Insurance Jottings
Markel moves insurance business from London to Munich ahead of Brexit
Specialist insurer Markel International has moved its European insurance business from London-based company, Markel International Insurance Company, to its Munich-based company, Markel Insurance SE (MISE) ahead of UK plans to leave the European Union.
Markel said its transfer of European business from the UK to Germany “secures continuity of service for our policyholders and supports the development of Markel’s business in continental Europe”. High Court approval for the move was granted on the 28th March.
William Stovin, president of Markel International, said: “For the last two years we have been working hard to make sure that, as far as our clients are concerned, Brexit will have no impact on their experience of doing business with us. The creation of MISE and the completion of this transfer support our commitment to becoming a substantially larger player in the European market.”
Energy only major Lloyd’s class with combined ratio below 100 per cent in 2018
Energy was once again the strongest performing line of non-life Lloyd’s business in 2018 but only because of releases from over-reserved prior years.
Ship insurer UK P&I Club gets green light for Dutch Brexit hub
UK P&I Club, the provider of protection and indemnity insurance to the international shipping community, has received approval from the Dutch financial regulator to establish a Brexit subsidiary in Rotterdam.
Lloyd’s makes £1 billion loss in 2018 but CEO says turnaround is underway
A volatile investment environment and a costly year for natural catastrophes drove an aggregated loss of £1 billion in 2018 at Lloyd’s – but its results were still a significant improvement on 2017 when it lost double this amount.
The market reported that it paid £19.7 billion in claims (gross of reinsurance) in 2018. It paid out net claims of £16.4 billion in 2018, a small improvement on the £18.3 billion it paid out in 2017.
A number of large natural catastrophe events occurred last year, including hurricanes Florence and Michael, Typhoon Jebi in Japan, as well as the Californian wildfires. These disasters costed the Lloyd’s market £2.9 billion, which it said was significantly higher than the long-term average of £1.9 billion.
It made a net investment return of £0.5 billion in 2018, a big decrease on the £1.8 billion it made a year earlier.
Lloyd’s recorded a combined ratio of 104.5 percent in 2018, an improvement from 114 percent in 2017.
The market posted gross written premiums of £35.5 billion, compared with £33.6 billion in the previous year.
Lloyd’s said that despite these substantial claims, it managed to strengthen its financial position. Its total assets grew by nine percent to reach £118 billion, and its net resources increased by two percent to £28.2 billion. Lloyd’s central assets also grew by eight percent to reach £3.2 billion.
Lloyd’s stressed that a rigorous business planning process for 2019 removed almost £3 billion of poorly performing business from the market in the previous year and remediation plans were implemented across all review classes of business.
Four new syndicates started trading at Lloyd’s in 2018.
“The market’s aggregated 2018 results report a combined ratio of 104.5 percent, and a £1 billion loss. This performance is not of the standard that we would expect of a market that has both the heritage and quality of Lloyd’s,” said chief executive John Neal.
“We have implemented stronger performance management measures which will remain an enduring feature of how we go about our business. We expect these actions to deliver progressive performance improvement across the market beginning in 2019 and in the years to come.”
Mr Neal added: “Over the last six months we have asked hundreds of stakeholders to tell us how we should evolve Lloyd’s to build a collective vision for the future. We have today released a preview of this vision in advance of a full prospectus to be published on the 1st May which discusses the future of insurance at Lloyd’s.
“We are determined to show decisive leadership across three fronts: to address the performance gap; to secure Lloyd’s future success; and to create a more inclusive working environment.”
Energas gets rating affirmation from AM Best
AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” of Energas Insurance. The outlook of these ratings is stable.
Energas is the sole captive insurer of Petroliam Nasional Berhad, Malaysia’s national oil and gas company.
According to AM Best the ratings reflect Energas’ balance sheet strength, which the rating agency categorises as very strong, as well as its strong operating performance, neutral
business profile and appropriate enterprise risk management (ERM). In addition, the ratings factor a neutral impact from the company’s 100 percent ownership and integration with Petronas.
AM Best expects Energas’ risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), to remain at the strongest level over the medium term, supported by its low underwriting leverage and a conservative investment approach.
A partially offsetting balance sheet factor is the company’s reliance on third-party reinsurance to enable it to underwrite large limit risks and appropriately manage its aggregate exposures.
The rating agency also stated that Energas has a track record of strong operating performance, with a five-year average combined ratio that is below 60 percent and a return on equity ratio of 11 percent (2013-2017). Underwriting performance remains subject to volatility dependent on large loss experience, as well as arising from changes in capital expenditure and operational activity at the parent, Petronas, which drives shifts in absolute premium generation at Energas.
The company’s low operating costs and steady stream of reinsurance commission income have contributed to the company’s overall profitability.
Prospective results are subject to volatility in claims experience, as Energas provides large policy limits compared with its premium income. However, this should be moderated partially by the captive’s comprehensive reinsurance programme.
Energas is well-integrated within the Petronas group’s risk management framework and has an active role in overseeing and containing the group’s insurance costs.
Energas has a developed ERM framework, with clear risk appetite and tolerance levels in place.
Alesco and Africa Re seek $3.5bn Lloyd’s capacity for Equatorial Guinea upstream energy risk
Broker Alesco Risk Management Services and Africa Re have launched a US$3.5 billion reinsurance facility designed to cover all international upstream energy insurance programmes written from Equatorial Guinea.
The move is partly in response to recent changes in the insurance regulations in Equatorial Guinea and a recent visit by Gabriel Obiang Lima, the minister of mines and hydrocarbons of Equatorial Guinea, to Lloyd’s of London, where Alesco hopes to place much of the risk.
The placement will complement laws in the country that mean all companies in the petroleum and gas sector in the Republic of Equatorial Guinea must be insured by GEPetrol Seguros, a local insurance company. But the facility is designed to support the government in developing a local insurance industry and strengthen the national economy.
Obiang Lima said: “The insurance industry in Equatorial Guinea has taken a significant step forward by our visiting Lloyd’s of London and meeting with senior representatives. We need to create a local financial services sector in general, and an insurance sector in particular, in Equatorial Guinea.
“Insurance is a vital peripheral service industry that will help our oil and gas-based economy to thrive and one that our country will benefit from when enforcing the new Local Content Law. We are committed to working with Lloyd’s, Africa Re and Alesco to make this happen.”
Ken Aghoghovbia, deputy managing director and chief operating officer, Africa Re, said: “Africa Re has followed with keen interest the rapid development taking place in Equatorial Guinea. We are particularly pleased with the bold steps the government has taken to introduce the Local Content Law in a transparent manner, with a view to creating more jobs and driving economic growth.
“In line with its mission of supporting African economic development, Africa Re identifies with the government initiatives and commits to support the efforts in establishing an efficient and transparent insurance market in Equatorial Guinea.”
Nadim Semaan, partner at Alesco, said: “Alesco is fully committed to supporting the government of Equatorial Guinea in growing their local insurance industry, working hand in hand with Africa Re to host conferences and workshops to share relevant skills and expertise.
“We are extremely excited about this opportunity and we look forward to working closely with the various international oil companies operating in the region, as well as the various reinsurers supporting us.”