Daily Willis Review- October 26,2017

Global reinsurance market remains strongly capitalized: A.M. Best
Despite challenging conditions, the global reinsurance market remains strongly capitalized, based on an aggregate basis, A.M. Best has reported.

The ratings agency used its updated Best’s Credit Rating Methodology (BCRM) and its new building block approach as part of its analysis.

It found that approximately two-thirds of the rated population has the strongest category of balance sheet strength and that no companies fell below the strong category.

This is mostly due to the reinsurers’ surplus growth, which stems from generating positive cash flows and loss reserve redundancies, managing high quality investment portfolios, and maintaining appropriate reinsurance structures to protect surplus, the report said.

Steven M. Chirico, a Director in A.M. Best’s property/casualty ratings division, said: “The analysis of the global reinsurance market using the building-block approach accentuates the value of the approach in that is based on the convergence of multiple analytical assessments that result in a published rating.”

Munich Re records Q3 losses of $3.78 billion
Munich Re has reported overall losses of €3.2 billion ($3.78 billion) for Q3 from hurricanes Harvey, Irma and Maria and expenditures from other natural catastrophes.

The three hurricanes will make up the bulk of the losses for the quarter, with the loss expected to be €2.7 billion ($3.19 billion). Other natural catastrophe losses included those from the Mexico earthquakes.

The global reinsurer will post a loss of €1.4 billion ($1.65 billion) for the period from July to September 2017 and now projects a small profit for the full year 2017.

Jörg Schneider, Chief Financial Officer of Munich Re, said: “High losses from severe natural catastrophes are part and parcel of our business; that is why we are here.

“Our capital base remains very strong. We will continue to offer our clients full reinsurance capacity.

“Moreover, Munich Re has enough capital to take advantage of the opportunities this exceptional situation provides in terms of profitable growth.”

Beazley reports rise in data breaches due to social engineering
A big rise in social engineering attacks – scams involving deception – are a growing cause of data breaches, a report by insurer Beazley has found.

It’s third quarter 2017 Breach Insights report found fraudsters use social engineering attacks to prey on employees’ role within their companies to orchestrate disclosure of information or the wire transfer of money to criminals.

These can occur in the months leading to tax filing deadlines when fraudsters target emails to a specific company employee to forward copies of all the company’s W-2 forms, resulting in criminals using false tax returns to claim refunds.
Criminals also impersonate a trusted party such as a company executive or payment system vendor to cause a fraudulent payment.

In Q1 to Q3 of 2016, social engineering attacks accounted for 1% of incidents handled by Beazley Breach Response (BBR) Services, but this increased to 9% of the 2,013 incidents reported to BBR services for the same time period in 2017.

For the first nine months of 2017, the predominant cause of data breach remained hacking and malware, accounting for 34% of the total reported. This included cyber extortion, which made up 30% of the total 34% recorded.

PERILS posts final loss estimate for Central Italian earthquake of $245.8 million
Zurich-based PERILS has announced a final loss estimate of €208 million ($245.8 million) for the earthquakes that impacted Central Italy between October 26 and 30 2016.

This is a revised estimate from an earlier assessment which was issued on January 26, 2017, three months after the event, that put the cost at €125 million ($147.7 million).

The series of earthquakes impacted the regions of Lazio, Marche and Umbria with moment magnitudes of Mw 5.4, 5.9 and 6.5, according to the Italian Institute of Geophysics and Volcanology.

Based on the PERILS’ loss estimates and the Italian Civil Protection Agency, which estimates total economic losses at €16.5 billion ($19.5 billion), only 1.3% of the overall economic loss was insured.

Daily Willis Review- October 25, 2017

Increase in purchasing of reinsurance possible at January renewals: Willis Re
Cedants may increase their purchasing of reinsurance cover during January 1 renewals, according to Alkis Tsimaratos, Managing Director, Head of EMEA, West/South, Willis Re.

He made the comments in an Insurance Insider feature on reinsurance buying habits published during the Baden-Baden reinsurance meeting.

Participants were asked if they thought additional reinsurance cover will be purchased in January renewals as a result of the current competitive rates.

“Potentially yes, but not due to competitiveness of rates,” he said. “The current Q3 U.S. loss environment and historical loss environment in Europe is advocating for more aggregate covers or second retention sublayer ones.

“However, for most, securing the existing coverages at acceptable terms for all parties is probably the main focus that we are seeing at the moment.”

When asked if he thought the trend of centralized reinsurance spending was coming to a halt or reversing, he said: “We don’t think so. More than coming to a halt or reversing, the centralization strategies are maturing.

“As companies are getting a better grasp on their risk appetites and requirements, the use of internal vehicles is being deployed with more business acumen – alongside the financial rationale that they absolutely provide.

“Hence, groups are becoming more tactical at using intra-group vs extra-group, with better-informed decisions and trade-offs between open market use, local or global, and own retention.”

Lloyd’s lowers claims estimates for Harvey and Irma by 10%
Lloyd’s has announced it has revised its net claims estimate for Windstorms Harvey and Irma to a combined $3.9 billion, in addition to a preliminary claims estimate of $0.9 billion for Windstorm Maria.

It also reported that the market has so fair paid claims of almost $900 million for Harvey, Irma and Maria.

Lloyd’s Performance Management Director Jon Hancock said that as more information became available, the market was relying less on preliminary estimates.

“The claims estimate for Harvey and Irma has reduced approximately 10% from the precautionary figure we issued with our half year results last month,” he said.

“We are experiencing one of the most active hurricane seasons this century and I am very proud of the way that the Lloyd’s market is responding to these events.

“Focus remains on getting policyholders back up and running, and we are paying claims quickly despite some very difficult conditions in the affected areas.

“Our ability to pay claims quickly even in difficult circumstance is a clear example of the valuable role that our sector plays in society.”

Sompo announces insurance alliances with two of Africa’s largest financial groups
Bermuda-based Sompo International Holdings and its subsidiary Sompo Holdings have announced a strategic partnership to expand their presence in Africa.

Sompo International will form alliances with Sanlam Limited, the largest financial group in South Africa, and SAHAM Finances, which is the biggest pan-African insurance group, excluding South Africa.

It said the partnership, which will be executed by Sompo Japan Nipponkoa Insurance (SJNK), will give it access to new markets by leveraging the experience and existing footprint of Sanlam and SAHAM.

SJNK said that since establishing an office in Johannesburg, South Africa, in 2014, it had expanded its customer support and insurance market research system throughout the continent, and that the partnership will allow it to support existing Japanese customers in Africa, as well as expanding distribution of new products to local customers.

Junichi Tanaka, Managing Executive Officer of Sompo Holdings and SJNK, said: “This alliance allows us to build Sompo’s reputation as a strong player in Africa by expanding our support to Japanese customers entering the continent.

“Through our new partners we will now have access to 27 African countries in total, more than double the presence of our peers across the continent, providing us with the largest scope of coverage in Africa.”

Karen Clark & Company releases Severe Convective Storm Model
Karen Clark & Company (KCC) has launched version 1.0 of its Severe Convective Storm (SCS) Reference Model.

It said that over the last several years in the U.S., annual SCS losses have consistently exceeded $10 billion, and the latest KCC SCS Reference Model shows that expected average annual aggregate losses are now approaching $20 billion.

The new model uses physical modeling methodology and high resolution atmospheric data to more accurately capture the dynamics of this peril.

It is a multi-peril model and simulates the hazards of hail versus tornadoes and straight-line winds, the company said.

Karen Clark, KCC President and Chief Executive Officer, said: “There has been significant industry demand for a more credible and accurate SCS model.

“While this peril does not pose a solvency threat to most insurers, claims from severe thunderstorms eat away at earnings each year, and our clients want to make sure their rates reflect the most up-to-date science and their actual loss experience.

“We’re pleased to release this new model that can accurately reproduce SCS losses.”

Daily Willis Review October 24,2017

Q3 losses will be a capital event for many reinsurers, says Willis Re’s Dirk Spenner
Third quarter 2017 catastrophe losses will turn into a capital event for many reinsurers, according to Willis Re Head of EMEA North/East Dirk Spenner.

“Whilst most reinsurers produced satisfactory returns on equity and high dividend levels at the end of Q2 2017, the third quarter losses will eliminate much of these earnings and for many will turn into a capital event to varying degrees,” he told an Insurance Insider round table published during the Baden-Baden reinsurance meeting.

“We would expect reinsurer renewal strategies to be influenced by their relative share of the losses – being over or underweight, their dependence on retrocession, their ability to purchase retro or for the ILS markets to reload capital (albeit at higher cost), and their ability to demonstrate a sustainable business model to their investors.”

The round table also discussed the impact that losses from Hurricanes Harvey, Irma and Maria may have on January 1 renewals in Europe.

Mr. Spenner said that in previous large loss years in 2005, 2011 and 2012 there had been single region rate adjustments for loss-affected regions.

He added: “We would anticipate that reinsurers would want to spread the burden of rate adjustments at 1 January as far as possible but would expect that impact on rates will be focused on loss-affected regions and accounts.

Steve Arora named CEO of AXIS Re
AXIS Capital Holdings has announced that Steve Arora has been named as Chief Executive Officer of AXIS Re.

He joins from Swiss Re, where he spent 18 years, most recently as Head of Casualty and a member of the Reinsurance Executive Committee.

Based in Zurich, he will lead AXIS’s $2.2 billion reinsurance business and will become a member of the Executive Committee, reporting to President and CEO Albert Benchimol.

“Steve is a remarkable talent and an accomplished and widely respected executive who stands at the forefront of an emerging generation of senior leaders in our profession,” said Mr. Benchimol.

“He is perfectly suited to be CEO of AXIS Re, bringing breadth and depth of experience on a global scale and a client-centric mentality that matches our culture.”

The company also announced that AXIS Re Interim CEO Jan Ekberg will resume his previous role as President and Chief Underwriting Officer of AXIS Re Europe when Mr. Arora takes up his new role in January 2018.

QIC reports 16% growth in premiums
Qatar Insurance Company (QIC) has reported a 16% growth in gross written premiums (GWP) to $2.46 billion in the first nine months of 2017.

QIC reported a net profit of $84 million for the first nine months of the year compared to $195 million for the same period last year.

Combined GWP for the Bermuda-domiciled reinsurance subsidiary Qatar Re, London-headquartered specialty insurer Antares, and Malta-based subsidiary QIC Europe Limited, grew by 25%.

The company said 2017 would be one of the costliest years on record for natural catastrophes. In addition, the Ogden rate adjustment had impacted UK re/insurers and the global market continued to be soft.

QIC President and Chief Executive Officer Khalifa Abdulla Turki Al Subaey said: “The financial results for the first nine months of 2017 demonstrate QIC Group’s resilience under conditions of severe market stress.

“In view of our significant global footprint and exposure as well as the ongoing diplomatic and economic concerns in the Gulf region, our financial performance is robust.

“The Group’s well-diversified franchise has proven able to tackle the challenges of the marketplace. The adverse impact of these events will be limited to our earnings, with QIC Group’s strong capital position remaining unscathed.”

Fitch maintains negative outlook on Lloyd’s
Fitch Ratings has maintained its negative outlook on the Lloyd’s of London market, Reinsurance News has reported.

The report quoted Fitch as saying that while the Mexican earthquakes, California wildfires and Hurricanes Harvey, Irma and Maria are within expected tolerances, they “place some pressure on Lloyd’s capital”.

It said that following a review of recent catastrophes, Fitch has affirmed Lloyd’s ratings, but the outlook remains negative.

While the capital is pressured, Fitch expects Lloyd’s to be able to recapitalize, but third quarter 2017 losses place an additional pressure on the outlook for the re/insurance market.

Fitch noted that Lloyd’s capitalization will “likely deteriorate to a level that is not in line with the current rating as a result of 3Q17 catastrophe losses,” according to the report.

Fitch expects this to be temporary and that Lloyd’s will restore its capitalization rates to a level commensurate with the rating as part of the ‘coming into line’ process that closes before end-2017.

EMEA pricing will be influenced by U.S. hurricane losses: Swiss Re

Heavy losses from Hurricanes Harvey, Irma and Maria in the United States will have an influence on pricing in Europe, the Middle East and Africa (EMEA), according to Swiss Re.

Intelligent Insurer quoted Jean-Jacques Henchoz, Swiss Re’s Chief Executive of Reinsurance, as saying that while the extent of U.S. hurricane losses was still developing, these are expected to have an impact on the global dynamics of the reinsurance market.

“There will be a spillover and I don’t believe any region will be spared what is happening globally,” it quoted him as saying.

“Bear in mind there have also been many other loss events, although not on the same scale in Asia and in Latin America, and the market will react on a global basis.

“It does not seem at this stage that this will be a capital event for the industry, although some players could be hit harder than others. But I’m convinced it will influence pricing for reinsurers.”

Swiss Re estimates $3.6 billion losses from hurricanes and Mexico earthquakes

Swiss Re has estimated that its losses from Hurricanes Irma, Harvey and Maria, and the Mexico earthquakes will be $3.6 billion, net of retrocession and before tax.

It said total market losses for the catastrophes are estimated to be $95 billion, and its share of pay-outs for the two Mexico earthquakes will be $175 million.

Swiss Re Group Chief Executive Officer Christian Mumenthaler, said: “The most recent natural catastrophes have been extremely powerful and we extend our sympathies to all those affected by these events.

“Through our long-standing and close client relationships, combined with our experience in complex claims handling after large natural catastrophes, we can support our clients when they need us most. It is during these times that we demonstrate our differentiated value proposition and show the value of insurance and reinsurance to society.”

Chief Financial Officer David Cole said: “Swiss Re maintains a very strong capital position and high financial flexibility to support our clients’ needs, respond to market developments and execute on our capital management priorities.”

Swiss Re sees $136 billion in insured losses from disasters in 2017

(Reuters) – Swiss Re Ltd. estimates that global insured losses from catastrophes in 2017 will hit $136 billion, the third-highest on record for the sector, with the United States hardest hit, it said on Wednesday.

Total economic losses from natural and man-made disasters in 2017 are estimated to be $306 billion, up from $188 billion in 2016, Swiss Re said in a statement, quoting preliminary data.

“The accumulation of economic and insured losses ramped up in the second half of the year, due primarily to the three hurricanes – Harvey, Irma and Maria – that hit the U.S. and the Caribbean, and wildfires in California,” Swiss Re said.

More than 11,000 people had died or gone missing in disaster events this year, the world’s second-biggest reinsurer said. ‍​

Based on 2017 values, the costliest year for insured catastrophe losses was 2011, when Japan and New Zealand were hit by earthquakes and Thailand suffered severe flooding, and the second most costly was 2005, when hurricanes Katrina, Rita and Wilma hit the U.S. Gulf Coast, Florida and the southeast.


Jamaica to review disaster insurance fund with CCRIF

Published:Wednesday | September 27, 2017 | 9:22 PM

  •  Shaw made the announcement while responding to questions in Parliament yesterday.  This after the island was unable to get a drawdown from the Fund because the country’s insurance policy did not cover damage associated with excess flooding.  In April and again in May, heavy rains caused flooding, landslides and breakaways across several parishes.
  • The damage was estimated at more than $4 billion.
  • Finance Minister Audley Shaw
  • Meanwhile, the finance minister disclosed that the allocations in the budget for natural disasters have already been depleted due to damage sustained from heavy rains that lashed the island earlier this year.
  • More than a year ago Jamaica upgraded its CCRIF policy after the country sustained massive flooding following the passage of tropical storm Erika in 2015.
  • Citing the damage sustained by several Eastern Caribbean countries in the aftermath of two powerful hurricanes in the space of a week, Shaw said there is a need for Jamaica to enhance its insurance coverage.
  • Finance Minister Audley Shaw says the government will be reviewing the insurance policy with the Caribbean Catastrophe Insurance Fund (CCRIF) given the severity and frequency of natural disasters affecting the region.

Lloyd’s of London reports £1.22bn profit – but it hasn’t factored in Hurricanes Harvey, Irma and Maria yet

Caitlin Morrison

Lloyd’s of London has announced a 16 per cent dip in profit for the first half of 2017, and the group said it has not yet taken stock of the effects of recent devastating hurricanes in the Caribbean and United States.

However, chief executive Inga Beale told Reuters that net losses from the storms could reach $4.5bn (£3.4bn).

“There was limited major claim activity in the first half. There’s a very different second half emerging – it’s not only the hurricanes but we’ve got the Mexican earthquakes, floods in Asia, typhoons in Asia,” she said.

“The hurricane season is still in play, earthquakes can happen at any time.”

The insurance market reported pre-tax profit of £1.22bn, compared with £1.46bn this time last year.

Gross written premiums increased to £18.9bn, and the combined ratio improved to 96.9 per cent, from 98 per cent.

“These results highlight the continued strength of the Lloyd’s market, but they do reflect the challenging conditions that have shaped the sector over recent years,” said Beale.

“Our focus on maintaining a strong underwriting discipline and concentrating on profitable lines of business is showing signs of success, but we cannot allow that focus to waver if we are to continue to ensure the Lloyd’s platform is the most attractive option for customers.

“Whilst these results do not cover the current hurricane season in the Caribbean and United States, the market is assessing claims and starting to make payments that will help local communities and businesses get back on their feet as quickly as possible. It is our ability to respond quickly and effectively in times like these that differentiates the Lloyd’s market and is ultimately what we are here to do.”

Beale previously said insurers could rack up losses of $200bn (£150m) due to the recent storms on the other side of the Atlantic.



Lloyd’s of London insurer Beazley hit by $275m bill for Harvey, Irma, Maria and earthquakes

Oliver Gill

One of Lloyd’s of London’s best-known insurers today revealed a series of natural catastrophes are to cost the firm up to $275m (£206m).

London-listed Beazley estimated the fall-out of hurricanes Harvey, Irma and Maria alongside earthquakes in Mexico would reduce bottom line earnings by $150m.

However, it added: “Currently there is significant uncertainty surrounding the cost of these events.”

Further details will be provided in Beazley‘s third-quarter trading update in November.

Earlier this week Lloyd’s of London boss Inga Beale said the summer storms that lashed the Caribbean and United States would lead to net losses of $4.5bn for the corporation.

Lloyd’s profits dipped 16 per cent to £1.2bn for the first half of 2017, though the figures did not take into account the impact of recent natural catastrophes.

Insurers are hoping that 2017’s catastrophes will reverse a trend of lowering insurance pricing for natural disasters.

Lloyd’s firms, which are one of the world’s largest underwriters of catastrophe policies, are dependent on the occurrence of natural disasters to prop up demand for such policies. Analysts have predicted that a summer of storms will at least halt the decline in premiums and could see them return to more profitable levels.

October 3, 2017

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