Daily Willis Review- January 11, 2018

2018 will see a number of insurtech companies fail, says XL Innovate
Too many insurtech start-ups are focused on “low hanging fruit” and those that cannot find unique solutions or gain traction will fail in 2018, according to Martha Notaras, a partner at venture capital firm, XL Innovate.

Writing in Digital Insurance, she says that whilst the number of funded insurtech companies continues to accelerate, with a record $946 million invested across 64 companies in Q2 of 2017 according to data from Willis Towers Watson and CBInsights, companies that have been in the market and haven’t been able to articulate a unique solution or gain traction will fail.

She also predicts that as the market matures, investors will be able to more accurately judge which products and services can really influence the insurance value chain.

She said there will be more acquisitions as the insurance industry decides to buy in skills such as artificial intelligence (AI), machine learning and data sciences.

Ms Notaras said the big tech companies such as Facebook, Google, Apple, Amazon and Netflix do not want to become insurers but rather they aim to deliver insurance coverage to their customers.

She said there had been a dearth of insurtech start-ups that were focused on commercial insurance, but this will change in 2018.

Commercial insurance is a $300 billion market that is “ripe for new technology solutions and data sources”.

She said even a one percent increase in cost savings would be a multi-billion opportunity.

“Watch for things to heat up as insurers and tech star-ups get into the details and identify where they can work together to make an impact,” she wrote.

Twelve Capital launches catastrophe bond Dodeka XIV
Insurance and reinsurance investment manager Twelve Capital has issued its latest series of private catastrophe bonds Dodeka XIV.

Dodeka XIV is a $35 million cat bond that features cover for second event risk across all natural perils in the United States.

The company said that all cat bonds issued from the Dodeka program are only available for funds and mandates managed by Twelve Capital, who have fully absorbed the entire issuance of this transaction.

Sandro Kriesch, Managing Partner and Head of ILS at Twelve Capital, said: “The Dodeka program allows our cat bond funds to invest into perils that are not readily available in securities format, resulting in improved portfolio diversification, or into transactions exhibiting more attractive economic terms.

“Especially in the aftermath of the recent hurricanes, the Dodeka program allows Twelve Capital’s investors to benefit from the current increases in premiums across collateralized reinsurance and retrocession markets.”

Arch Capital revises 2017 Q4 catastrophe loss estimates
Arch Capital has revised its loss estimates for the fourth quarter of 2017 – primarily related to California wildfires – to pre-tax losses of $60 million to $75 million, net of reinsurance recoveries and reinstatement premiums.

The company said that this figure includes and updates the initial $30 million to $55 million range previously disclosed in its third quarter report.

The most recent estimate includes the second series of California wildfires as well as other catastrophic events from around the globe.

Due to the reduction in the U.S. corporate tax rate from 35% to 21%, Arch Capital anticipates that it will write down a portion of its deferred tax asset by approximately $15 million to $20 million in Q4.

The company also estimates that the effective tax rate on pre-tax operating income for the fourth quarter of 2017 will be in a range of 17% to 20%.

XL Catlin appoints EMEA Head Of M&A Insurance
XL Catlin has appointed Simon Price as Head of Mergers and Acquisitions in its insurance operations for EMEA.

Based in London, Mr. Price will be responsible for all of XL Catlin’s EMEA business, including all international business placed through the London market.

He brings with him 17 years’ transactional experience and joins the company from Marsh’s Private Equity and M&A practice.

Richard Belsey has also joined XL’s insurance operations as an underwriter also based in London.
Mr. Belsey is a qualified English solicitor and brings with him more than 10 years of transactional legal experience.

Brian Benjamin, Global Head of M&A, said: “Today, global M&A activity is on the increase and the demand for insurance coverage is also on the rise.

“We are excited to have this team in place in London and welcome the deep transactional experience that Simon and Richard bring to our expanding platform.”