UK and Ireland.

Doyle also made additional appointments to Marsh’s executive committee, including US and Canada president Martin South and David Eslick, chairman and CEO of Marsh & McLennan Agency. 

Commenting on the changes, Doyle said: “This is an exciting time in our industry as the complexity of risks and the speed of change our clients face increase,”

“Our new global structure and expanded executive team will better enable us to deliver unmatched innovation and value to our clients around the world.” 

Doyle was named as president and CEO of Marsh in July, succeeding Peter Zaffino who left to join Brian Duperreault at AIG as global COO of the US insurance giant.

Regan succeeds Neal as QBE CEO

QBE has appointed Patrick Regan as group CEO, succeeding John Neal who will be stepping down after five years in the role.

Regan, who will take the reins of the company on 1 January 2018, is currently chief executive of QBE’s Australian and New Zealand operations, having previously served as group CFO. Prior to joining QBE in June 2014, he served a variety of CFO and financial director roles at the likes of Aviva, Willis Towers Watson, RSA and AXA.

Meanwhile, Neal joined QBE’s European Operations in 2003. In 2011, he relocated to Australia, where he assumed the position of CEO of global underwriting operations.

QBE group chairman Marty Becker said; “We are delighted to appoint Pat Regan to the position of Group Chief Executive Officer.”

“In the last 12 months Pat has led a strong turnaround in the Australian & New Zealand Operations highlighting his operational skills and business acumen and, in his previous role as Group Chief Financial Officer, had been pivotal in stabilising the balance sheet and enhancing the Group’s capital management.”

Commenting on his appointment, Pat Regan said “QBE has some clear strengths and great franchises, as well as talented and dedicated people and I am delighted to be appointed to lead the Group. One of my first priorities will be to lead a search for my successor as Chief Executive Officer of our Australian and New Zealand Operations.”

Chubb chooses France for post-Brexit EU hub

Chubb has announced its intention to establish an EU headquarters in France if the UK leaves the European Union.

Chubb chairman and CEO Evan Greenberg said that selecting France as its preferred post-Brexit headquarters for its Continental European operations was a “clear choice” for company.

"Paris is the principal office for our Continental European operations and we have a significant investment there in both financial and human resources, as well as a large portfolio of commercial and consumer insurance business throughout France,” he said.

"Our many years of experience in the French market and working closely with the French regulators gives us great confidence in making this decision and reinforces our commitment to our staff, clients and distribution partners in both France and across the Continent,” Greenberg concluded.

Chubb executive vice president and general counsel Joseph Wayland added: "We have been encouraged by the assistance and cooperation provided by the French government as we have considered our post-Brexit options and we look forward to working closely with the French authorities as we move forward on this project."

Post-Brexit, which is expected to happen in March 2019, Chubb said it will continue to have a substantial presence in London in addition to its offices and operations across the UK and EU.

Chubb’s choice of France has bucked the trend, with several carriers selecting Luxembourg as the preferred destination for post-Brexit hubs as they look to safeguard access to the EU.

Chubb said that the establishment of the new EU headquarters is contingent on receiving all necessary regulatory and government approvals.

Hamilton appoints Barvé

Hamilton Insurance Group has appointed Nikhil Barvé as head of outwards reinsurance and underwriting supervision within the firm’s Lloyd’s operations.

Barvé, who assumed his new position at the end of August, reports to Hamilton Underwriting CEO Dermot O'Donohoe and active underwriter and head of treaty Trevor Carvey.

Barvé joins the company from Markel International where he most recently served as underwriting manager, wholesale. His responsibilities included the development and oversight of overseas platforms.

He brings more than 30 years’ reinsurance experience to his new role, having most recently served as wholesale underwriting manager at Markel International where he was responsible for the development and oversight of overseas platforms.

During his long-spanning career, Barvé has served as treaty underwriter at International General Insurance Company where he focussed on the creation of a London subsidiary, IGI UK. From 2002 to 2007, he was based in Bermuda combining underwriting treaty business and outwards reinsurance placement and was also responsible for run-off management. Prior to Bermuda, Mr. Barvé was active in treaty reinsurance underwriting and ceded reinsurance in the Lloyd’s marketplace.

Commenting on the appointment, O’Donohoe said: “[Nikhil] has in-depth knowledge of the Lloyd’s and European markets and will play a leading role in our outwards reinsurance strategy, working closely with our underwriting and risk departments to develop controls around the business as we grow.”