News in brief
Commercial insurance rates falling everywhere
Commercial insurance rates declined globally in all regions and most lines of business in the third quarter of 2015, the tenth consecutive quarter of global rate decreases, according to Marsh’s latest Global Insurance Market Quarterly Briefing.
Renewal rates decreased in all regions in the third quarter, contributing to a 4.8% global composite decline. The UK and Asia-Pacific regions posted the largest composite rate decreases, followed by Continental Europe, Latin America, and the US, respectively, said Marsh.
Ample capacity and a low level of catastrophic loss activity accounted for healthy underwriting results and satisfactory combined ratios for insurers.
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Among the major coverage lines, property insurance showed the largest rate declines, with decreases averaging more than 5%. Rate decreases for property insurance, on average, occurred across all regions in the third quarter, led by Asia-Pacific, followed by Continental Europe and the US, with Latin America and the UK showing the smallest decreases regionally.
Casualty insurance rates, on average, decreased less than property rates, but still showed average declines consistently from 2% to 4% across all major regions, led by Asia-Pacific and the UK, said Marsh. Financial and professional lines of business presented mixed rate results during the third quarter.
The global composite index for financial products decreased 5% but the US and Latin America both posted small increases. Marsh said this was largely a consequence of cyber insurance, which in the US experienced average rate increases of more than 15% in the third quarter. Financial and professional rates declined steadily in other regions, particularly in the UK.
Cyber insurance stood out in the third quarter as the only line with consistent, large rate increases, averaging more than 15% in the US. The average cyber insurance limit purchased grew in the third quarter, piercing the $20m level for the first time, according to data gathered by Marsh. Limits purchased were up more than 10%, on average, in the third quarter compared to the same period last year, the Briefing noted.
FDI in Indian insurance sector more than doubles
Foreign direct investment in the Indian insurance sector more than doubled to $341.43m during the period from March 2015 to September 2015, according to the Indian Commerce and Industry Minister Nirmala Sitharaman.
According to a report in India’s First Post, the Minister also said that during the period March 2014 to September 2014, the Indian insurance sector had received foreign direct investment worth $135.30m. The Minister made the comments in a written reply to the Rajya Sabha, the upper house of the Parliament of India, First Post reported.
CEO of Zurich stands down
Martin Senn, CEO of Zurich has decided to step down by mutual agreement with the board of directors after 10 years with Zurich, six of which as CEO. He will leave the company at the end of the year. Tom de Swaan, who has been a member of the board since 2006 and was named its Chairman in 2013, has been appointed interim CEO with immediate effect. Zurich said the process to appoint Mr Senn’s successor is underway, and added that his departure will have no impact on Zurich’s strategic focus or its financial targets.
Martin Senn said: “After ten very intense years with Zurich, I have decided to step down as CEO and to make way for new leadership. Zurich is a profitable, well capitalised company with outstanding employees. It enjoys an excellent reputation with customers around the world and sustainably delivers attractive dividends to shareholders. There have been some setbacks in recent months, but I am convinced that we have put in place the right measures for Zurich to reach its targets. I will remain closely tied to the company and am proud of what we have achieved together over the years.”
SII standard formula could include sovereign risk
Insurers with large Italian operations would probably have the greatest increase in capital charges if European regulators were to remove the zero risk-weighting for sovereign debt under Solvency II’s standard formula, according to Fitch Ratings.
EIOPA has already said insurers using internal models to calculate capital should take account of sovereign risks. But in a recent speech, EIOPA Chairman Gabriel Bernardino said this could be extended to cover all insurers by including sovereign risk in the standard formula.
“We believe any incorporation of sovereign risk into the standard formula would therefore take a long time. But to prevent regulatory arbitrage between use of internal models and the standard formula, regulators might consider imposing add-ons for standard formula users in the meantime where they believe sovereign risk is material,” said Fitch.
Among major European insurers, Generali, Aviva and Allianz have the most significant Italian exposure, although they are likely to use internal models rather than the standard formula, Fitch explained.
Asbestos and environmental losses down in the US
AM Best’s annual analysis of the asbestos and environmental (A&E) industry concluded that incurred losses for US A&E exposures declined 33% in 2014. These incurred losses were driven by a 38% drop in asbestos losses and a 15% decrease in environmental losses. Additionally, AM Best has estimated net asbestos losses in the US property/casualty industry to be $85bn.
“Incurred losses dipped significantly in 2014, which is the first decrease we have seen in several years,” AM Best Assistant Vice President Gerard Altonji said on AM Best TV. “As paid losses continue to rise, there doesn’t seem to be an end to asbestos litigation, since such a large number of people have been exposed and are living longer with the illness.”
Mr Altonji added that the potential for large settlements remains extremely probable, as medical care expenses that are related to taking care of people directly or indirectly exposed are very costly.
Chinese insurer profits double at Q3
China’s insurance companies saw their profits rise an estimated 95% year on year to reach CNY244bn ($38.4bn) in the first three quarters of 2015, the China Insurance Regulatory Commission (CIRC) said.
The industry’s revenues from premiums grew 19.5% to reach CNY1.9tn during the period, while total industry assets stood at CNY 11.6tn, up 14% over the beginning of the year, the Xinhua News Agency reported. Life insurance expanded more than any other category with a 21.3% growth rate. Foreign insurance companies posted a strong performance, the CIRC said, reporting premium revenue growth of 27.3% to reach CNY85.8bn. Their business accounted for 4.5% of China’s insurance market, up 0.27 percentage points.
Moody’s affirms Argentine insurers
Moody’s Investors Service’s has affirmed the global local currency and national scale insurance financial strength (IFS) ratings of 14 insurers in Argentina. Moody’s changed the outlook of six of the insurers from stable to positive, while the outlook of the other eight insurers remains stable. The action follows Moody’s recently announced outlook change to positive, from stable, of Argentina’s local-currency and foreign-currency Caa1 sovereign bond ratings.
The six insurers whose outlooks have been changed to positive from stable are Caja de Seguros, La Segunda ART, La Segunda Compañía de Seguros de Personas, La Segunda Coop. Ltda. de Seguros Generales, Provincia Seguros, and San Cristóbal Sociedad Mutual de Seguros Generales.
Global commercial non-life insurance premiums total $728.6bn
The value of global commercial non-life (P&C) insurance premiums in 2014 was $728.6bn, according to research from Finaccord. The market has increased at a nominal compound annual growth rate of 5.1% since 2010, when premiums totalled $596.3bn. The largest single segment of the global market was commercial motor (28.9% of the total).
“At a respective $266.0bn, $63.1bn and $33.7bn in gross written premiums, the US, China and Germany were the world’s largest commercial lines markets in 2014,” said David Parry, Managing Consultant at Finaccord. “Meanwhile, in nominal terms, and across the 40 major markets analysed in depth by Finaccord, the markets that grew most rapidly between 2010 and 2014 were those of Argentina, Turkey and Thailand with compound annual growth rates of 34.6%, 18.3% and 16.0%, respectively. However, once national inflation rates have been accounted for, the fastest-growing markets were those of Thailand, Turkey and the Philippines with respective real compound annual growth rates of 13.7%, 10.0% and 9.5%.”
Finaccord’s research indicates that the global commercial non-life insurance market is likely to increase at slightly faster nominal and real compound annual growth rates between 2014 and 2018 than it did between 2010 and 2014 with the result that it will reach a value of around $895.1bn by 2018, which converts to $824.5bn when deflated in line with forecast inflation rates.
“Worldwide, we expect commercial liability insurance premiums to increase at more than three times the rate of commercial motor, commercial property and commercial MAT premiums through to 2018,” said Mr Parry. “This will essentially be a result of liability insurance growth in the US, which constitutes more than half of the global commercial liability insurance market. While the commercial motor and property insurance markets are stable in the US, liability premiums continue to grow strongly, especially for workers’ accident insurance.”
AXA increases stake in Indian joint ventures
AXA has increased its stake from 26% to 49% in its life and general insurance joint-ventures in India, Bharti AXA Life Insurance Co and Bharti AXA General Insurance Co. AXA said this operation, “further strengthens the existing partnership between Bharti Enterprises and AXA in India, and demonstrates the agility and commitment of both parties in further expanding their operations in the country.”
In fiscal year 2014-20151, Bharti AXA GI recorded INR14.6bn (€214m) of gross direct premiums, achieving a growth of 18% on average over the past three years.
“This transaction confirms AXA’s long-term commitment towards the Indian insurance market and is another step in our development in Asia. India is one of the most dynamic insurance markets in the world and we remain fully confident in the capacity of our joint-ventures to continue building upon and developing our operations as an innovative and customer-focused insurer to offer services and products of high quality to our customers,” said Jean-Louis Laurent Josi, CEO of AXA Asia.
Hiscox establishes new product recall team
Specialist insurer Hiscox has established a new product recall team within its London Market business with four new hires. Heading up the team is David Burke, who comes to Hiscox from Catlin where he focused on writing niche specialty lines. He is joined by product recall underwriters Ian Bailey, Andrew Kyle and John Naughton, also previously at Catlin.
David Slevin, Divisional Head of Specialty within Hiscox London Market, said: “Establishing a product recall offering within Hiscox London Market is an exciting step for us. Product recall is a huge area and the team will focus on a range of recall risks across industries including food and drink, automotive, restaurants, pharmaceutical and consumer durables.”
The team will initially focus on offering automotive component recall and food and drink product recall cover. The scope of coverage ranges from recall costs and crisis consultancy to product replacement/reinstallation, business interruption, brand rehabilitation and third party financial loss.
Indonesian insurance sector to benefit from GDP growth
Growth in the insurance sector in Indonesia is expected to stabilise in 2016 as economic growth is likely to recover, according to Fitch Ratings. The agency estimates that Indonesian real GDP growth will improve to 5.3% in 2016 and 5.5% in 2017 from 4.8% in 2015. This follows the recent wave of reforms introduced by the government to improve business sentiment and strengthen the country’s financial fundamentals.
Fitch said that the rating outlook for Indonesia’s non-life insurance sectors in 2016 is stable, underpinned by steady demand, manageable investment risks among insurers, and adequate buffers against catastrophe losses through reinsurance coverage.
Fitch reckons that the non-life insurance sector is supported by rising affluence and disposable incomes among the population, economic recovery and protection from reinsurance coverage.
Initiatives taken by the regulator to optimise local reinsurers’ capacity could widen the sector’s operating scale and raise the level of competitiveness among domestic players. “Nonetheless, managing risk accumulation and enhancing risk management are key to ensure maintenance of healthy underwriting margin among reinsurers,” Fitch added.
Myanmar’s insurance market growth spurt
Myanmar’s insurance market has grown about 40% since it was opened up two years ago, the Myanmar Times has reported. In 2013, state-owned Myanmar Insurance relinquished its monopoly to allow a private market to emerge, with the participation of foreign companies, 21 of which have since opened representative offices here.
“Foreign companies have been opening one new representative office a month. That shows they trust the Myanmar insurance market,” said deputy finance minister U Maung Maung Thein, speaking at the launch of Marsh Insurance’s representative office in Yangon. “Although they are not yet allowed to operate, their presence supports growth in a market in which they will one day be allowed to compete. They are training staff and sharing experience that will build and develop Myanmar’s insurance market.”
The Myanmar Times said that according to the director general of Myanmar Insurance, U Aye Min Thein, foreign companies must share 10% of proceeds if they enter into a partnership with Myanmar Insurance. He was quoted as saying: “This cooperation supports state-owned Myanmar Insurance. We consider the 10% payment to be an acceptable amount for a partnership, and the companies can gain more trust by cooperating with the state-owned insurer.”
Lloyd’s upbeat on emerging Asia prospects
Lloyd’s intends to capitalise on the rapid development of emerging Asia to boost growth of its specialist insurance business. Chief executive Inga Beale told The Straits Times that growth in gross written premiums in China, India, and the ASEAN region is outpacing economic growth.
Ms Beale said that economic growth in the region has fuelled demand for insuring against risks to construction projects, as well as infrastructure facilities like ports and rail, with countries are also seeking cover against aviation and terrorism risks.
As markets further urbanise, demand for insurance against more intangible risks like cyber and reputation risk will rise, she told the paper. She added: “Lloyd’s wants to be part of those new growing markets, and that means we have to have more of a physical presence and have underwriters on site.”
Aon Benfield sees opportunities in Colombia
The Colombian insurance market continues to offer ample growth opportunities according to Sergio Rivera Jiménez, CEO of Aon Benfield Colombia, speaking to BNamericas. He said that a very low level of insurance penetration and a large pipeline of infrastructure projects bode very well for future insurance growth in Colombia. Inflows of foreign direct investment and an expanding middle class with stronger purchasing power will also help to drive insurance demand in the country, he said.
He also pointed to the government’s highway concession program, known as 4G, membership of the Pacific Alliance trading bloc, and a possible peace agreement with the FARC rebel group, as factors that could indirectly benefit the insurance industry in the coming years through faster economic growth.
