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EC News (5th October 2017)

October 05, 2017

Round-up of the weekly news and developments from the global insurance market with stories from AIG, Sompo International, Everest Re and more.

Fry to head up reinsurance at AIG

AIG has appointed former Novae CFO Charles Fry as head of reinsurance, operations and transformation within its general insurance division as recently instated CEO Brian Duperreault continues to build out his senior team.

Within his new role, Fry will be responsible for overseeing AIG’s global reinsurance, shared services, transformation and administration functions. He will report to recently appointed CEO of general insurance, Peter Zaffino and will become a part of the executive leadership team.

Fry, Duperreault and Zaffino are all former colleagues, having worked together at Marsh & McLennan Companies.

Fry has over 20 years’ experience in the (re)insurance industry. He was most recently group CFO at Novae, having left the position in October 2016 after serving in the role for more than three years. Prior to this, he was COO at Guy Carpenter from April 2007 to June 2010. In addition, Fry previously worked with Apax Partners on its investment in Travelex Group, where he was the executive responsible for the group’s global reorganisation. He was also CFO of Benfield from 1999 to 2006.

Commenting on the appointment, Zaffino said: “Having worked with Charlie in the past, I am confident he brings a valued skill set to these important responsibilities. Charlie has a proven track record of running complex operations, change management projects and profit improvement in the insurance and reinsurance industry.

AIG freed from SIFI status

AIG has positively embraced the decision from the Financial Stability Oversight Council to remove the firm from the list of financial organisations deemed as a Systemically Important Financial Institution (SIFI).

The US insurance giant was designated a SIFI or “too big to fail” in 2013 after its near-collapse during the 2008 financial crisis. It was rescued by the US government in September 2008, ultimately requiring $182bn to avoid collapse after losses on risky derivatives. The money was subsequently paid back to taxpayers in four years.

Since then, AIG has stripped down by selling assets and taking measures that the company could argue has made it far less systemically important. AIG's total assets have dropped to about $500bn from just over $1trn in 2007.

But on Friday 29 September, six members of the council voted in favour of rescinding AIG's SIFI status including Treasury Secretary Steven Mnuchin and Federal Reserve Chair Janet Yellen, whilst three members voted against the change.

"The Council has worked diligently to thoroughly re-evaluate whether AIG poses a risk to financial stability," Mnuchin said in a statement. "This action demonstrates our commitment to act decisively to remove any designation if a company does not pose a threat to financial stability."

The decision frees AIG from the heightened capital and regulatory requirements connected with SIFI status, with analysts suggesting that removal of AIG’s SIFI designation could relieve the company of an estimated $100mn-$150mn cost associated with complying with the SIFI regulation.

AIG president and CEO Brian Duperreault welcomed the verdict: “The Council’s decision reflects the substantial and successful de-risking that AIG’s employees have achieved since 2008. The company is committed to continued vigilant risk management and to working closely with our numerous regulators to enable a strong AIG to continue to serve our clients.”

Sompo International launches global insurance platform

Sompo International has unveiled plans to create a unified global insurance platform, with an aim to bring all Sompo worldwide subsidiaries under the ownership and control of Sompo International Holdings (SIH).

The creation of the worldwide platform began on 27 September with the transfer of all former Endurance companies to SIH. The company added that it intends to transfer all Sompo America companies and Sompo Japan Nipponkoa Insurance Company of Europe Limited (SJNKE) to SIH in the “near future”.

Over a period of time, subject to various regulatory authority approvals and a newly formed governance structure, the intention is to bring all other Sompo worldwide subsidiaries under the ownership and control of SIH,” the firm said in a statement.

The Sompo International group, which is led by chairman and CEO John Charman, will include all commercial property, casualty and specialty products for both current Sompo Japanese interest accounts and locally sourced and written non-Japanese accounts and will have worldwide oversight for these accounts including technical products and underwriting support.

Meanwhile, the company concurrently announced the initial launch of its Global Clearance System (GCS), a web-enabled technology platform that provides all Sompo Group operations with access to view and clear submissions regardless of their location, operating platform or legacy system.

Initially, legacy Endurance, Sompo America and Sompo Japan Nipponkoa Insurance Company of Europe operations have been placed on the platform, with a full integration of all Sompo International operations onto a common platform slated for 2020.

Starting with the solid oversight for all commercial lines of products, this reorganization and the alignment of our global platform under John Charman’s leadership is the next logical step in our journey to fulfill our vision to build the first truly global integrated insurance and reinsurance business,” remarked Sompo Holdings president and CEO Kengo Sakurada.

Charman said he was “delighted” with the “substanstial” progress that has been made to date in integrating the various operating entities that comprise Sompo International.

The launch of our new global clearance system is just the first step as we continue to modernize and transform our technology platform across all lines of business and geographies. In keeping with Sakurada-san’s vision, we remain steadfastly focused on creating and growing a highly profitable, globally integrated business that is unique in the history of our industry,” he concluded.

Sompo International is the new name for Endurance, which Sompo Holdings acquired in a $6.3bn takeover that was completed in March.

Everest Re names Heizmann as European credit and surety head

Everest Re has named former Axis Re underwriter Markus Heizmann as head of its Zurich-based credit and surety operation.

In his new role, he will work alongside head of financial products Laurent Arnould to further develop the worldwide trade credit reinsurance business, and the surety and political risks business outside the US, Canada and Latin America.

Heizmann joins from Axis Re, where he was most recently a senior credit and surety underwriter. Before that, he spent nearly 14 years at PartnerRe.

Stephan Knipper, managing director of Everest Re Continental Europe, said: "Markus is a perfect fit with his broad product knowledge and his leadership capability in the trade credit and surety business."

Meanwhile, Andrew Carrier, head of Everest Re's European operations, added: "Hiring Markus as the head of trade credit and surety is another important cornerstone of our concept to build out Everest Re Europe as one of the key reinsurance hubs for financial products within the Everest Reinsurance Group."

Blockchain initiative B3i expands with 23 new members

The blockchain insurance industry initiative B3i, which was launched in October 2016, is adding 23 new members for its market testing programme.

The 23 new additions to the initiative are: AIA, AIG, Aon, Chubb, Covéa, Everest Re, Gen Re, Guy Carpenter & Marsh, JLT Re, Leadway Assurance, LocalTapiola, Mapfre Re, Navigators, PartnerRe, QBE Re, SAHAM Assurance, Sava Re, Takaful Emarat, TigerRisk, Trust Re, UnipolSai, and Willis Re.

Since the launch, the B3i initiative has gained vast attention spanning the industry and beyond. The group is now attaining a global scope, attracting companies from Africa, Asia, Australia, Europe, the Americas, the Middle East and the Caribbean.

Blockchain technology enables the recording of data including transactions, contracts and agreements, in a way that means the data is simultaneously stored, but also updated in real time, on hundreds or even thousands of computers globally. It is meant to make the data near impossible to tamper with or hack as well as being easily accessible and updated instantly for every user involved.

The B3i initiative is a collaboration of insurers and reinsurers formed to explore the potential of using distributed ledger technologies within the industry for the benefit of all stakeholders in the value chain.

The move follows the launch of a working market testing prototype at this year’s Monte Carlo Rendez-Vous. Market testing of the prototype will begin this month, following on boarding and the provision of training to all member companies.

Each participating company will simulate the creation and management of property catastrophe insurance contracts in order to test post placement processes. This will apply from the setting up of the contract, through to the automated calculation for payment of claims.

The testing companies will provide their feedback based upon their experiences using the platform, thereby contributing to the development of a viable production platform for the (re)insurance industry by the second half of 2018.

B3i will also look to develop and prototype further use cases during 2018 for market adoption, which will be done by leveraging the collective views of the expanded membership to prioritise projects which extend beyond the current P&C reinsurance horizon.

Early next year, B3i will put in place a new structure designed to better serve its members and future platform users. This will take the form of a limited liability company structure, with a research and development function and commercial operations.

Commenting on the initiative Paul Meeusen of B3i said:  “In less than a year B3i has become truly global, both in terms of the work we are undertaking and the companies we represent. We look forward to working with the new entrants who will take part in our market testing, and to learning from each other’s expertise and experience.”

Liberty Specialty Markets establishes renewable energy team

Liberty Specialty Markets (LSM) has announced that it is expanding its onshore energy offering with the launch of a new specialist renewable energy team.

The new team will by headed by senior underwriter for power and renewables Tom Clifton from LSM’s London office. He will be supported by Madrid-based energy manager Jose Luis Ruiz-Poveda.

LSM said that its decision builds upon significant experience in the renewables sector, including being a lead market in Spain for solar power markets, adding that business will be underwritten from London and regional hubs in Paris, Madrid, and Dubai.

Commenting on the announcement, the company’s CUO for specialty Mike Gosselin said: “The renewable energy sector is increasingly a mainstream source of energy, and is growing rapidly. As the energy landscape changes, so too have the demands of our clients. By leveraging our existing industry knowledge and technical expertise in onshore renewable energy, we can offer an integrated service that includes risk engineering capabilities.

This service will allow us to work closely with our clients and provide them with a holistic and unique perspective on their exposures, offering guidance and advice on loss prevention and control issues.”

XL Catlin partners with AI start-up Cytora

XL Catlin’s internal innovation team, Accelerate, has teamed up with Cytora, a UK-based Insurtech start-up that uses artificial intelligence (AI) and open source data to improve the way insurers quantify, select and price risk.

Cytora’s risk engine scrapes and analyses information from the internet, including data from company websites, news articles and government datasets and processes it using AI algorithms in order to predict future claims, attractive risk profiles and quality of risks.

XL Catlin will use Cytora’s expertise to create new risk insights in a bid to improve underwriting and identify new opportunities. The company said that the insights generated will “help actuaries at portfolio level to identify new profitable segments, help underwriters to improve risk selection and provide tailored risk solutions for clients.

Commenting on the partnership, CEO of Accelerate Vincent Branch said: “We are experimenting with a wide range of cutting-edge technologies to explore what is possible. But we cannot do it alone. We need to partner with like-minded start-ups like Cytora that can help us embed those new technologies to transform our product design, pricing, underwriting, claims and risk engineering capabilities to the benefit of our clients and brokers.”

We are excited to be working with Cytora, a company that has, in just three years, built such an excellent reputation around its ability to use artificial intelligence and machine learning to help drive better business decisions,” he added.

Cytora was founded in 2014 by a multidisciplinary team and spun out of the University of Cambridge. According to Crunchbase, the start-up has raised $3.48mn of equity funding since October 2015 from eight investors which include Parkwalk Advisors, Cambridge University Enterprises and former RMS executive Matthew Grant.

XL Catlin established its Accelerate team in November 2016, to leverage commercial opportunities arising from new technologies and to drive transformational innovation by working closely with the business.

Everest Re gains clearance for Dublin EU subsidiary

Everest Re has announced that its Dublin-based subsidiary has been granted in-principle approval by the Central Bank of Ireland to operate as a non-life insurer in Ireland, enabling it to continue trading with the EU market following Brexit.

The unit, Everest Insurance Ireland, will be led by Stephen Cross, who will become CEO of the platform. Prior to Everest, Cross served a 17-year tenure at Aon, where he most recently held the position of chief innovation officer.

The subsidiary will initially focus on underwriting trade credit and political risk lines, although it has obtained approval to underwrite a variety of specialty commercial insurance products, including third-party liability, property and financial lines.

Commenting on the announcement, Everest Re president and CEO said: “Everest has operated as a reinsurer in Ireland since 2009. The robust regulatory environment, stable economy and highly educated talent pool make Ireland an excellent choice for Everest, providing additional options for our global insurance clients, in an increasingly complex and interconnected world.

“Our new Irish insurance platform will complement our North American insurance operations and our Lloyd’s syndicate and enable Everest to serve clients through insurance transactions originating in the European Union. Establishing this platform is an important milestone in executing our strategy.”