Insurance Jottings

Lloyd’s to tackle emerging risks with new £53 million innovation facility backed by 12 carriers

Lloyd’s has launched a new initiative with £53 million capacity to expedite product development for new and emerging risks in the re/insurance marketplace. The move is a part of John Neal’s transformation strategy to prepare the market for the future.

 

A group of Lloyd’s underwriters from Tokio Marine Kiln, Beazley, MS Amlin, Talbot, Liberty Specialty Markets, Hiscox, Ascot, Chubb, Chaucer, Brit, Antares and Apollo have formed a product innovation facility which will develop new types of insurance for complex and non-standard risks, including intangible assets and supply chain risks, or mishaps caused by artificial intelligence.

 

The launch is aligned with ‘The Future at Lloyd’s strategy‘ announced in May 2019 to build a new Lloyd’s market that will thrive in the future by providing greater value to its customers.

 

Lloyd’s said it is committed to nurturing a “safe space” for underwriters to experiment with new ideas in a controlled way, which balances the need for appropriate oversight with the risk of not innovating fast enough.

 

“Lloyd’s has a deserved reputation as the home of insurance innovation and I am delighted to see this initiative taking shape, which harnesses Lloyd’s unrivalled entrepreneurial spirit,” said Lloyd’s CEO Neal.

 

“In so doing The Product Innovation Facility aligns with our collective vision for the future of the world’s (re)insurance market. By incubating new product ideas and helping them to scale up over time, Lloyd’s will continue helping its customers to deal with rapidly evolving and emerging risks.”

 

According to Trevor Maynard, Lloyd’s head of innovation: “The Product Innovation Facility formalises underwriting at the centre of the Lloyd’s innovation ecosystem. Working closely with Lloyd’s innovation team the group has put forward this new concept of product development by agreeing to support one another’s initiatives with £53 million of capacity in the first instance. The facility is still open to other market participants to join.”

 

The Association of Insurance and Risk Manager (AIRMIC) has welcomed the move, describing it as potentially ground-breaking. “This initiative has the potential to break new ground, and we applaud Lloyd’s not only for the breadth of what is being considered, but also the extent of collaboration between syndicates to achieve an ambitious but important goal,” said AIRMIC’s deputy CEO and technical director Julia Graham.

 

Thomas Hoad, head of innovation at Tokio Marine Kiln, said: “We are fully supportive of the Product Innovation Facility and we invite risk managers, brokers and other interested parties to contact and collaborate with it. By accessing the best ideas and data from the Lloyd’s market, the group will bring forward new solutions for nascent risks, in direct answer to clients’ evolving needs.”

 

Tina Kirby, head of innovation & product development at Beazley, added: “The Lloyd’s market has always been at the forefront of innovation and syndicates work on new solutions for their clients daily. This initiative is to promote and facilitate collaborative innovation where non-standard risks might require different thinking and expertise.”

 

Insurance for Middle East Oil Shipments Soars to More Than US$500,000

The cost of insuring Middle East oil shipments is soaring as tensions mount in a region responsible for about a third of all seaborne petroleum.

 

So-called war risk premiums for a standard oil cargo from the Persian Gulf and the tanker hauling it can now cost upwards of US$500,000, according to people familiar with the insurance market. Earlier this year, the same premiums would have cost owners less than 1/10 of that.

 

The vulnerability of maritime traffic to mounting tensions came into sharp focus on the 24th June when President Trump said other nations need to do more to help protect navigation from the Middle East in the wake of six attacks on tankers since early May.

 

The incidents, which American officials blamed on Iran, prompted an adviser to insurers to classify the entire Persian Gulf as a riskier area for shipping, giving underwriters scope to charge bigger premiums.

 

“This will get passed on the customers,” said Sandy Fielden, an analyst at Morningstar

Inc. “Refiners are paying more for crude and they will pass on the cost to customers if they can. If refiners choose not to pass that along, their margins would get squeezed.”

 

The insurance prices being lifted fall into two categories: one is for the vessels themselves, the other for their cargoes. While the cost of covering the tankers surged as soon as the most recent attacks happened, the surge in prices for the cargoes only happened over the past week.

 

Underwriters are now aiming to charge anywhere from US$150,000 to US$325,000 to cover a cargo valued at US$130 million, the people familiar with that market said.

 

Until this week, the same cover cost US$1,000 or less. Insuring the tanker itself now costs in excess of US$200,000, based on a US$75 million vessel. That is up from less than US$30,000 at the start of 2019.

 

It is not just the insurers who have turned more wary about the Middle East. Ship owners themselves are raising rates to lift barrels from the region, despite signs that there are plenty of vessels that in theory are available to haul cargoes.

 

Despite the surge in insurance premiums, the extra cost is still a small part of a barrel of crude. Based on standard super-tanker cargo, US$500,000 would equate to 25 cents per barrel.

(Article dated the 25th June)

 

Lloyd’s Gathers Group of Industry Heavy-Hitters as Advisers for Its Future Strategy

Lloyd’s has gathered a group of industry heavy-hitters — such as Evan Greenberg at Chubb, Dan Glaser at Marsh & McLennan, and John Haley at Willis Towers Watson — to sit on advisory committees which will help support and develop its strategy for the future.

 

“The Future at Lloyd’s” project is focused on offering better value for customers by providing cutting-edge risk management products and services, simplifying access to the market, reducing the cost of doing business, and building an inclusive, innovative culture that attracts the best talent, said Lloyd’s.

 

The strategy was launched on the 1st May 2019 and is accompanied by a ten-week consultation period where market participants, customers and other stakeholders have been invited to offer suggestions.

 

A framework for what is possible for the future was laid out in the prospectus called “The Future at Lloyd’s.” (See the six proposed ideas listed below).

“This is an exciting time for us all as we drive forward the next stage in Lloyd’s evolution and I am delighted that we have the support of a number of global industry leaders, as well as the market associations representing some of our key stakeholders,” said Lloyd’s CEO John Neal, in a statement.

 

“Together with the feedback and insights we are gathering from our wide-ranging consultation, the advisory committees will play a critical role in providing guidance and advice as we develop and implement a blueprint for the future at Lloyd’s,” he continued.

 

Work will begin on building and delivering prototypes and full services from October 2019, with some operational in early 2020, said Lloyd’s.

 

Members of The Future at Lloyd’s global advisory committee (in alphabetical order) include:

 

  • Andrew Brooks, CEO of Ascot
  • Bruce Carnegie-Brown, chairman of Lloyd’s and the advisory committee
  • Greg Case, CEO of Aon
  • Dan Glaser, president and CEO of Marsh & McLennan
  • Evan Greenberg, chairman and CEO of Chubb
  • John Haley, CEO of Willis Towers Watson
  • Jon Hancock, performance management director, Lloyd’s
  • Andrew Horton, CEO of Beazley and chairman of the London Market Group (LMG)
  • Bronek Masojada, CEO of Hiscox; John Neal, CEO of Lloyd’s
  • Peter Spires, general counsel of Lloyd’s

 

Members of the Future at Lloyd’s London advisory committee are:

  • Amanda Blanc, chairwoman, and Huw Evans, CEO of the Association of British Insurers (ABI)
  • Sian Fisher, CEO of the Chartered Insurance Institute (CII)
  • Malcolm Newman, chairman, and Dave Matcham, CEO of the International Underwriting Association (IUA)
  • Roy White, chairman, and Chris Croft, CEO of the London and International Insurance Broker’s Association (LIIBA)
  • Andrew Brooks, chairman, and Sheila Cameron, CEO of the Lloyd’s Market Association (LMA)
  • Andrew Horton, chairman, and Clare Lebeq, CEO of the London Market Group (LMG)
  • Bronek Masojada, chairman of Platform Placing Ltd (PPL), the London market’s electronic placing platform
  • Jon Hancock, performance management director, Lloyd’s and chairman of the London advisory committee
  • Peter Montanaro, head of Syndicate Capability, Lloyd’s
  • John Neal, CEO of Lloyd’s
  • Ben Reid, office of the CEO, Lloyd’s
  • Peter Spires, general counsel, Lloyd’s

 

The six ideas outlined in “The Future at Lloyd’s” prospectus illustrate how the market could transform the way it delivers value to its customers.

 

They are:

 

  • A platform for complex risk which makes doing business easier and enables efficient digital placement of the most difficult-to-cover risks
  • Lloyd’s Risk Exchange through which less complex risks can be placed in minutes at a fraction of today’s costs
  • Flexible capital which can simply and effectively access a diverse set of insurance risks on the Lloyd’s platform
  • A Syndicate-in-a-Box, which offers a streamlined opportunity for innovators to bring new products and business into the market
  • A next generation claims service which improves customer experience and increases trust in the market by speeding up claims payments
  • An ecosystem of services which helps all market participants develop new business and provide outstanding service to their customers.

 

AIG Consolidates Reinsurance into New AIG Re

American International Group has announced the formation of AIG Re, which consolidates the company’s assumed reinsurance operations, including Validus Re, AlphaCat and Talbot Treaty, into one global business.

 

AIG completed its acquisition of Bermuda reinsurer and specialist insurer Validus Holdings last July. The US$5.56 billion transaction added Validus Re, a reinsurance platform; AlphaCat, an insurance-linked securities asset manager; and Talbot, a Lloyd’s syndicate along with other entities.

 

To head the new consolidated reinsurance operation AIG Re, the company has appointed Christopher Schaper as CEO. Mr Schaper will oversee implementation of AIG’s assumed reinsurance strategy while continuing to develop, market and deliver reinsurance and capital market solutions to clients on a global basis.

 

Mr Schaper brings three decades of experience in the insurance and reinsurance industries to AIG. He joins AIG from Marsh, where he was CEO of the managing general agent businesses since 2016.

 

Prior to that, he served as president of Montpelier Re Ltd and underwriting chairman of Blue Capital, Montpelier’s capital markets entity.

 

Previously, Mr Schaper held several leadership positions at Endurance Specialty Insurance Ltd, including chief underwriting officer and head of Reinsurance, and head of Casualty Treaty Reinsurance.

 

Earlier in his career, he held roles at Gerling Global Financial Products, Employers Reinsurance Corporation, Cigna and USF&G.

 

Mr Schaper will be based in Bermuda and report to Peter Zaffino, president and CEO, AIG General Insurance, and global chief operating officer, AIG.

 

Brazilian reinsurers Austral Re and Terra Brasis Re to merge

Brazilian reinsurers Austral Re and Terra Brasis Re have signed an investment agreement to merge their operations in order to create the second-largest domestic reinsurer in the vast South American country.

 

Together, the companies would hold gross premiums of R$ 672 million (US$172 million) based on 2018 figures, and become the fourth-largest local reinsurer in terms of shareholders’ equity.

 

Bruno Freire will become the CEO of the new company, and Rodrigo Botti will become the CFO.

 

Following the merger, the controlling bloc of the operation will be held by Vinci Partners,

along with partners from the Brasil Plural group and the International Finance Corporation (IFC), the investment arm of the World Bank, which already have stakes in the two companies.

 

The reinsurer said it will maintain its strategic focus on serving the insurance industry in all the business lines with innovative solutions, risk management and the highest standards of corporate governance.

 

The completion of the deal is conditional on the approval of Brazil’s official anti-trust agency CADE, and the Private Insurance Supervisory Regulator (SUSEP).

 

Marine insurers face ‘cocktail of risk’ after Gulf of Oman tanker attacks

Attacks on two oil tankers in the Gulf of Oman on the 13th June will force insurance underwriters to scrutinise voyages more closely with premium increases for vessels in the region a “near certainty”, an industry expert has said.

 

Jonathan Moss, head of transport and shipping at global law firm DWF Partner, said the incident was “likely to lead insurers to raise premiums, renegotiate terms of cover and introduce riders to marine and energy contracts of insurance and reinsurance”.

 

The attacks happened near major shipping lane, the Strait of Hormuz, which is already a focus for geopolitical tensions as it links middle east oil producers to the global market.

 

A Japanese and a Norwegian tanker were damaged, reportedly by limpet mines, prompting US secretary of state Mike Pompeo to blame Iran. The Iranian mission to the UN “categorically rejects” his claim.

 

“This coming year will see a drive by insurers to raise premium in the face of a cocktail of instability in the region,” said Mr Moss. “Global marine insurers are closely monitoring the current situation employing complex risk models.

 

“Determining the level of risk in the region is difficult as long periods of calm are followed by a spate of notifications to marine insurers of large claims caused by acts of aggression.”

 

In May four ships, two Saudi oil tankers, and a Norwegian and a UAE-flagged ship, were hit. In the days after, armed drones also attacked two Saudi oil pumping stations.

 

The shipping attacks caused London market marine insurers to extend the list of waters deemed high risk under their hull war, piracy, terrorism and related peril policies to include Oman, the United Arab Emirates and the Gulf, while risk areas for Saudi Arabia were extended to include its coasts.

 

Global insurance markets are “accustomed to factoring geopolitical uncertainty into pricing models” but this level of geopolitical fallout had not been seen since 2003.

In 2003, rates for hull and machinery, war risk cover for tankers in the Persian Gulf increased “significantly” in response to political instability in the region.

 

Mr Moss said: “Given the risk of hostility in the Persian Gulf, underwriters will be closely scrutinising voyages on a case-by-case basis with premium increases covering vessels in the region a near certainty.”

 

Berkshire Hathaway opens French hub in European expansion

Berkshire Hathaway Specialty Insurance (BHSI) has launched a new office in Paris, and appointed François-Xavier d’Huart as country manager, as part of its strategic expansion in Europe.

 

BHSI has received the insurance licence to begin underwriting property, casualty, and executive & professional lines in France. The company expects to launch several other products later this year.

 

Mr D’Huart comes to BHSI with 15 years of industry experience. He was most recently head of client and broker management for France at AXA XL (previously XL Catlin). Before that he was chief executive officer, Office Lyonnais d’Assurances and Interassur, at SATEC, and head of marine cargo & hull for Asia at AXA Asia.