Insurance Jottings
Cyber driven business interruption threatens energy sector
Energy executives are increasingly concerned about the impact of cyber-attacks on their operations, according to insurance broker Marsh.
Over three-quarters (76 percent) of respondents to a survey cited business interruption (BI) as the most concerning consequence of a cyber-attack for the energy industry.
The report looks at the most concerning cyber loss scenarios for energy executives, the industry’s understanding of cyber exposures, and how organisations plan to manage these risks in the future.
Despite more than half of energy executives naming cyber as a top-five risk, 54 percent of energy executives have not quantified or did not know what their worst possible loss exposures could be.
Of the energy executives participating in the survey, 26 percent said they were aware that their company had been victim to a successful cyber-attack in the past 12 months.
The energy industry plans to invest more in cyber risk management, with 77 percent of energy executives surveyed saying their organisations will increase levels of investment in cyber risk management, while 26 percent plan to purchase or increase their cyber insurance.
“As the energy industry relies more on interconnectivity as a result of greater digitalisation, the potential for cyber-attacks to cause severe disruption to operations, loss of data, and, consequently, high financial losses, should be a key concern for energy executives,” said Andrew Herring, EMEA energy and power practice leader.
“While it is encouraging that three-quarters of respondents plan more investment in cyber risk management, it is worrying that over half questioned have yet to quantify their exposures.
“For those firms that have not put plans in place to mitigate and manage attacks or have not measured their cyber exposure, now is the time to take steps to be prepared for the impact an attack could have on their operations and systems.”
Admiral selects Spain for post-Brexit hub
Admiral has announced plans to establish an EU hub in Spain as it looks to safeguard its access to the EU following the UK’s exit from the EU.
Within its 2017 results announcement, the motor insurer had already filed applications to the regulator in Spain for permission to underwrite all the EU insurance business (Admiral Seguros, ConTe and L’olivier) from there and expects to have everything up and running in advance of any “hard deadline” which might eventually become clear.
The insurer expects to receive the necessary approvals from the Spanish regulator this year.
AXA acquires XL Group in $15.3bn deal
French insurer AXA is acquiring Bermuda-based property/casualty commercial lines re/insurer XL Group for US$15.3 billion (€12.4 billion) in cash.
The price represents a premium of 33 percent to XL Group closing share price on the 2nd March.
The move will shift AXA’s business profile from L&S (life & savings) business to P&C (property & casualty) business. The deal will enable the group to become the biggest global P&C commercial lines insurer based on gross written premiums, according to a company statement.
The transaction increases diversification of the business, enables higher cash remittance potential and reinforced growth prospects, rebalancing the profile towards insurance risks and away from financial risks, the company said.
“XL Group has the right geographical footprint, world-class teams with recognised expertise and is renowned for innovative client solutions,” said AXA CEO Thomas Buberl.
“Our combined P&C commercial lines operations will have a strong position in the large and upper mid-market space, including in specialty lines and reinsurance, and will complement and further enhance AXA’s already strong presence in the SME (small and medium-sized enterprise) segment. The two companies share a common culture around people, risk management and innovation, positioning AXA uniquely for the evolving future of the P&C industry,” Mr Buberl added.
The opportunity to acquire XL Group has led AXA to review its exit strategy from its existing US operations which AXA now expects to accelerate. Together with the planned IPO (initial public offering) of AXA’s US operations (expected in the first half of 2018 subject to market conditions) and intended subsequent sell-downs, this transaction would gear AXA further towards technical margins less sensitive to financial markets.
The XL acquisition will be financed by around €3.5 billion of cash at hand, around €6.0 billion from the planned US IPO and related transactions, as well as about €3.0 billion of subordinated debt. There is also $9 billion of backup bridge financing already in place.
Upon completion of the transaction, the combined operations of XL Group, AXA Corporate Solutions (AXA’s large commercial P&C and specialty business) and AXA Art will be led by Greg Hendrick, currently the president and chief operating officer of XL Group, who will be appointed CEO of the combined entity and join AXA Group’s management committee, reporting to Thomas Buberl.
Greg Hendrick will work closely with Doina Palici-Chehab, AXA Corporate Solutions’ executive chairwoman, and Rob Brown, AXA Corporate Solutions’ CEO, to build an integrated organization and leadership team for this new company.
Following the closing, Mike McGavick, XL Group’s current CEO, will become vice-chairman of the combined P&C Commercial lines operations and special adviser to Thomas Buberl to advise on integration-related and other strategic matters.
Mike McGavick, said: “Today marks an unrivalled opportunity to accelerate our strategy with a new strength and dimension. With every confidence in how we have positioned XL Group for the future, it is a substantial testament to AXA’s leadership and commitment to maintaining the XL Group brand and culture that we have come to an alignment”.
“We are excited at the opportunity to build the scale, geographical footprint, product portfolio, and the unmatched commitment to innovation that relevance in the global insurance industry requires. In AXA we have found like-minded partners committed to the absolute necessity to innovate and move this industry forward,” he added.
AM Best reveals Brexit contingency plan with new EU base
Re/insurance sector rating agency AM Best is establishing a new office in Amsterdam during 2018 as part of its Brexit contingency plan.
AM Best, through its London-based subsidiary AM Best Europe Rating Services, is currently registered with the European Securities and Markets Authority (ESMA) in Paris, which allows it to provide rating services throughout the EU on a cross-border basis.
However, for it to continue to provide ratings to be used for regulatory purposes post-Brexit on the 29th March 2019, it will need to have a registered operation within the remaining 27 EU countries.
The company said that Amsterdam has been selected as closely matching its strategic priorities with an excellent talent pool and transportation links to all the major European locations where AM Best’s clients are based.
AM Best’s office in the City of London will continue to act as its hub for the EMEA region.
JLT to restructure business into three units: reinsurance, specialty, employee benefits
Jardine Lloyd Thompson Group unveiled radical plans to restructure the business in its 2017 results, which it hopes will result in annualised savings of £40 million by 2020 for a one-off cost of £45 million spread across 2018 and 2019.
The broker said that effective the 1st April 2018, the group will be aligned into three divisions to “facilitate closer global coordination and enhance client delivery”. These will be: reinsurance, specialty and employee benefits.
It noted that a so-called group-wide ‘Transformation Programme’ will deliver globally “consistent processes and operational efficiencies creating opportunities for improved returns through global client solutions”. Annualised savings of £40 million are projected by 2020 for a one-off cost of £45 million spread across 2018 and 2019.
It said that its US Specialty build-out will focus on continuing organic growth, complemented by targeted acquisitions.
Its International Employee Benefits proposition is being developed, with close coordination of existing operations and the launch of an integrated offering to multinational clients.
Dominic Burke, group chief executive, said: “2017 was an important year for the JLT Group. The decisions we took during the year and the strategic developments we have initiated will, I believe, mark the start of a new chapter in the growth of JLT.”
It is also making a number of structural changes to the businesses and the management of JLT.
As announced in January 2018, Lucy Clarke has been appointed to the new role of Global CEO of the Group’s Specialty business. The company said it believes that bringing JLT’s regional insurance broking operations together into an integrated Specialty division, with leaders appointed in each of JLT’s principal industry specialities (Energy, Construction, Financial Lines, Aerospace, Marine & Cargo and Credit & Political Risks) responsible for globally coordinated sales and delivery to clients, will enable JLT to operate as a combined group of global specialists.
Verisk launches new energy insurance platform
Data analytics provider Verisk has launched a new platform which claims to enhance how insurers research, assess, and underwrite complex energy risks.
The new risk-scoring platform Energy & Power Intelligence Xchange (EPIX) provides a wide range of information on energy risks-information which otherwise can be time-consuming and costly to obtain and fraught with inaccuracies, according to the company.
“Our energy insurance customers have asked us to provide data analytic solutions to help them improve underwriting precision, reduce costs, and increase operational efficiencies,” said Maroun Mourad, president of ISO Commercial Lines. “The EPIX digital platform can provide energy risk engineers and underwriters with actionable insights in a highly reliable, accurate, and timely fashion for individual risks and portfolios.”
Elizabeth Casas, managing director of energy and insurance for ISO, added: “EPIX is a powerful platform which can support underwriters, engineers, claims experts, and client managers in making more informed decisions and help reduce the time they spend researching and collecting broad industrywide data.
“With the power of Verisk data, analytics, and insights, insurers can map out energy facilities owned and operated by hundreds of companies around the world, compare their risks and exposures, and access valuable insights with visualizations of key market data. They can also compare their existing portfolios to energy assets and companies worldwide and develop a strategy for profitable growth.”
Verisk said that it built EPIX leveraging the data assets of several of its businesses, including Wood Mackenzie, ISO, AIR Worldwide, AER, Arium and Geomni, and is currently building two additional modules.