Insurance Jottings
AXA XL gains approval to move EU unit from the UK to Dublin
Re/insurer AXA XL has received authorisation from the Central Bank of Ireland (CBI) to move its principal EU insurance company, XL Insurance Company (XLICSE), from the UK to Dublin in response to Brexit uncertainty.
In September 2017, prior to XL Group’s acquisition by AXA Group, XL had announced its plan to move XLICSE to Ireland ahead of the 29th March 2019 when the UK is due to leave the EU.
In the UK, AXA XL will retain XL Catlin Insurance Company UK (XLCICL), and its Lloyd’s of London operations (Syndicates 2003 and 3002).
CTMA places Standard Syndicate 1884 into run-off
Charles Taylor Managing Agency has placed Syndicate 1884, which is managed by the business, into run-off.
The Standard Syndicate 1884 offers marine and energy risks with a focus on providing a broad range of cover to the marine and energy industry sectors. The syndicate has been established by The Standard Club, a marine protection and indemnity (P&I) mutual insurer.
Syndicate 1884 offers a range of fixed premium insurance covers for property, casualty and liability risks.
Syndicate 1884’s principal capital provider has decided to withdraw from the Lloyd’s market for the 2019 underwriting year, according to a corporate statement. The syndicate will write live business for the remainder of 2018 and will enter run-off on the 1st January 2019.
Charles Taylor Managing Agency intends to manage the run-off of Syndicate 1884.
Charles Taylor Managing Agency is focused on developing its business as a provider of syndicate management and operations.
The managing agency believes there will be increased demand for live and run-off syndicate management capabilities in the Lloyd’s market, which it is well-placed to meet.
Barnabas Hurst-Bannister, chairman, Charles Taylor Managing Agency said: “We are very confident in the prospects for Charles Taylor Managing Agency, both as a manager of live and runoff syndicates.
“We established the managing agency as a third-party syndicate manager in 2015 and developed up-to-the-minute systems and processes, designed specifically for that purpose.”
Jon Hancock, performance management director, Lloyd’s said: “Lloyd’s is pleased to continue to work with and support Charles Taylor Managing Agency. We are confident that Syndicate 1884 will be run-off in an orderly and professional manner and that policyholders’ interests will be protected.”
The Standard Club established the syndicate in 2015 to underwrite marine and energy risks. It represented one strand of the club’s broadly-based strategy to provide its members with a wider range of insurance covers to meet their needs and diversify the club’s source of revenues.
The Club remains committed to these strategic aims but it has concluded that current overcapacity and a weak pricing environment have made Lloyd’s a challenging environment for it to develop a profitable underwriting business with sufficient scale.
The club is exploring alternative approaches to provide its members with additional insurance covers, including establishing an underwriting agency, to build on the strong base established through the Lloyd’s initiative.
UK Needs to Get ‘Good and Scared’ About No-Deal Brexit: Opinion
The European Union summit in Brussels this week was meant to be historic: a Brexit divorce deal would be reached and sent to parliaments to be approved.
That is now not going to happen, once again raising the risk that the UK will leave Europe with no deal at all.
There is a worrying parallel between the current stage of the Brexit negotiations and the run-up to the 2016 UK referendum on leaving the EU. What it suggests is that unless Britain gets good and scared about leaving without settling the terms of a withdrawal agreement, risk is all it will get.
In 2016, most people assumed that the UK would vote to remain in the EU. The Leave campaign made outrageous claims — a promise that weekly savings of 350 million pounds (US$460 million) would be ploughed back into the health-care system was the most famous one. The argument that Brexit would be a) easy, b) quick, and c) wildly advantageous were repeated endlessly, and went mostly unchallenged.
A lot of people believed them.
With only minutes left on the negotiating clock, something similar is happening now. Those who once advocated giving up EU membership now insist the only way to leave is to cut all the ties built up over four decades, including access to the EU’s single market and many other trade benefits guaranteed by the customs union.
Anything less would be a betrayal of Brexit, the argument goes: Having no deal at all isn’t great but it’s really nothing to be dramatic about either.
The “no-deal, no-drama” narrative has gotten louder. Negotiations on a Brexit divorce deal are stalled over how to ensure that there will be no physical border between Northern Ireland and EU-member Ireland after Brexit if the future trading relationship doesn’t solve the problem.
Hard-liners in Prime Minister Theresa May’s Conservative Party, and the small Northern Irish party which props up her government, are unhappy with her proposed compromise and say that it’s worse than walking away.
Arlene Foster, leader of the Democratic Unionist Party, May’s Northern Irish ally, says she now thinks that no deal is “the likeliest outcome.” Jacob Rees-Mogg, leader of a group of hard-line Brexiter members of Parliament told a radio show on the 15th October that a no-deal Brexit would bring “transition issues,” but also asserted that any difficulties “should be overcome as we begin to trade with the EU on a perfectly normal World Trade basis.”
“World Trade basis” was shorthand for the Brexiters’ claim that the UK would be no worse off if it jettisoned the EU agreements and lived instead with the ones encompassed by Britain’s continuing membership in the World Trade Organisation.
That is almost certainly false, but the problems inherent in what is called the WTO-option have been rehearsed aplenty, and they resonate no more than the warnings of economic cost did during the referendum campaign.
As tension rises over the course of negotiations, so has the emotional appeal of what Mr Rees-Mogg called a “much cleaner and quicker Brexit.”
A study published on the 15th October by the think tank Open Europe provides fodder for the no-deal arguments. The authors say that if the UK unilaterally liberalises tariff and non-tariff barriers, a no-deal exit would lead to a 0.17 percent per year drag on growth until 2030, much lower than many other studies show.
Even that negligible impact, they argue, could be wiped out with the construction of an additional 30,000 homes per year and other mitigation measures.
“If you just focus on tariffs and non-tariff barriers, it’s true that you can legitimately get smallish aggregate figures,” said Alex Stojanovic of the Institute for Government, who has studied the impact of Brexit on various sectors. “This still obscures the big sectoral damage, like the car sector, and the loss of jobs in particular regions.”
The study is at least honest about its assumptions. Among them: the model “does not capture the effects of the disruption of deeply integrated value chains, sector-specific regulatory impediments to UK-EU-27 trade, the labour market impacts of limiting access to EU labour, or the impact of Brexit on the strategic considerations of multinationals,” who may locate their businesses elsewhere.
It also assumes that the UK, having ended its two-year EU negotiations without a deal, will manage to form side deals quickly on everything from data to aviation to agri-food and financial services. Given all the factors that are taken out of the equation, it is breathtakingly bold to ask anyone to draw comfort from the conclusions.
Plenty of other studies suggest that no deal is not just a little bit worse than a deal within the range of options which Mrs May and the EU are looking at — it is a lot worse. And the UK is not prepared for it. The British Chambers of Commerce say that 62 percent of member firms have not even done a Brexit risk assessment to ascertain what leaving will mean.
The government appears to be similarly unprepared. Despite massive hiring and attempts to gear up for the biggest legislative and institutional change in a generation, a study of Whitehall by Joe Owen, Lewis Lloyd and Jill Rutter in June showed that the machinery of government is nowhere near geared up for a challenge of that scale.
As with the referendum campaign, the pushback against the “no deal, no drama” fiction has been weak. The assumption, which markets seem largely to share, is that a deal will happen at the 11th hour and 58th minute. That is how the EU always works, the argument goes.
And because Mrs May has had to maintain the pretence in negotiation that she is ready to walk away, there is no effective counter-narrative coming from the government.
The paradox now is that Mrs May’s best chance of getting a deal is for a no-deal Brexit to be a prospect that most Conservative MPs genuinely fear. Only then will they hold their nose and cast a vote for a deal they hate.
That, in turn, favours yet more brinkmanship and a summit of perhaps some soothing words but no real progress. The fear of failure will only become real when the markets buy it and businesses make more noise.
At the moment, they are more inclined to shrug, just as many remainers did in 2016.
(This article was dated the 16th October)
Marine mutual insurers Standard Club, Strike Club to merge
Marine mutual insurers The Strike Club and The Standard Club are combining their businesses in a move intended to improve the synergies, efficiencies and cost savings in governance, management, underwriting and reinsurance for both the organisations.
The Strike Club is a marine mutual insurance group fully owned by its members. It offers mutual delay cover for the daily operating costs of ships held up by strikes, port closures, collisions, breakdowns and other unexpected delays.
The Standard Club is a mutual insurance association and a member of the International Group of P&I Clubs. It is managed by the Charles Taylor group.
Under the proposed plan, The Strike Club will continue as a member-controlled mutual delay insurer, operating as a class of The Standard Club. It will be supervised by the current Strike Club board, which will become a Strike committee of The Standard Club.
The transaction will enable The Standard Club members access to marine delay insurance while diversifying the club’s underwriting portfolio and risk profile, and further increasing the club’s free reserves. The Strike Club members will benefit from being part of a larger mutual insurer with over US$460 million free reserves.
“Marine delay insurance provides valuable protection to ship owners and operators protecting them from delays outside their control. At a time when the shipping market is facing difficult market conditions and financial pressures, our cover can make all the difference between profit and loss on voyages for operators,” said Alain Le Guillard, president and chairman of The Strike Club.
“Joining The Standard Club is an excellent move for the club,” Mr Le Guillard added. “It will provide our members with long-term financial stability and S&P A-rated cover, while preserving the independence of operation, identity and other valuable mutual characteristics of The Strike Club.”
Cesare D’Amico, chairman of The Standard Club, commented: “This transaction is a win-win for members of both clubs. It increases our membership and enables us to offer valuable additional protection to members of The Standard Club. It extends our strategy of offering a wide range of insurance covers to our members and diversifying our sources of revenue.
“The Standard Club will also benefit from increased reserves from The Strike Club. I will look forward to welcoming the members of The Strike Club to The Standard Club