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EC News (28th September 2017)

September 28, 2017

Round-up of the weekly news and developments from the global insurance market with stories from Thomas Miller Specialty, AFL Insurance Brokers, AIG and more.

Thomas Miller Specialty set to launch general aviation facility

Thomas Miller Specialty has announced the launch of its general aviation facility. 

The industry sector underwriting agency focuses on marine, offshore, aerospace and cyber insurance products. 

Operating from a branch office in St. Martin, Guernsey and Thomas Miller Specialty’s head office in London, the new business will be headed up by underwriting director Nic Vine, senior underwriter Bruce Dovey and underwriter Simon Ingrouille.  

Commenting on the development of the underwriting agency, Vine said: “The combination of Thomas Miller’s heritage, support infrastructure and global network, together with strong support from leading general aviation Lloyd’s and company market security, will ensure that our clients benefit from attractive products and excellent service.

Deputy chairman at Thomas Miller Specialty, Roger Lewis says: “This is a significant and exciting step in Thomas Miller Specialty's development and we welcome Nic, Bruce and Simon. Our experienced general aviation team is very familiar with the unique risks and requirements of the general aviation industry and, as specialists, fully understand the key concerns and business drivers required to ensure we provide high quality general aviation insurance solutions to this sector.

Hurricane Maria caused as much as $85bn in insured losses: AIR Worldwide

Hurricane Maria is the worst storm to strike Puerto Rico since 1928 with insured losses estimating between $40bn and $85bn, AIR Worldwide said. 

Since the storm devastated Puerto Rico it has resulted in widespread property damage and power outages with AIR saying that over 85 percent of the insured loss is in the island. Dominica was also hit with extensive damage from the storm. 

AIR’s preliminary damage estimate is higher than its estimates for Hurricane Harvey, which made landfall in Texas in August, and Hurricane Irma, which passed through the Caribbean before hitting Florida earlier this month. The firm said Harvey caused more than $10bn in insured losses, excluding losses borne by the National Flood Insurance Program, which provides majority of residential flood insurance and Hurricane Irma caused $32bn to $50bn in insured losses in the U.S. and the Caribbean.

AIR’s estimate for Maria includes damage to residential, commercial and industrial properties and vehicles, as well as losses due to business interruption and additional living expenses. It also takes into account higher rebuilding costs due to increased demand for labour and materials. The estimate for Maria excludes losses to infrastructure or boats and damage to uninsured properties. 

Last week, AIR estimated around 50 percent of homes in Puerto Rico has insurance policies that protect against wind damage which is much lower than is typical across the U.S.

AFL Insurance Brokers spark further growth with energy team

AFL has hired Dominic Quick and Simon Pearce, two highly experienced and respected London market broking professionals, to spearhead the firms new energy practice.

The new energy practice unit will serve both clients and customers from other independent brokers connected to AFL through the Worldwide Broker Network, “the largest organisation of privately held insurance brokers, controlling premiums in excess of US$50 billion.

Combined, Quick and Pearce bring nearly 50 years’ experience in the (re)insurance industry with them to the practice.  

Quick has previously worked for the likes of JLT Specialty, Lloyd & Partner and Guy Carpenter. Pearce has a career spanning over 33 years in numerous senior roles including JLT Specialty, RFIB Group and Swiss Re. 

Commenting on the new hires, recently appointed executive chairman, Toby Esser, who joined AFL earlier this month said: “There is a lot of synergy between the skillsets of Dominic and Simon, and we’re delighted to have this experienced team championing the launch of our energy practice. We plan to offer a broad spectrum energy capability, with our main target market being the USA, but also including emerging markets such as Iran. Fantastic growth opportunities lie ahead.”

ERN International puts Mexico quake insured loss at $4.8 billion

Mexico’s Evaluacion de Riesgos Naturales (ERN International) has provided an insured loss estimate of up to $4.8bn for the Magnitude 7.1 earthquake that struck around 120km southeast of Mexico City earlier this month, resulting in widespread damage to buildings and hundreds of fatalities.

ERN International is a seismic engineering entity headquartered and founded in Mexico City. The firm has announced an insurance industry loss estimate of up to $4.8bn for the event, which is based on a portfolio of buildings that is representative of both the size and distribution of insured buildings.

Furthermore, catastrophe risk modellers AIR Worldwide and RMS have both produced a lower insurance industry loss estimate for the event.

AIR Worldwide, has provided an insurance industry loss for the event of between $730mn and $2.06bn.

RMS has provided an insured loss estimate for the event of up to $1.2bn.

In Mexico City, 52 buildings collapsed and roughly 500 more were damaged including schools, hospitals and churches.

AIR reports that most residential buildings in Mexico are vulnerable to shake damage whilst commercial buildings are generally better able to withstand shaking from an earthquake.

The firm expects total economic losses from the event to be far higher than the insured loss, something also noted by RMS, which also underlined the low level of insurance penetration in the region.

Based on current building information from the Mexican authorities, RMS estimates that economic shake losses will be between $4bn and $8bn, while no more than $1.2bn will be covered by insurance protection.

Shimek leaves AIG as firm adjusts its organisational structure

AIG has announced it will be adjusting its organisational structure as part of the strategy to address its customer needs and respond to future market opportunities. 

The firm will be moving away from its commercial and consumer segment split and will introduce three new segments: general insurance led by Peter Zaffino as CEO, life & retirement, led by Kevin Hogan, CEO; and a stand-alone, technology-enabled platform, led by Seraina Macia, CEO.

As a result of the re-organisation, Rob Schimek, CEO of commercial at the insurer will be leaving at the end of next month after 12 years with the company. 

The new general insurance and life & retirement divisions will both have distinct business units within them, reflecting the target markets. General insurance will include commercial, personal insurance, and U.S. and international field operations, while life & retirement will include group retirement, individual retirement, life, and institutional markets.

President and CEO at AIG, Brian Duperreault had been promising changes since he took over and this is a relatively big one, in terms of how AIG goes about its business. 

Commenting on the changes Duperreault said: “These changes are designed to best position AIG for the future, as a growing, profitable leader in the insurance industry that is famous for its underwriting excellence. We believe this structure will maximise our global platform by empowering our local geographies, and provide our businesses with the greatest competitive advantage and ability to serve our clients.”

At this stage, analysts have said they do not believe the general and life split implicates that the life division may be offloaded; however it will provide options for the future.

The structural changes could make reinsurance buying more efficient, offering AIG a new way to look at its protection buying and bringing all property related business under one division.

The breaking out of technology operations could benefit the group greatly, by allowing tech initiatives to be operated at the group level in order to maximise efficiency they offer to the insurer.

Asta receives ‘in principal’ approval to establish Agora syndicate 3628 at Lloyd’s

Asta has received approval ‘in principal’ from the Lloyd’s Franchise Board to launch and manage Agora Syndicate 3628 and is scheduled to start writing business from 1st January 2018.

The Lloyd’s of London third-party managing agent, along with Skuld, announced the establishment of Special Purpose Arrangement (SPA) 6126 in 2015. Following two years of operations the Lloyd’s Franchise Board has now given approval for the SPA to turn into a syndicate, “fulfilling [its] long-term ambition.

The syndicate will continue to underwrite property business with a focus on international direct and facultative, binders and treaty business, which is to be privately placed by numerous “well-known industry players.

The syndicate has planned gross premium of £98mn for 2018. 

Active underwriter, Mike Pritchard, SPA 6126 Chairman and CEO since its establishment said: “Over the past two years we have grown from strength to strength and built a robust and diversified book of business with the hard work of all the team and the support of Skuld, all our capital partners, and managing agent Asta.

Julian Tighe, CEO of Asta added; “Agora has developed an exceptional reputation in the market as an underwriter-driven and owned business. Mike and his team of experienced and skilled underwriters have developed a profitable and diversified book of business. We look forward to continuing to work alongside Mike and all his team as they take this next step in the evolution to become an independent syndicate.

Pioneer Underwriters syndicate 1980 at Lloyd’s approved in principle

Pioneer Underwriters, which operates as a risk insurer and managing agent currently with the backing of Liberty Syndicate 4472, announced that it has received approval “in principle” to establish its own Lloyd’s of London syndicate to begin underwriting business from the 1st January 2018.

Working alongside Asta, the firm are moving forwards to operate its own capacity source in the form of a stand-alone Lloyd’s syndicate which “marks an important next step in Pioneer’s development and supports the long-term strategic objectives of the business.”

Lloyd’s has approved the syndicate in principle and Pioneer and Asta will continue to work with the Lloyd’s market to gain permission for its Syndicate 1980.

Pioneer said there will be no change to its underwriting operations after the new syndicate is launched, meaning it will continue to share risks with Liberty’s syndicate as well.

Pioneer Underwriters CEO, Darren Doherty, said: “The establishment of a Lloyd’s syndicate is a long-held ambition of Pioneer. Since we launched, we have demonstrated a profitable underwriting track record, based on differentiated underwriting strategies and specialist expertise. The syndicate is part of the natural evolution of our business as we look to further secure underwriting capacity and continue the diversification of the lines of business that we underwrite.

“This is the right time for us to take this important next step and we are confident that with the support and management of our partner, Asta, it will be a success. It is our intention that our existing capital partners, including Liberty, will continue their support of the business in this exciting phase of Pioneer’s story.”

Asta CEO, Julian Tighe added; “Over the past six years Pioneer has been on an exceptional and successful journey, which will continue with the launch of the Pioneer Syndicate. We have been impressed with the quality of Pioneer’s business plan and believe that its experience of profitable underwriting in the Lloyd’s market, exceptional team of underwriters and diversified book of business will make the Syndicate a success. We are very pleased that Pioneer has chosen Asta to support them in the next step in their growth strategy and see today’s announcement as the beginning of a long-term partnership with a successful Syndicate.” 

Bilateral agreement signed by EU and US 

The EU and the US are due to sign a landmark bilateral agreement on insurance and reinsurance.

Following over 20 years of discussions and a year of formal negotiations between the European Commission and the US Department of the Treasury and Office of the Trade Representative, the signatures will mark the final step for them.

The agreement will boost consumer protection by facilitating the exchange of information between EU and US supervisors and cut costs and red tape for EU insurers and reinsurers active in the US. The agreement also brings prudential benefits. EU insurers and reinsurers will only have to prepare one risk and solvency assessment (ORSA) in light of their specific risk profile which can then also be used by US supervisors. The signature allows parts of the agreement to become immediately applicable on a provisional basis.

In line with the objectives of the Investment Plan for Europe and the Capital Markets Union, the agreement will sanction reinsurers to boost their investment capacity. EU reinsurers estimate that they have about $40bn of collateral posted in the US, which could instead be invested to create jobs and growth. The opportunity cost is estimated at around $400mn per year.

The European Parliament and the Council will need to approve the conclusion of the agreement.

In a joint statement, the EU and the US said: “The agreement represents a major step forward in US- EU cooperation on insurance and reinsurance, conveying benefits to EU and US insurers and reinsurers operating across the Atlantic, by offering them enhanced regulatory certainty, while maintaining robust consumer protections.”