Insurance Jottings

EU Gives Britain 6-Month Brexit Extension, Despite French Resistance

European Union leaders gave Britain six more months to leave the bloc, more than Prime Minister Theresa May says she needs but less than many in the bloc wanted, thanks to fierce resistance from France.

The summit deal in Brussels in the early hours of the 11^th April meant Britain will not crash out on the 12^th April without a treaty to smooth its passage. But it offers little clarity on when, how or even if Brexit will happen, as Mrs May struggles to build support in parliament for withdrawal terms agreed with the EU last year.

With German Chancellor Angela Merkel insisting that Britain would not be forced out and that a chaotic no-deal departure must be avoided if at all possible, there was never any real doubt that May would get an extension.

The drama was about its length and conditions.

French President Emmanuel Macron, reprising a role he took last month when Mrs May got a first, two-week delay, pushed leaders into hours of debate over dinner as he fought a largely solo campaign to persuade them not to give the British up to another year.

Summit chairman Donald Tusk and others argued that obliging Mrs May to accept a much longer deadline than the 30^th June date she had sought could help swing pro-Brexit hardliners within her own Conservative party behind her deal, fearing a long delay could see the British public turning against a withdrawal altogether.

But Mr Macron, while irritating some peers who saw his stance as Gallic grandstanding, insisted that letting Britain stay in the Union any longer risked undermining the project of European integration which is one of his main policy goals.

The result was a compromise on the date, with a deadline of the 31^st October, for Britain to leave, deal or no deal — on condition which Mrs May holds an election on the 23^rd May to return British members to a new European Parliament which convenes in July, and that it pledge not to disrupt key EU decision-making before it leaves.

If Mrs May fails to win over lawmakers on the treaty or fails to hold an election, Britain will leave with no deal on the 1^st June.

May Eyes Brexit Soon

The prime minister was keen to stress that the extension to the 31^st October — and several leaders refused to rule out further delays — did not mean she would not deliver Brexit sooner and before, as she promised her rebellious party, she steps down.

“I know that there is huge frustration from many people that I had to request this extension,” she told reporters, as her team prepared for another round of talks on the 11^th April with the Labour opposition, to whom Mrs May turned for help last week.

“But the choices we now face are stark and the timetable is clear. So we must now press on at pace with our efforts to reach consensus on a deal that is in the national interest,” she added, acknowledging the coming weeks would not be easy.

Mr Tusk, a former Polish premier who has long tried to keep a door open for Britons to change their minds and stay, said the delay until Halloween gave time for London to ratify Mrs May’s deal, tweak elements of the future EU-UK relationship to Labour’s liking — or give it a chance to “cancel Brexit altogether.”

Mrs Merkel, who eased tension at the start of the talks by sharing a joke with Mrs May over photographs of them both wearing very similar jackets, stressed a need for calm and order: “We want an orderly exit by Britain,” she said. “And an orderly exit by Britain can be best ensured if we give it some time.”

French Resistance

Mr Macron defended his resistance to giving Britain nine months or a year more, saying it was for the “common good.” French officials, pointing to threats by some of Mrs May’s pro-Brexit potential successors, spoke of the EU facing “blackmail” by a future British government blocking decisions in Brussels.

“It’s true that the majority was more in favour of a very long extension. But it was not logical in my view, and above all, it was neither good for us, nor for the UK,” Mr Macron said.

French pressure also tightened clauses referring to Britain not disrupting EU affairs if it stays in longer and a reference to a June 20-21 EU summit taking stock of the position again.

Mrs May addressed the other 27 for an hour at the start of the summit and failed to convince many, notably Mr Macron, that she truly had a new strategy for securing ratification.

Leaders are exasperated with Mrs May’s handling of a tortuous and costly divorce which is a distraction from ensuring the bloc can hold its own against global economic challenges.

London Market Group unveils new post-Brexit trade priorities

The London Market Group (LMG) has unveiled a number of key priorities which it will seek to work on in order to take advantage of the new trading opportunities that may emerge in the post-Brexit environment.

LMG has called on the UK government to use its network of embassies and consulates to promote the London insurance market, and “liberalise” access to key markets such as the US, Switzerland, MENA and Latin America.

“The London Market can play a critical role in supporting the economic development of countries across the world, growing trade in existing markets and opening new ones,” said Malcolm Newman, managing director of SCOR’s EMEA Hub and sponsor of the workstream to create the right business environment.

In collaboration with market participants, the LMG has identified a number of priority markets which it will seek to work on with the Treasury and the Department of International Trade.

These include a potential new trading arrangement with Switzerland; maximising alignment with the US market; promoting the value of the London Market in key ASEAN economies such as Indonesia and Malaysia; and supporting the work of the Islamic Insurance Association of London to promote London’s (re)takaful offer.

Mr Newman said: “Some of this will clearly depend on the Brexit discussions which are currently ongoing, but we feel we can make progress now using many of the existing trade fora.

“Our target markets include the US, Switzerland, ASEAN, Latin America and the MENA countries. We would like the UK Government to develop an approach to third countries that seeks to liberalise access to such markets.

“Using its embassies, consulates, and the many trade discussions and dialogues it is having, the UK Government can also help London to promote insurance and support the message that it helps foster sustainable economic and social development.”

Mr Newman added: “We believe that to make the most of these opportunities, we should move the conversation on insurance away from simple indemnity and focus on how the industry can support economic growth and resilience across the world. Insurance has a positive economic impact: a 1% rise in insurance penetration translates into a 13% reduction in uninsured losses, a 22% reduction in taxpayers’ contribution following a disaster and increased investment equivalent to 2% of national GDP.”

Energy insurance sectors diverging for first time in years: Marsh JLT

The segments of the energy market are for the first time in many years running at different speeds, with rates climbing faster in downstream than upstream and casualty, according to Marsh JLT Specialty.

Downstream energy market struggles, upstream in good health: Willis Towers Watson report

There has been a decrease in underwriting capacity for the downstream energy market for the first time since 2001 and the prospects for this segment look bleak after a disastrous couple of years for insurers, Willis Towers Watson has claimed in a new report.

The broker, in its ‘Energy Market Review 2019’ report, suggests downstream energy capacity fell from US$6.5 billion to US$6.2 billion. It said this was caused by a number of factors, including continuing losses and the unprofitability of related sectors such as power, mining and renewables.

The downstream market has had another gruelling loss year, while the recent twin losses emanating from Darwin are causing serious concern in an already reeling construction market.

In terms of profitability, the report said: “The prospects for this portfolio look bleak unless there is some improvement after what has been a disastrous couple of years for these insurers.”

In contrast, the upstream market enjoyed a marginal increase in the capacity available, which increase to US$8.1 billion compared with US$7.7 billion a year earlier. Upstream also had another mild loss year, stifling the hardening dynamic in this market. However, land rig and other onshore losses are currently causing insurer concern, the report noted.

But the upstream market has continued to generate underwriting profits, the report noted. Although it also said it would take much to change this should the current mild loss record deteriorate.

In terms of rates, the report suggested that except where sought after programmes have been extensively re-modelled, or where risk profiles have significantly changed, almost every programme will now be subject to some form of rating increase (with the one exception of the growing energy insurance market in China).

In the upstream and liability markets, these are generally relatively mild, it said, but not so in downstream and construction, where the fight to survive for some insurers is now entering a decisive phase.

Graham Knight, head of Natural Resources GB at Willis Towers Watson, said: “This year’s Energy Market Review highlights the inherent volatility in our insurance markets, which are now showing increasing signs of hardening.

“In this challenging market environment, we have to adjust to the way in which energy industry risks are identified, collated and presented to insurers in an era where “Big Data” is king, and we have to be relentless in our pursuit of fresh ideas that produce valuable new products and services for the energy industry.”

CLS Risk to ‘wake sleeping giant’ with renewables permit challenge insurance

CLS Risk Solutions (CLS), a provider of property and renewables development risk cover, has launched permit challenge insurance for renewable energy infrastructure.

It insures against barriers to construction caused by third party judicial review challenges to a project’s permit or planning permission. CLS said the policy will help secure financing for renewable energy projects that may have struggled to get investment in the past.

The company said it “could unlock a significant number of renewable projects throughout Europe”, including wind farms, ensuring the solvency of the developer during third party challenges. It also covers the capital investment into the project and financing repayment obligations in the event of an unfavourable final court order.

As renewable energy has grown in line with green targets, existing wind farms and other renewable buildings will need to be renewed or replaced as they age. But as renewable energy is no longer in its infancy; developers and investors have to work harder to get projects underway, while the remaining investment opportunities are riskier, the company explained.

The new insurance product “helps developers and investors access more opportunities by turning a ‘difficult’ investment into an ‘easier’ one, CLS added. “In a maturing market it is these B rated, riskier renewable projects, where there is potential for the bigger returns.”

Will Brooks, business development director at CLS, said: “As well as creating better investments, the threat of a challenge to a permit is enough for private investors and banks to stop funding; without insurance there is no certainty that the business plan will perform. In the worst case scenario, they lose all their money. They won’t take that risk. In the simplest terms, without permit challenge insurance, developers will find it difficult to get the funding they need to build wind farms.

“It is clear from our existing strong local broker partnerships in Europe, that the insurance industry has a significant opportunity to support the renewable energy sector by providing certainty that has been missing until now.”

The company is partnered with insurance brokers including Marsh, Aon, Willis and Verspieren.

Mr Brooks added: “It’s an area of insurance that is little known and even less understood in the wider broker market – it has been a sleeping giant in many respects. The growth potential is huge, but there is a lot of work to be done to raise awareness among brokers and their clients of these products and what they are capable of.

“With the right collaborative approach and broker training, we aim to wake up this sleeping giant across Europe.”

Newline Group launches Brexit hub in Germany; appoints CEO

London-based specialty insurer Newline Group has launched its new European Union insurance hub in Cologne, following authorisation from the German Federal Financial Supervisory Authority (BaFin).

Newline Europe Versicherung AG (Newline Europe), a subsidiary of Newline Insurance Company, will be led by Manuel Wirtz as chief executive officer. He was previously Newline’s general representative for Germany.

“Newline’s history of underwriting German-based insurance risks dates back to 2002, so we are delighted to strengthen our footprint in Cologne and expand our platform by providing seamless and continuous service to our clients throughout Europe in the post-Brexit environment,” said Carl Overy, CEO of Newline Group.