Insurance Jottings

Argenta launches Lloyd’s SPA with Hannover Re backing

Argenta Holdings is establishing a special purpose arrangement (SPA) in conjunction with its parent company Hannover Re after it received approval from the Lloyd’s franchise board.

 

Argenta Syndicate Management (ASML), the managing agency subsidiary of Argenta is establishing SPA 6134 which will be managed alongside Syndicate 2121.

 

The SPA will be sponsored and capitalised by Hannover Re. It will be a quota share facility reinsuring business written by Syndicate 2121, which will operate as the host syndicate for the SPA and will retain at least ten percent of the business introduced by the sponsor.

 

For 2018 the SPA is targeting gross written premium income of £36 million across various classes of business within the underwriting capability of the host syndicate.

 

Andrew Annandale, chief executive of Argenta, commented: “SPA 6134 will provide ASML with greater flexibility to react to changing market conditions and allow Syndicate 2121 to take advantage of new opportunities following Argenta’s acquisition by Hannover Re and the very significant losses experienced by the market during 2017.”

 

Hannover Re reached an agreement in March 2017 to acquire the entire share capital of the UK holding company Argenta, which owns Lloyd’s managing agent Argenta Syndicate Management and Argenta Private Capital as well as pro rata share of the Lloyd’s Syndicate 2121.

 

Integro buys Tysers

Integro Insurance Brokers has bought Hawkes Bay, the parent company of Lloyd’s broker Tyser & Co, for an undisclosed amount.

 

The takeover is Integro’s largest ever acquisition.

 

Integro confirmed that the two parties’ UK wholesale divisions will merge as will their UK retail operations.

 

It explained that the combined wholesale business will trade under the Tysers brand and be led by Integro’s current co-heads of UK wholesale, David Abraham and Jason Collins.

 

Tysers’ UK corporate team members will join Integro’s UK retail team, overseen by Bob Pybus, Integro’s head of UK retail and trade under the Integro brand.

The broader management team will be made up of a combination of the existing Integro and Tysers management teams.

 

Final details have yet to be announced however Integro confirmed that Christopher Spratt, chairman of Tysers, and Peter Haynes, non-executive director, will be joining Integro’s UK board.

 

Tysers was founded in 1820 and, after a management buyout in 2007, was 100 percent colleague-owned before the latest deal. In 2017 it had 260 staff and over £50 million of gross written premium.

 

Digital applications in vessels worry marine insurers

Consequences of advances in the digital applications involved with naval architecture and the operation of vessels are worrying the insurance sector.

 

Of particular concern is crew training and their ability to manage cutting-edge technology and large amounts of data, according to the International Union of Marine Insurance (IUMI).

 

The organisation is seeing evidence that the frequency of collisions is increasing, possibly resulting from the introduction of modern technology.

 

This comes as the frequency of total losses within the global fleet has been stabilising over the past three years at 0.13 percent by number and 0.05 percent by tonnage. The stabilisation is largely attributable to an improved safety climate, improvements in naval architecture and marine engineering and more effective regulation, according to IUMI.

 

Total losses involving vessels younger than 15 years were significantly less during the 2013-17 period than the years 2008-2012. At the same time, the frequency of serious casualties has increased since 2014 but appeared to be stable in 2016-17.

 

Concerns within the hull insurance market remain, however: “All hull markets acknowledge the severe volatility inherent in a typical international hull portfolio,” said Mark Edmondson, chairman of IUMI’s Ocean Hull Committee.

 

“The global premium base has been eroding year-on-year as a result of reduced asset values, reduced activity in some sectors, and reduced premium rates. Although the financial impact of major casualties was modest recently, increasing values of single risks bear the potential risk of new record losses, and attritional losses are a growing concern.”

 

The marine cargo insurance market faces larger and more complex risks, natural catastrophes, vessel and port accumulations and larger outlier losses. In addition, the sector is facing a commoditisation of specialty lines, an increase in broker facilities with high commissions and rising expense ratios.

 

Cargo underwriters are being stretched to evolve and improve their products, explained Sean Dalton, chairman of IUMI’s Cargo Committee. “The modern cargo policy has been significantly enhanced to include storage extensions, broad policy valuations and coverage provisions such as Control of Damaged Goods which provide for ‘fear of loss’ and ‘brand protection’. As underwriters we are being challenged to improve our approach and utilise tools such as third-party data, sensor technology and predictive analytics.”

 

“Cyber is also a concern,” Mr Dalton said. “Most policies remain silent on cyber issues, but the recent Maersk NotPetya attack highlights potential exposures and consequences.

 

“Policies which raise the greatest potential risks include Freight Forward Liability cover such as NVOCC Legal Liability, Indirect Air Carrier Liability and Errors and Omissions,” Mr Dalton noted.

 

Pool Re expands retro programme to include cyber terrorism

Pool Re has renewed its retro programme and extended the cover to include material damage and direct business interruption caused by acts of terrorism using remote digital interference.

 

Brokered by Guy Carpenter, the renewed cover has been increased by £100 million to £2.1 billion and has been placed with an expanded panel now containing 47 reinsurers, with Munich Re remaining the largest market. The three-layer programme matches the cover provided to Pool Re member insurers, with cyber terrorism now included along with chemical, biological, radioactive and nuclear risks.

 

This represents the most comprehensive and largest terrorism retro placement in the world. Pool Re chief executive Julian Enoizi commented: “This retrocession programme represents a significant milestone for Pool Re and the culmination of months of collaboration, not only with our reinsurance panel and Guy Carpenter, but also with Cambridge Centre for Risk Studies who provided the research into cyber terrorism.

 

“We have sought to make the cover we provide truly reflective of the risks our member insurers face and also to future-proof the scheme to ensure it represents the most comprehensive terrorism reinsurance cover possible. The appetite to engage with the programme has been exceptional and reflects the reinsurance market’s comfort with the risk and the modelling information provided by Pool Re.

 

“It also highlights their support for the pool model, which provides them with sufficient information to determine the level of capacity they are comfortable providing. We will continue to seek to extend our programme, in line with our cost and security parameters.”

 

GIC Syndicate 1947 gets green light for April launch

Pembroke Managing Agency has received final approval from Lloyd’s to establish and manage GIC Syndicate 1947, in time to begin writing business from the 1st April.

 

Syndicate 1947 has a stamp capacity of £55 million for 2018 and will underwrite property, agriculture and engineering lines of business.

 

Neil Attwood has been appointed as active underwriter for the syndicate. Prior to joining the carrier, he was active underwriter at AmTrust Syndicate 2526 and before that Torus Syndicate 1301.

 

Mr Attwood will report to Chris Brown, strategic partnership director for Pembroke Managing Agency.

 

BIBA and WBN agree new arrangement to help members with their clients post Brexit

The British Insurance Brokers’ Association (BIBA) has reached an agreement with the Worldwide Broker Network (WBN) which will facilitate the introduction of BIBA member firms to one of their member firms in an EU state in order to enable them to continue to work with EU based clients.

 

BIBA Executive Director, Graeme Trudgill said: “In our survey of members last year we asked what concerns they had about the UK’s impending exit from the EU. One of the most common and worrying was the issue around continuing to help EU clients with renewals, claims handling and placement post Brexit. As soon as we had the results of the survey we began looking for a solution and working with WBN is the obvious choice.”

 

WBN has at least one member operating in each EU country, which are all subject to checks on their regulatory status. Alec Finch, a founder and board member of WBN said: “We were delighted to work with BIBA on this matter. We are still unaware of what provisions may be in place for cross-border trading and this arrangement makes perfect sense for UK based brokers. Importantly once the introduction is made the two broking firms will have complete control of their relationship and terms of business which means they can agree a collaboration which fits the clients’ needs.”

 

Steve White, BIBA Chief Executive concluded: “This important agreement will provide some certainty and continuity to BIBA members and their EU clients in the absence of a trade agreement providing access to the single market. It’s an example of great synergy between two organisations responding to BIBA member concerns.”

 

AIG in US$2.5 billion debt raise as it acquires Validus

American International Group is raising US$2.5 billion in debt as it prepares the funding for the acquisition of Bermuda-based Validus Holdings.

 

In January, AIG unveiled its plan to acquire Validus for an aggregate transaction value of US$5.56 billion, funded by cash on hand.

 

Now, AIG has revealed two debt offerings to finance the transaction. For one, AIG is offering US$750 million principal amount of 5.750 percent fixed-to-floating rate series A-9 junior subordinated debentures due 2048. Commencing on the 1st April 2028, the junior subordinated debentures will bear interest on their principal amount at an annual rate equal to three-month LIBOR plus 2.868 percent, payable quarterly in arrears on each of the 1st April 1st July. 1st October and the 1st January, beginning on the 1st July 2028.

 

AIG intends to use the net proceeds of this offering for general corporate purposes, including funding a portion of the consideration for the acquisition of Validus, according to the prospectus.

 

The offering is not contingent on the consummation of the acquisition of Validus.

 

Lloyd’s posts underwriting loss of £3.4 billion for 2017

Lloyd’s has posted its first aggregate pre-tax loss in six years as major claims more than doubled in 2017, causing an underwriting loss of £3.4 billion.

 

Overall, the market reported an aggregated pre-tax loss of £2 billion for 2017 after a pre-tax profit of £2.1 billion in 2016. Major claims for 2017 more than doubled from £2.1 billion to £4.5 billion over the period.

 

This “significant” claims activity generated an underwriting loss of £3.4 billion for 2017 after a £0.5 billion profit in 2016 and resulted in a combined ratio of 114.0 percent after 97.9 percent in 2016, according to a company statement.

 

“The market experienced an exceptionally difficult year in 2017, driven by challenging market conditions and a significant impact from natural catastrophes,” said Lloyd’s CEO Inga Beale. “These factors mean that for the first time in six years Lloyd’s is reporting a loss,” Ms Beale added.

 

The Lloyd’s market has paid a total of £18.3 billion in claims gross of reinsurance during 2017. Nevertheless, total resources remain “strong” at £27.6 billion, according to the statement.

 

Lloyd’s capital position continues to be “robust” and the ratings with the leading ratings agencies remain at A (excellent) from AM Best, A+ (strong) from Standard & Poor’s and AA- (very strong) from Fitch.