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Colombian insurance industry thriving, says AM Best The insurance industry in Colombia is thriving, with premium growth and improved regulation, at a time when the economy is growing and the market is about to be opened to non-admitted insurers, according to a report from A.M. Best Co. "Insurance companies operating in Colombia are benefiting from a vibrant, growing economy, the country's commitment to building infrastructure and helping its industry access global markets, and regulation that is improving and is aimed at responsible growth of this important Latin American market, said Best. The report, 'Regulation Tightens as Colombia's Insurance Market Grows and Matures', found that the Colombian insurance industry's gross premium increased by 15% to COP14.2 trillion (USD7.3 billion) in 2011, and is projected to reach COP20.3 trillion in 2016. Nearly half of the non-life market's premium is concentrated among the top five writers.hideBest pointed to regulatory efforts by the Superintendencia Financiera de Colombia (SFC) that have resulted in enhanced risk-based capital requirements to align its approach with international standards. In addition to underwriting risks, insurers' capital models will address asset exposure in the coming year, while non-life writers also must factor in market risks. The regulatory push coincides with next year's opening of Colombia's insurance market to non-admitted writers, said Best. Broker consolidation in Australia, Canada and South Africa A report has suggested that a trend towards more consolidation among commercial non-life insurance brokers in Australia, Canada and South Africa is now underway. The report from market research consultancy Finaccord, said that the levels of market concentration among commercial non-life insurance brokers in Australia, Canada and South Africa are still lower than in most European markets. Collectively, the markets for commercial non-life insurance broking in the three markets studied by Finaccord are estimated to be worth nearly USD5 billion in terms of broking revenues in 2012. The largest of these three markets is Canada where brokers' revenues from commercial non-life insurance are estimated at USD2.42 billion in 2012, followed by Australiawith USD2.01 billion. While they are much lower in South Africa, at USD528 million, brokers there recorded the highest nominal compound annual growth rate of 6.8% between 2008 and 2012, compared to 3.7% in Canada and 3.3% in Australia. However, when adjusting for inflation, commercial broking revenues achieved the highest growth rate in Canada at 1.8%, ahead of South Africa at 1.2% while in Australia, revenues grew by a compound annual growth rate of only 0.2% in real terms. "In all three markets, brokers have a very strong presence in the intermediation of commercial non-life insurance", said Bernd Bergmann, a Consultant at Finaccord. "Historically, there has been only a moderate degree of competition from agents in commercial lines, and online and other direct providers have so far not made much progress in undermining the dominance of brokers among business customers. But while brokers can defend their share, there is little room for them to grow further collectively as a distribution channel. Combined with the fact that growth in the underlying market for commercial insurance has been mostly unimpressive since 2008, the most obvious way for individual brokers to grow in these three markets is through mergers and acquisitions." Chartis Europe changes name back to AIG Europe Chartis Europe has changed its name to AIG Europe, as from 3 December, 2012. Other than the change in name, this will not affect its clients or policyholders in any way, the company said. Nor does it impact the terms and conditions of its insurance policies or its policyholders' ability to claim. And AIG added that the same teams will continue to provide underwriting and claims handling services. Insurers call for 'minimum harmonisation' approach to nat cats Insurance Europe has warned that a 'one size fits all' approach to EU natural catastrophes is inappropriate, due to national differences in risk exposures, public awareness of potential risks and the extent of government intervention and adaptation measures. This is one of the key points that Insurance Europe submitted to the European Commission ahead of the Green Paper on natural catastrophes that is expected early next year. The Brussels based insurance association stressed the need to increase knowledge about nat cat exposure in EU member states. It also stressed the need for cooperation between governments, public bodies and private companies to prepare for, and minimise, the impact of catastrophes without damaging current insurance systems. Should the EC propose any legislative action, Insurance Europe advocates a 'minimum harmonisation' approach that would retain existing national solutions that function well. Time running out for flood agreement, says S&P The UK non-life insurance industry is facing a number of significant regulatory developments, according to Standard & Poor's Ratings Services. In particular, S&P said a new agreement is needed to determine the basis on which flood cover is provided beyond June 2013. In 2008, insurance companies signed a statement of principles with the UK government under which they agreed to offer flood cover in areas of high risk of flooding in exchange for increased government spending on flood defences, but the agreement expires in June 2013. Although all parties seem enthusiastic about developing a replacement regime, no agreement is in place, or seems to be even close to being finalized. S&P said, "Should no agreement be reached by June 2013, in theory the statement of principles would expire and insurers would be free to set more realistic, market-driven premiums for homes in high-risk areas. We consider this unlikely, however, as it would be politically unacceptable." Three proposals have been presented, one by the ABI and the others by leading insurance brokers. Broker Marsh has suggested 'Project Noah', a reinsurance-based project to transfer all UK flood risk to a panel of major global reinsurers. Insurers would offer similar buildings cover policies to those now available, but the flood risk portion would be reinsured through the Project Noah panel. Support from insurers for this suggestion appears to be limited, however, said S&P. The ABI and Aon Benfield have each proposed charging a levy on all UK buildings policies. These levies would go into a pool that would be used to pay flood claims. Small flood-related claims would be paid directly, and the pool would purchase reinsurance to cover flood claims arising from the most at-risk properties. S&P said that both pool-based proposals suggest that the government would cover losses from events more serious than one-in-100 years. "In our view, a pool system seems most politically and commercially acceptable," said S&P. "Any solution would, however, have to be sufficiently robust to withstand a series of bad flood years. The ABI suggested a levy of £10 per policy. We expect that this would be inadequate. A pool funded on this basis would have to build up for several years to be able to meet claims arising from the summer 2012 flood, which added only 2%-3% to the household sector combined ratio. In November 2012, the government indicated that it would not be prepared to provide a loan to the pool should it receive large claims in its early years." European environmental fund opposed by insurers and buyers Insurers and risk managers in Europe have taken issue with a proposal from the European Economic and Social Committee to create a fund to cover environmental liability losses from industrial accidents. The proposal comes in the form of a BIO Intelligence Service (BioIS) study to explore the feasibility of creating a fund or a resource pooling scheme (or multiple funds/schemes for different industrial sectors) to address liabilities for traditional damage and environmental damage resulting from major industrial accidents involving pollution, with a focus on environmental damage. At a workshop in Brussels to present preliminary findings Olivér Várhelyi, Ambassador, Deputy Permanent Representative of Hungary to the EU made the case for a European Industrial Disaster Risk Sharing Facility which would be funded by a mandatory premium of 0.2% of annual net sales revenue payable by industrial sectors involved in major disasters. The facility would have an intervention potential of around EUR4-5bn per year for accident damages beyond a threshold of EUR100m. He said that in order to ensure immediate access to funds, monies up to EUR100m would be provided in the form of loans to be repaid, which would preserve the polluter-pays principle and helps avoid bankruptcies. However, Insurance Europe said that, in principle, it does not find that there exists a need to introduce an industrial disaster fund at EU level. "The BioIS Study does not, at this stage, demonstrate that the financial security instruments currently in place for the liabilities of industrial disasters (in particular, insurance) are insufficient, said Insurance Europe. "The need for new financial instruments to cover industrial accidents should only be considered if the presently available financial instruments (such as insurance) are determined to not be available, affordable or efficient." Ferma is also opposed to the proposal. Ferma executive manager Florence Bindelle told the Brussels workshop that Ferma believes that there is sufficient insurance coverage available for sudden and accidental and gradual environmental pollution. She added that Ferma disagrees with making any coverage mandatory either through a fund, pool or any other insurance scheme.

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