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Rates Retreat as Capital Rebounds - Global Reinsurance Renewals at January 1, 2010
GC Capital Ideas
04 January 2010
25 March 2009
I'm here just for the horses and gin.
Not really, but now that I have your attention: My apologies for not posting recently... As our reinsurance industry readers know, the 1/4 renewals (or 4/1 for those in the USA) are upon us, so 1212 has been on and off planes for the last few weeks...
Our postings about the comings and goings of the reinsurance marketplace have been few and far between during this time, but please stay tuned -- I promise you that we will be back right after April 1st with lots to talk about!
All the best,
1212
Our postings about the comings and goings of the reinsurance marketplace have been few and far between during this time, but please stay tuned -- I promise you that we will be back right after April 1st with lots to talk about!
All the best,
1212
19 March 2009
AIG Sells Stakes in 3 Solar Power Plants in Spain
AIG Sells Stakes in 3 Solar Power Plants in Spain: "American International Group has sold its shares in three solar power plants in Spain that already are generating electricity for the grid.
The company’s AIG Financial Products Corp. said Wednesday the three plants have a combined generation capacity of 35.4 megawatts and a total value of about €300 million ($404 million). HgCapital, a private equity firm in London, bought the stakes for an undisclosed amount of money.
HgCapital said it bought the interests not only from AIG but also from 360 Corporate, an investment bank in Spain. The acquisition is HgCapital’s first in the solar energy sector, the firm said. The power plants were installed before the Spanish government lowered its solar energy subsidies last fall. HgCapital, which also invests in wind power, said two of the plants have a fix-axis design while the third uses a single-axis tracker system (18MW).
AIG’s spokesman Mark Herr said via email that the operators of those power plants are City Solar, Proener and SunPower (SPWRA). SunPower, based in San Jose, Calif., makes solar panels and single-axis trackers, and it engineers and develops solar power projects. The three power plants are located in the regions of Extremadura, Murcia and Castilla-La Mancha, Herr said."
For Source and Full Article Visit: Seeking Alpha
The company’s AIG Financial Products Corp. said Wednesday the three plants have a combined generation capacity of 35.4 megawatts and a total value of about €300 million ($404 million). HgCapital, a private equity firm in London, bought the stakes for an undisclosed amount of money.
HgCapital said it bought the interests not only from AIG but also from 360 Corporate, an investment bank in Spain. The acquisition is HgCapital’s first in the solar energy sector, the firm said. The power plants were installed before the Spanish government lowered its solar energy subsidies last fall. HgCapital, which also invests in wind power, said two of the plants have a fix-axis design while the third uses a single-axis tracker system (18MW).
AIG’s spokesman Mark Herr said via email that the operators of those power plants are City Solar, Proener and SunPower (SPWRA). SunPower, based in San Jose, Calif., makes solar panels and single-axis trackers, and it engineers and develops solar power projects. The three power plants are located in the regions of Extremadura, Murcia and Castilla-La Mancha, Herr said."
For Source and Full Article Visit: Seeking Alpha
Regulators: AIG Not Using Bailout Funds to Underprice Insurance
Regulators: AIG Not Using Bailout Funds to Underprice Insurance: "Despite some complaints by competitors, American International Group (AIG) does not appear to be using federal bailout funds to lower its insurance prices to keep and attract business, state and federal officials told a House subcommittee today.
Representatives for the Government Accountability Office (GAO), which was asked by Congress to investigate the allegations of unfair pricing, and the National Association of Insurance Commissioners (NAIC), told lawmakers that they have not found enough evidence to conclude that the bailout funds triggered by AIG's financial products unit have been of any direct benefit to the insurance operations.
Orice M. Williams, director of Financial Markets and Community Investment for GAO, and Pennsylvania Insurance Commissioner Joel Ario, representing the NAIC, however, indicated that their monitoring of the pricing situation is ongoing and their results are preliminary.
The GAO testimony and that of Ario on behalf of the NAIC were presented before the House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises today. AIG CEO Edward Liddy is also scheduled to appear before the subcommittee today.
Williams did suggest the property/casualty and life insurance operations of AIG may have received some indirect benefit 'to the extent that the property/casualty insurers would have been adversely affected by a credit downgrade or failure of the AIG parent.'
She said that some of AIG's competitors claim that AIG's commercial insurance pricing is out of line with its risks but other insurance industry participants and observers disagree."
For Source and Full Article Visit: Insurance Journal
Representatives for the Government Accountability Office (GAO), which was asked by Congress to investigate the allegations of unfair pricing, and the National Association of Insurance Commissioners (NAIC), told lawmakers that they have not found enough evidence to conclude that the bailout funds triggered by AIG's financial products unit have been of any direct benefit to the insurance operations.
Orice M. Williams, director of Financial Markets and Community Investment for GAO, and Pennsylvania Insurance Commissioner Joel Ario, representing the NAIC, however, indicated that their monitoring of the pricing situation is ongoing and their results are preliminary.
The GAO testimony and that of Ario on behalf of the NAIC were presented before the House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises today. AIG CEO Edward Liddy is also scheduled to appear before the subcommittee today.
Williams did suggest the property/casualty and life insurance operations of AIG may have received some indirect benefit 'to the extent that the property/casualty insurers would have been adversely affected by a credit downgrade or failure of the AIG parent.'
She said that some of AIG's competitors claim that AIG's commercial insurance pricing is out of line with its risks but other insurance industry participants and observers disagree."
For Source and Full Article Visit: Insurance Journal
FSA head calls for regulation of rating agencies
FSA head calls for regulation of rating agencies: "Credit rating agencies should be regulated, the chairman of the U.K.'s financial services regulator said in a wide-ranging report on the regulation of the global banking sector.
In the Wednesday report, Lord Adair Turner, chairman of the London-based Financial Services Authority, said the regulator supports European Commission efforts to bring in regulation for rating agencies. In the report, 'The Turner Review: A regulatory response to the global banking crisis,' Lord Turner said the growth of the credit derivatives market, for example, created the possibility that the use of credit ratings in counterparty collateral arrangements would produce a 'strong procyclical effect.' For example, he said, the threatened rating agency downgrade of American International Group Inc. in September 2008 'led to severe liquidity strain.'
Among other things, Lord Turner said 'there are concerns about whether the governance of rating agencies has adequately addressed issues relating to conflict of interest and analytical independence.'"
For Source and Full Article Visit: Business Insurance
In the Wednesday report, Lord Adair Turner, chairman of the London-based Financial Services Authority, said the regulator supports European Commission efforts to bring in regulation for rating agencies. In the report, 'The Turner Review: A regulatory response to the global banking crisis,' Lord Turner said the growth of the credit derivatives market, for example, created the possibility that the use of credit ratings in counterparty collateral arrangements would produce a 'strong procyclical effect.' For example, he said, the threatened rating agency downgrade of American International Group Inc. in September 2008 'led to severe liquidity strain.'
Among other things, Lord Turner said 'there are concerns about whether the governance of rating agencies has adequately addressed issues relating to conflict of interest and analytical independence.'"
For Source and Full Article Visit: Business Insurance
African Insurance Brokers Assoc to establish reinsurer
African Insurance Brokers Assoc to establish reinsurer: "THE African Insurance Brokers Association (AIBA) is to establish a reinsurance firm with �5 million start-up capital.
Mr. Jonnie Wilcox, Managing Director of United African Insurance Brokers (UAIB), disclosed this in Lagos yesterday at the 2009 AIBA International Seminar organised by the African Insurance Organisation (AIO) in conjunction with the AIBA.
He disclosed that the reinsurance firm would open for business in January 2010 and its headquarters would be located in London, which he described as the home of insurance business worldwide.
He said that each broker would be required to buy a minimum of one unit of the company's shares and a maximum of four units.
'One unit of share in the reinsurance company will cost about N6.25 million at an exchange rate of N250 to �1.
The scheme tagged 'The Reinsurance Brokers Project' was planned since 1993 and would have started operation in 1994 but due to circumstances beyond our control.
'Now that it is being brought up again, January 2010 will not elude us,' he said.
Wilcox said that the firm had been planned in such a way that it would become a vehicle to generate large volume of businesses into the African economy.
He said that it would also bridge the gap between African countries and Europe by bringing technical expertise as well as reinsurance businesses to African circle.
Chief John Akin-George, Chairman of AIBA, said that the brokers could not wait any more for the company to come on board.
He pointed out that if it had been floated 10 years ago, brokers would have been enjoying its benefits as well as dividends.
'With only one unit a broker or anybody that has invested in it will sit at home, take coffee, smoke his cigar and wait for his dividend,' he said.
Ms Prisca Soares, Secretary General of AIO, advised that brokers should have a report of the company ready to present to the AIO General Assembly and yearly general meeting coming up in Tanzania later this year."
For Source and Full Article Visit: Guardian Newspapers
Mr. Jonnie Wilcox, Managing Director of United African Insurance Brokers (UAIB), disclosed this in Lagos yesterday at the 2009 AIBA International Seminar organised by the African Insurance Organisation (AIO) in conjunction with the AIBA.
He disclosed that the reinsurance firm would open for business in January 2010 and its headquarters would be located in London, which he described as the home of insurance business worldwide.
He said that each broker would be required to buy a minimum of one unit of the company's shares and a maximum of four units.
'One unit of share in the reinsurance company will cost about N6.25 million at an exchange rate of N250 to �1.
The scheme tagged 'The Reinsurance Brokers Project' was planned since 1993 and would have started operation in 1994 but due to circumstances beyond our control.
'Now that it is being brought up again, January 2010 will not elude us,' he said.
Wilcox said that the firm had been planned in such a way that it would become a vehicle to generate large volume of businesses into the African economy.
He said that it would also bridge the gap between African countries and Europe by bringing technical expertise as well as reinsurance businesses to African circle.
Chief John Akin-George, Chairman of AIBA, said that the brokers could not wait any more for the company to come on board.
He pointed out that if it had been floated 10 years ago, brokers would have been enjoying its benefits as well as dividends.
'With only one unit a broker or anybody that has invested in it will sit at home, take coffee, smoke his cigar and wait for his dividend,' he said.
Ms Prisca Soares, Secretary General of AIO, advised that brokers should have a report of the company ready to present to the AIO General Assembly and yearly general meeting coming up in Tanzania later this year."
For Source and Full Article Visit: Guardian Newspapers
WR Berkley CEO: Offshore Insurance Tax Advantage's Days Appear Limited
BER Berkley CEO: Offshore Insurance Tax Advantage's Days Appear Limited: "American insurers looking to curtail a tax advantage they say favors competitors who set up reinsurance operations in Bermuda have taken heart that the Obama administration's proposed budget includes language favorable to their cause. But little will happen until legislation enabling that becomes reality.
Speaking at A.M. Best's Review/Preview ratings conference, W.R. Berkley Corp. Chairman and Chief Executive Officer William R. Berkley said he was heartened by news that projections in the President's budget anticipate increased tax revenues from offshore financial transactions, some of which will likely include insurance activities.
At present, there is no formal legislation in either branch of Congress that changes the treatment of related party reinsurance transactions with offshore affiliates with regard to risk underwritten in the United States.
In 2008, U.S. Rep. Richard Neal, D-Mass. introduced H.R. 6969, to address concerns raised by the 14-member Coalition for a Domestic Insurance Industry. That group includes U.S.-based property/casualty insurers such as W.R. Berkley Corp., Berkshire Hathaway, Chubb Corp., Hartford Financial Services Group, Liberty Mutual, Safeco Corp. and Travelers Cos. The group contends that shifting profits on business written in the United States to jurisdictions with favorable tax treatment such as Bermuda and the Cayman Islands have made it increasingly difficult for U.S.-domiciled firms to compete. That legislation expired.
Neal's original bill called for limiting deductions for related-party reinsurance cessions to the average percentage of premium ceded to unrelated reinsurers. Excess amounts would be determined by line of business, and the U.S. Treasury would be authorized to enforce its provisions."
For Source and Full Article Visit: Trading Markets
Speaking at A.M. Best's Review/Preview ratings conference, W.R. Berkley Corp. Chairman and Chief Executive Officer William R. Berkley said he was heartened by news that projections in the President's budget anticipate increased tax revenues from offshore financial transactions, some of which will likely include insurance activities.
At present, there is no formal legislation in either branch of Congress that changes the treatment of related party reinsurance transactions with offshore affiliates with regard to risk underwritten in the United States.
In 2008, U.S. Rep. Richard Neal, D-Mass. introduced H.R. 6969, to address concerns raised by the 14-member Coalition for a Domestic Insurance Industry. That group includes U.S.-based property/casualty insurers such as W.R. Berkley Corp., Berkshire Hathaway, Chubb Corp., Hartford Financial Services Group, Liberty Mutual, Safeco Corp. and Travelers Cos. The group contends that shifting profits on business written in the United States to jurisdictions with favorable tax treatment such as Bermuda and the Cayman Islands have made it increasingly difficult for U.S.-domiciled firms to compete. That legislation expired.
Neal's original bill called for limiting deductions for related-party reinsurance cessions to the average percentage of premium ceded to unrelated reinsurers. Excess amounts would be determined by line of business, and the U.S. Treasury would be authorized to enforce its provisions."
For Source and Full Article Visit: Trading Markets
Investor Wilbur Ross eyeing insurance investments
Investor Wilbur Ross eyeing insurance investments : "Billionaire investor Wilbur Ross said on Thursday he is keen to invest more in insurance, a sector he has been active in for more than a decade, but is biding his time until pricing fundamentals improve.
Mr. Ross, on the sidelines of an insurance conference in New York, told Reuters he is especially interested in the reinsurance sector but would like to see improvement in the rates carriers charge for coverage.
Insurance pricing tends to rise after an event that leads to large claims on the industry's capital and to decline when underwriting losses are minimal. Currently, rates are expected to increase, with the industry having been hit in 2008 by large hurricane losses and poor investment performance.
Mr. Ross said he would like to see the industry's big pricing swings tamed. 'There has to be more stability in the rates,' he said.
The veteran turnaround specialist first invested in insurance—a Korean life insurer—in 1998 and later made numerous investments in property/catastrophe reinsurers, including Montpelier Re, a Bermuda-based firm.
More recently, he has built a stake in Assured Guaranty, a bond insurer that has seen its stock price hammered amid the credit crunch despite strong underwriting results.
Mr. Ross, the founder of New York-based private equity firm WL Ross & Co. L.L.C., said U.S. municipal bond buyers are now doing the bulk of their business with Assured. The firm has captured 80% market share, he said.
A newer bond insurer formed in late 2007 by Warren Buffett's Berkshire Hathaway Inc. is the other company most active in the market.
Assured has largely escaped the credit problems that crippled rivals Ambac and MBIA by avoiding insuring repackaged subprime mortgages. It is expected to soon seal its acquisition of Belgian lender Dexia's U.S. bond insurance unit, Financial Security Assurance."
For Source and Full Article Visit: Business Insurance
Mr. Ross, on the sidelines of an insurance conference in New York, told Reuters he is especially interested in the reinsurance sector but would like to see improvement in the rates carriers charge for coverage.
Insurance pricing tends to rise after an event that leads to large claims on the industry's capital and to decline when underwriting losses are minimal. Currently, rates are expected to increase, with the industry having been hit in 2008 by large hurricane losses and poor investment performance.
Mr. Ross said he would like to see the industry's big pricing swings tamed. 'There has to be more stability in the rates,' he said.
The veteran turnaround specialist first invested in insurance—a Korean life insurer—in 1998 and later made numerous investments in property/catastrophe reinsurers, including Montpelier Re, a Bermuda-based firm.
More recently, he has built a stake in Assured Guaranty, a bond insurer that has seen its stock price hammered amid the credit crunch despite strong underwriting results.
Mr. Ross, the founder of New York-based private equity firm WL Ross & Co. L.L.C., said U.S. municipal bond buyers are now doing the bulk of their business with Assured. The firm has captured 80% market share, he said.
A newer bond insurer formed in late 2007 by Warren Buffett's Berkshire Hathaway Inc. is the other company most active in the market.
Assured has largely escaped the credit problems that crippled rivals Ambac and MBIA by avoiding insuring repackaged subprime mortgages. It is expected to soon seal its acquisition of Belgian lender Dexia's U.S. bond insurance unit, Financial Security Assurance."
For Source and Full Article Visit: Business Insurance
Where next for the merger market?
Where next for the merger market?: "Several UK and European insurance businesses could be sold as part of the sector restructuring as banks try to find ways of raising capital says Pricewaterhouse Coopers. “Throughout 2009, there will be scope for in-market and cross border consolidation, and banks divesting insurance subsidiaries will provide further stimulus for M&A in the European insurance market,” said Charles Garnsworthy, partner at PwC. “UK banks will probably be active in making divestments in 2009 as they seek to shore up their capital positions.”
Market consolidation could also be driven by falling profitability in the general insurance market, capital pressure on life companies, and capital requirements under Solvency II. But there will be winners out of this, points out Garnsworthy: “There may be opportunities for aggregators and external capital sources, such as PE Houses, to selectively acquire distressed portfolios at discounted prices.”
The report by PwC revealed that deal dynamics have changed dramatically since 2008. Deals are now dominated by haste, opportunism, and government involvement, and are no longer driven by the desire to expand businesses or reaching into new markets.
For Source and Full Article Visit: Insurance Times
Market consolidation could also be driven by falling profitability in the general insurance market, capital pressure on life companies, and capital requirements under Solvency II. But there will be winners out of this, points out Garnsworthy: “There may be opportunities for aggregators and external capital sources, such as PE Houses, to selectively acquire distressed portfolios at discounted prices.”
The report by PwC revealed that deal dynamics have changed dramatically since 2008. Deals are now dominated by haste, opportunism, and government involvement, and are no longer driven by the desire to expand businesses or reaching into new markets.
For Source and Full Article Visit: Insurance Times
Qatar aims to become insurance hub
Qatar aims to become insurance hub: "Qatar Financial Centre Authority (QFCA) has set its sights high with the goal of making Qatar a regional hub for insurance and reinsurance activity.
The group’s director-general, Stuart Pearce, said the country must develop strategic initiatives from locally-based assets if the goal is to be achieved.
“Following the 500 meetings that QFCA official had held with leading insurance firms across the world, the level of interest about the region and especially Qatar is growing, thanks to the country’s sound economic performance and strategic economic initiatives initiated by the government,” Pearce said.
Government support is indeed forthcoming, with Qatar’s finance minister, Yousef Hussein Kamal, giving his personal backing to the QFCA’s vision.
Speaking at the MultaQa Qatar conference this weekend, Kamal said: “In our region, non-life premiums, on average, account for just one percent of GDP.
“This compares with 3% for the UK and 5% for the US.
“I am convinced that we will successfully narrow this gap as our economic diversification strategy progresses and public awareness of insurance improves.”
He added that insurance activity in the Gulf Cooperation Council (GCC) accounts for less than 1% of the world’s total.
“The potential for growth is enormous,” Kamal said.
He added that Qatar’s efforts to reinforce its economy include the creation of Qatar Insurance Services (QIS) and Qatar Finance and Business Academy (QFBA)."
For Source and Full Article Visit: Insurance Daily
The group’s director-general, Stuart Pearce, said the country must develop strategic initiatives from locally-based assets if the goal is to be achieved.
“Following the 500 meetings that QFCA official had held with leading insurance firms across the world, the level of interest about the region and especially Qatar is growing, thanks to the country’s sound economic performance and strategic economic initiatives initiated by the government,” Pearce said.
Government support is indeed forthcoming, with Qatar’s finance minister, Yousef Hussein Kamal, giving his personal backing to the QFCA’s vision.
Speaking at the MultaQa Qatar conference this weekend, Kamal said: “In our region, non-life premiums, on average, account for just one percent of GDP.
“This compares with 3% for the UK and 5% for the US.
“I am convinced that we will successfully narrow this gap as our economic diversification strategy progresses and public awareness of insurance improves.”
He added that insurance activity in the Gulf Cooperation Council (GCC) accounts for less than 1% of the world’s total.
“The potential for growth is enormous,” Kamal said.
He added that Qatar’s efforts to reinforce its economy include the creation of Qatar Insurance Services (QIS) and Qatar Finance and Business Academy (QFBA)."
For Source and Full Article Visit: Insurance Daily
AIG weighing sale of Manhattan headquarters
AIG weighing sale of Manhattan headquarters: "American International Group Inc (AIG.N), being kept afloat by a $180 billion government bailout, may sell its downtown Manhattan headquarters.
'AIG is evaluating the potential sale of its headquarters building at 70 Pine Street and the 72 Wall Street building,' said spokesman Mark Herr in a statement. 'This is part of AIG's divestiture strategy and effort to maximize operating efficiency.'
AIG has been the focus of an irate U.S. Congress this week, fuming over $165 million in bonus payments to executives after the massive bailout.
Both buildings were constructed in 1932 and have been owned and operated by AIG since the 1970s. The insurer's roots date back to China in 1919.
The 66-story 70 Pine Street building is topped with a Gothic-like spire, and was the tallest building in downtown Manhattan prior to the building of the World Trade Center.
Herr said 'market interest' would help AIG decide the best way to proceed with the sale.
He declined to say what price tag AIG was seeking for the properties. CB Richard Ellis (CBG.N) is representing AIG.
It has also put the prized building in the Otemachi section of Tokyo that overlooks the Imperial Palace up for sale and is in talks to sell other real estate assets around the world."
For Source and Full Article Visit: Reuters
'AIG is evaluating the potential sale of its headquarters building at 70 Pine Street and the 72 Wall Street building,' said spokesman Mark Herr in a statement. 'This is part of AIG's divestiture strategy and effort to maximize operating efficiency.'
AIG has been the focus of an irate U.S. Congress this week, fuming over $165 million in bonus payments to executives after the massive bailout.
Both buildings were constructed in 1932 and have been owned and operated by AIG since the 1970s. The insurer's roots date back to China in 1919.
The 66-story 70 Pine Street building is topped with a Gothic-like spire, and was the tallest building in downtown Manhattan prior to the building of the World Trade Center.
Herr said 'market interest' would help AIG decide the best way to proceed with the sale.
He declined to say what price tag AIG was seeking for the properties. CB Richard Ellis (CBG.N) is representing AIG.
It has also put the prized building in the Otemachi section of Tokyo that overlooks the Imperial Palace up for sale and is in talks to sell other real estate assets around the world."
For Source and Full Article Visit: Reuters
S&P has a gloomy outlook for Chinese insurer
S&P has a gloomy outlook for Chinese insurer: "US ratings agency Standard & Poor's Ratings Services has placed its 'BBB-' long-term and 'A-3' short-term counterparty credit ratings on China Insurance International Holdings Co. Ltd. (CIIH) and the 'BBB-' issue rating on the company's senior unsecured debt on CreditWatch with negative implications.
At the same time, Standard & Poor's also placed its 'A-' long-term counterparty credit and insurer financial strength ratings on China International Reinsurance Co. Ltd. (CIRe) on CreditWatch with negative implications.
'The CreditWatch actions follow the group's recent profit announcement and reflect the risks stemming from the deterioration in the group's capitalization as a result of losses made in 2008,' S&P said. It added that 'there is some uncertainty about the group's likely earnings performance over the next two years, given the currently volatile market conditions and the rapid growth of the group's operations in China.'
S&P said that CIIH's operating performance in fiscal 2008 was weaker than expected despite its profit warning a month ago. The insurer reported a loss attributable to shareholders of Hong Kong dollar (HK$) 299.715m."
For Source and Full Article Visit: Reinsurance Magazine
At the same time, Standard & Poor's also placed its 'A-' long-term counterparty credit and insurer financial strength ratings on China International Reinsurance Co. Ltd. (CIRe) on CreditWatch with negative implications.
'The CreditWatch actions follow the group's recent profit announcement and reflect the risks stemming from the deterioration in the group's capitalization as a result of losses made in 2008,' S&P said. It added that 'there is some uncertainty about the group's likely earnings performance over the next two years, given the currently volatile market conditions and the rapid growth of the group's operations in China.'
S&P said that CIIH's operating performance in fiscal 2008 was weaker than expected despite its profit warning a month ago. The insurer reported a loss attributable to shareholders of Hong Kong dollar (HK$) 299.715m."
For Source and Full Article Visit: Reinsurance Magazine
A Milder Hurricane Outlook From AccuWeather
A Milder Hurricane Outlook From AccuWeather: "The 2009 hurricane season will see three hurricanes impacting the U.S. coast, compared with four that arrived last year, and a lower total number of named storms, according to an AccuWeather.com early forecast.
Joe Bastardi, AccuWeather chief long-range and hurricane forecaster, also predicted storms may be more likely to form in the Atlantic basin closer to the coast. The possibility of a major hurricane making a U.S. landfall cannot be ruled out, he warned.
“This year’s forecast shows only half as many impacts on the United States as there were last year,” Mr. Bastardi said. “But keep in mind, it only takes one major hurricane hitting a highly populated area to have devastating impact.”
“Early indications show a reduction in the overall number of named storms and of major hurricanes in the Atlantic basin compared to last year, but the number of storms should still be near or a little above normal.”"
For Source and Full Article Visit: National Underwriter
Joe Bastardi, AccuWeather chief long-range and hurricane forecaster, also predicted storms may be more likely to form in the Atlantic basin closer to the coast. The possibility of a major hurricane making a U.S. landfall cannot be ruled out, he warned.
“This year’s forecast shows only half as many impacts on the United States as there were last year,” Mr. Bastardi said. “But keep in mind, it only takes one major hurricane hitting a highly populated area to have devastating impact.”
“Early indications show a reduction in the overall number of named storms and of major hurricanes in the Atlantic basin compared to last year, but the number of storms should still be near or a little above normal.”"
For Source and Full Article Visit: National Underwriter
Prudential CEO to step down, company not bidding for AIG
Prudential shares soar after insurer beats forecast, ups dividend: "Shares in U.K. insurance giant Prudential Plc soared over 20% Thursday after the group reported better-than-expected results, lifted its dividend and said it won't bid for a division of American International Group.
PUK 8.13, +0.50, +6.5%) said it swung to a 396 million pound ($562 million) overall net loss in 2008 from a profit of 947 million pounds a year earlier, due to a loss on investments of 1.78 billion pounds, mainly from its U.S. operations.
However, the group said that operating profit using European embedded value accounting standards (EEV) rose 17% to 2.96 billion pounds, beating the consensus forecast of 2.56 billion pounds. Operating profit doesn't include any short-term investment losses.
It also announced the departure of CEO Mark Tucker, who will step down at the end of September after four-and-a-half years in the role. He will be succeeded by Chief Financial Officer Tidjane Thiam.
'Prudential is likely to be one of only a few insurers that can afford to raise its dividend as it has strong cashflow and a strong capital base,' said Societe Generale analyst Michael van Wegen, who added that Thiam has made 'a good impression' since joining the firm in April last year.
Shares in Prudential, which is not affiliated with the U.S. company of the same name, jumped 22% in London following the announcements. See London Markets for more.
The gains were also part of a broader rally for the insurers -- which are significant holders of corporate bonds -- following the Federal Reserve's plan to buy up to $300 billion of long-term Treasurys, which sent bond prices soaring.
Prudential said operating profit growth was strongest in Asia -- its largest market -- and the U.K., while earnings shrank in the U.S.
The company reportedly may replace American International Group as the sponsor of Manchester United Football Club, which has a strong fan-base in Asia.
However, CEO Tucker confirmed on a conference call with analysts that Prudential will not be bidding for AIA, the Asian arm of AIG, saying the potential terms simply didn't make financial sense for the group. Ruling out an AIA bid removes one of the worries that Prudential could overpay for the business and end up having to launch a massive rights issue, said Keefe, Bruyette & Woods analyst Greig Paterson."
For Source and Full Article Visit: MarketWatch
PUK 8.13, +0.50, +6.5%) said it swung to a 396 million pound ($562 million) overall net loss in 2008 from a profit of 947 million pounds a year earlier, due to a loss on investments of 1.78 billion pounds, mainly from its U.S. operations.
However, the group said that operating profit using European embedded value accounting standards (EEV) rose 17% to 2.96 billion pounds, beating the consensus forecast of 2.56 billion pounds. Operating profit doesn't include any short-term investment losses.
It also announced the departure of CEO Mark Tucker, who will step down at the end of September after four-and-a-half years in the role. He will be succeeded by Chief Financial Officer Tidjane Thiam.
'Prudential is likely to be one of only a few insurers that can afford to raise its dividend as it has strong cashflow and a strong capital base,' said Societe Generale analyst Michael van Wegen, who added that Thiam has made 'a good impression' since joining the firm in April last year.
Shares in Prudential, which is not affiliated with the U.S. company of the same name, jumped 22% in London following the announcements. See London Markets for more.
The gains were also part of a broader rally for the insurers -- which are significant holders of corporate bonds -- following the Federal Reserve's plan to buy up to $300 billion of long-term Treasurys, which sent bond prices soaring.
Prudential said operating profit growth was strongest in Asia -- its largest market -- and the U.K., while earnings shrank in the U.S.
The company reportedly may replace American International Group as the sponsor of Manchester United Football Club, which has a strong fan-base in Asia.
However, CEO Tucker confirmed on a conference call with analysts that Prudential will not be bidding for AIA, the Asian arm of AIG, saying the potential terms simply didn't make financial sense for the group. Ruling out an AIA bid removes one of the worries that Prudential could overpay for the business and end up having to launch a massive rights issue, said Keefe, Bruyette & Woods analyst Greig Paterson."
For Source and Full Article Visit: MarketWatch
Willis Research Network wins Google Research Award
Willis Research Network wins Google ResearchAward: "Willis Research Fellow Dr Aidan Slingsby and Dr Jason Dykes and Dr Jo Wood of City University London, in collaboration with Willis Research Network (WRN) Senior Academic Dr David Stephenson and Rachel Lowe of Exeter University, have won a Google research prize for their work on visualising seasonal climate forecasts in Google Earth. The entry allowed 10 years of seasonal climate forecast data in South America to be explored.
The judges agreed that it 'represented a novel and compelling representation of science using Google Earth and the KML language'. Willis aims to lead modern mapping and GeoVisualisation techniques across insurance."
For Source and Full Article Visit: Willis Research Network
The judges agreed that it 'represented a novel and compelling representation of science using Google Earth and the KML language'. Willis aims to lead modern mapping and GeoVisualisation techniques across insurance."
For Source and Full Article Visit: Willis Research Network
Swiss Re extends IT services contract - vnunet.com
Swiss Re extends IT services contract: "Swiss Re has extended a business process outsourcing deal with Perot Systems for a further 10 years.
The renewal will see Perot continuing to provide administrative and business process services, including IT support for new acquisitions, as well as customer service and transaction processing through the supplier’s service policy administration platform.
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Business process services provided by the outsourcer also include product engineering, claim application processing, life insurance policy administration, running of call centres, payment and settlement and services to improve the collection of receivables."
For Source and Full Article Visit: vnunet.com
The renewal will see Perot continuing to provide administrative and business process services, including IT support for new acquisitions, as well as customer service and transaction processing through the supplier’s service policy administration platform.
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Business process services provided by the outsourcer also include product engineering, claim application processing, life insurance policy administration, running of call centres, payment and settlement and services to improve the collection of receivables."
For Source and Full Article Visit: vnunet.com
America Hates AIG, So the Company’s Stock Triples
America Hates AIG, So the Company’s Stock Triples: "We’re well into the Great American Outrage-fest over AIG. It’s been a week since President Barack Obama learned of the bonuses, according to the White House. We’ve had finger-pointing between Congress and the Treasury, even though people in each knew about the bonuses because — surprise! — they’ve been reported in the Journal and elsewhere for months. America is angry. They hate AIG. Its once-great name will have to go.
The result of this outpouring? AIG shares have more than tripled.
Last Friday, AIG stock sat at 50 cents a share. The shares closed Wednesday at $1.38, despite the weekend of outrage and a three-day beating that forever branded the world’s largest insurer into America’s most unforgettable corporate villain. This morning the stock jumped 44% out of the gates to $1.99, though it has since pulled back.
Of course, the stock is far from the $50 a share it was trading at a year ago. It’s well off the $3.75 closing price a few hours before the September bailout, and still shy of the $2.04 closing a day after the bailout.
But that’s more than a 200% return in three days. Some of it may have been short-covering, with investors realizing the stock’s low point (33 cents) was enough. Maybe the fact that the Federal Reserve and the Obama administration were standing behind AIG — and the successful resolution of AIG Financial Products — gave investors hope. Maybe it’s the start of something that will return taxpayers some value eventually. (The government owns about 80% of the equity in AIG.)
It’s hard to say. It just tells you that a widespread loss of America’s confidence does not always translate into a loss in equity value."
For Source and Full Article Visit: WSJ
The result of this outpouring? AIG shares have more than tripled.
Last Friday, AIG stock sat at 50 cents a share. The shares closed Wednesday at $1.38, despite the weekend of outrage and a three-day beating that forever branded the world’s largest insurer into America’s most unforgettable corporate villain. This morning the stock jumped 44% out of the gates to $1.99, though it has since pulled back.
Of course, the stock is far from the $50 a share it was trading at a year ago. It’s well off the $3.75 closing price a few hours before the September bailout, and still shy of the $2.04 closing a day after the bailout.
But that’s more than a 200% return in three days. Some of it may have been short-covering, with investors realizing the stock’s low point (33 cents) was enough. Maybe the fact that the Federal Reserve and the Obama administration were standing behind AIG — and the successful resolution of AIG Financial Products — gave investors hope. Maybe it’s the start of something that will return taxpayers some value eventually. (The government owns about 80% of the equity in AIG.)
It’s hard to say. It just tells you that a widespread loss of America’s confidence does not always translate into a loss in equity value."
For Source and Full Article Visit: WSJ
Outing AIG's Bonus Babies: What's the Point?
Outing AIG's Bonus Babies: What's the Point?: "Is there a point in divulging the names of the AIG (AIG) executives who received bonuses? There seems to be a frenzy on the part of some blogs and the MSM to identify the recipients and even publish their pictures.
Given that credible threats have been made towards AIG and those that received bonuses, publishing information that could lead some lunatic to them seems awfully irresponsible. Whatever possible good may be accomplished (I can think of none), the potential for causing great harm would seem to argue strongly in favor of some reticence.
One could argue simply that those who received bonuses are deserving of the same right to privacy as any of us. I know that argument will be attacked with lots of pious counters about receiving government money, our right to know as shareholders etc. So be it. Let me throw something else out there.
How about granting a presumption of innocence to some of these guys. Do you know who took the money and contributed nothing in return? Of course you don’t, and neither do any of the high-minded accusers. Quite probably there are some pretty smart guys in AGIFP who could have checked out at the first sign of trouble and walked across the street to a job that would have paid them as much or more than they made by sticking around. It’s also pretty likely that some of them saved us more than a little bit of money just because they knew where the bodies were buried and how to unwind part of the mess at the least cost.
Damning all of them without knowing all of the facts is unfair. Putting their welfare and that of their families in jeopardy is not something I want to be responsible for.
Barring any more lunacy, I suspect that this will be the last I write about this issue. It’s a media-inspired tempest that means little in the larger scheme. Thankfully, the Fed came along yesterday and pretty much sucked the air out of it."
For Source and Full Article Visit: Seeking Alpha
Given that credible threats have been made towards AIG and those that received bonuses, publishing information that could lead some lunatic to them seems awfully irresponsible. Whatever possible good may be accomplished (I can think of none), the potential for causing great harm would seem to argue strongly in favor of some reticence.
One could argue simply that those who received bonuses are deserving of the same right to privacy as any of us. I know that argument will be attacked with lots of pious counters about receiving government money, our right to know as shareholders etc. So be it. Let me throw something else out there.
How about granting a presumption of innocence to some of these guys. Do you know who took the money and contributed nothing in return? Of course you don’t, and neither do any of the high-minded accusers. Quite probably there are some pretty smart guys in AGIFP who could have checked out at the first sign of trouble and walked across the street to a job that would have paid them as much or more than they made by sticking around. It’s also pretty likely that some of them saved us more than a little bit of money just because they knew where the bodies were buried and how to unwind part of the mess at the least cost.
Damning all of them without knowing all of the facts is unfair. Putting their welfare and that of their families in jeopardy is not something I want to be responsible for.
Barring any more lunacy, I suspect that this will be the last I write about this issue. It’s a media-inspired tempest that means little in the larger scheme. Thankfully, the Fed came along yesterday and pretty much sucked the air out of it."
For Source and Full Article Visit: Seeking Alpha
Midwest's New Madrid Earthquake Zone: Is It Dying Out?
Midwest's New Madrid Earthquake Zone: Is It Dying Out?: "A Midwest fault zone that unleashed a series of violent earthquakes in the early 19th century shows no signs of building up the stresses needed for the quakes many seismologists expect to someday rock the region again, two scientists say.
The researchers said that may mean the little-understood New Madrid Seismic Zone is shutting down or that seismic activity is shifting to adjacent faults in the nation's midsection.
Other scientists called those conclusions premature, in part because the study was based on a relatively narrow time period from the area that remains seismically active.
For their study, researchers from Purdue and Northwestern universities analyzed global positioning measurements of shifts in the Earth's surface taken from 10 sites within the New Madrid zone over eight years. That region in the central Mississippi Valley produced a series of earthquakes in 1811 and 1812 of an estimated magnitude 7.0 or greater.
Researchers expected to find surface features moving at least one to 2 millimeters each year. Such shifts would reflect growing subterranean stresses like the slow stretching of a rubber band that seismologists expect to someday spark more big New Madrid quakes.
Instead, they found annual shifts of 0.2 millimeter or less each year -- an amount so tiny it essentially represents no growing stresses in the seismic zone, said Eric Calais, a Purdue professor of earth and atmospheric sciences who led the study."
For Source and Full Article Visit: Insurance Journal
The researchers said that may mean the little-understood New Madrid Seismic Zone is shutting down or that seismic activity is shifting to adjacent faults in the nation's midsection.
Other scientists called those conclusions premature, in part because the study was based on a relatively narrow time period from the area that remains seismically active.
For their study, researchers from Purdue and Northwestern universities analyzed global positioning measurements of shifts in the Earth's surface taken from 10 sites within the New Madrid zone over eight years. That region in the central Mississippi Valley produced a series of earthquakes in 1811 and 1812 of an estimated magnitude 7.0 or greater.
Researchers expected to find surface features moving at least one to 2 millimeters each year. Such shifts would reflect growing subterranean stresses like the slow stretching of a rubber band that seismologists expect to someday spark more big New Madrid quakes.
Instead, they found annual shifts of 0.2 millimeter or less each year -- an amount so tiny it essentially represents no growing stresses in the seismic zone, said Eric Calais, a Purdue professor of earth and atmospheric sciences who led the study."
For Source and Full Article Visit: Insurance Journal
AIG could face court action on bonus details: Cuomo
AIG could face court action on bonus details: Cuomo: "American International Group Inc. will be taken to court if it does not provide details Thursday of bonus recipients that were requested under a subpoena, New York Attorney General Andrew Cuomo said.
Mr. Cuomo also told reporters on a conference call that he expected Bank of America to provide the names of 200 highest bonus earners at Merrill Lynch & Co. last year under a state court ruling published Wednesday, which said the names were not a trade secret and could be made public."
For Source and Full Article Visit: Business Insurance
Mr. Cuomo also told reporters on a conference call that he expected Bank of America to provide the names of 200 highest bonus earners at Merrill Lynch & Co. last year under a state court ruling published Wednesday, which said the names were not a trade secret and could be made public."
For Source and Full Article Visit: Business Insurance
18 March 2009
Plumeri asks Willis staff to take unpaid leave
Plumeri asks Willis staff to take unpaid leave: "Willis chief executive Joe Plumeri has offered staff cash incentives to cut their working hours in a bid to trim costs, Reinsurance can reveal.
According to sources inside the company, Plumeri told staff at The Willis Building that he was looking for volunteers to work four-day weeks for less pay. It is understood that an internal email had gone round Willis employees in February informing them of the same thing.
After a less-than-lukewarm response from Willis staff initially, Plumeri has now offered staff cash incentives in return for blocks of unpaid leave. Reinsurance understands that one of the ideas is that staff taking a month's sabbatical can earn 30% of the salary for that period.
A number of market sources told Reinsurance that Willis' move may hurt the broker in the long run with regards to account serving, but there is a general agreement amongst London Market brokers and underwriters contacted by Reinsurance that Willis' move may safeguard jobs - even if it is only for the short term.
'Having a month's sabbatical on 30% salary is better than having a permanent sabbatical on zero salary,' one broker said.
When contacted by Reinsurance about the story, Willis said: 'We are offering our associates the option to take some unpaid leave, and/or partly paid sabbaticals. This fits with our policy of moving toward more flexible working and benefit structures. It also gives us another tool that allows us to manage our costs as we, like all other professional services firms, navigate these times of economic turmoil and uncertainty. This scheme is not compulsory, and is managed completely in conjunction with the team leaders to ensure client service is never compromised. It has been extremely well received by our associates.'"
For Source and Full Article Visit: Reinsurance
According to sources inside the company, Plumeri told staff at The Willis Building that he was looking for volunteers to work four-day weeks for less pay. It is understood that an internal email had gone round Willis employees in February informing them of the same thing.
After a less-than-lukewarm response from Willis staff initially, Plumeri has now offered staff cash incentives in return for blocks of unpaid leave. Reinsurance understands that one of the ideas is that staff taking a month's sabbatical can earn 30% of the salary for that period.
A number of market sources told Reinsurance that Willis' move may hurt the broker in the long run with regards to account serving, but there is a general agreement amongst London Market brokers and underwriters contacted by Reinsurance that Willis' move may safeguard jobs - even if it is only for the short term.
'Having a month's sabbatical on 30% salary is better than having a permanent sabbatical on zero salary,' one broker said.
When contacted by Reinsurance about the story, Willis said: 'We are offering our associates the option to take some unpaid leave, and/or partly paid sabbaticals. This fits with our policy of moving toward more flexible working and benefit structures. It also gives us another tool that allows us to manage our costs as we, like all other professional services firms, navigate these times of economic turmoil and uncertainty. This scheme is not compulsory, and is managed completely in conjunction with the team leaders to ensure client service is never compromised. It has been extremely well received by our associates.'"
For Source and Full Article Visit: Reinsurance
NAPSLO encouraged by planned reintroduction of NRRA in U.S. Senate
NAPSLO encouraged by planned reintroduction of NRRA in Senate: "NAPSLO officials said they are encouraged by the planned early reintroduction of the Nonadmitted and Reinsurance Reform Act of 2009 in the Senate and hope that the bill will be approved by the 111th Congress.
Senators Evan Bayh (D-IN) and Mel Martinez (R-FL), members of the Senate Committee on Banking, Housing and Urban Affairs, announced today that they will introduce a version of the Nonadmitted and Reinsurance Reform Act (NRRA) of 2009.
'We are thrilled to have garnered the leadership of Senator Bayh, a senior Democratic member of the Senate Banking Committee, to help lead the effort on surplus lines reform this year along with the continued excellent leadership of Senator Martinez,' said Maria Berthoud of B&D Consulting, who represents NAPSLO in Washington, D.C.
'The new leadership of Senator Bayh shows the momentum the NRRA has this year. With the leadership of Senators Bayh and Martinez, we are optimistic about the bill's chances for passage.' said NAPSLO President John Wood. “This bill was approved unanimously by the House of Representatives the past two sessions and the early introduction in the Senate offers encouragement that the bill will be approved by the 111th Congress and signed into law.”
The Nonadmitted and Reinsurance Reform Act (NRRA) measure is aimed specifically at streamlining and reducing barriers in state regulation of surplus lines insurance and reinsurance. It would create a uniform system, while preserving the role of the state regulator."
For Source and Full Article Visit: NAPSLO BLOG
Senators Evan Bayh (D-IN) and Mel Martinez (R-FL), members of the Senate Committee on Banking, Housing and Urban Affairs, announced today that they will introduce a version of the Nonadmitted and Reinsurance Reform Act (NRRA) of 2009.
'We are thrilled to have garnered the leadership of Senator Bayh, a senior Democratic member of the Senate Banking Committee, to help lead the effort on surplus lines reform this year along with the continued excellent leadership of Senator Martinez,' said Maria Berthoud of B&D Consulting, who represents NAPSLO in Washington, D.C.
'The new leadership of Senator Bayh shows the momentum the NRRA has this year. With the leadership of Senators Bayh and Martinez, we are optimistic about the bill's chances for passage.' said NAPSLO President John Wood. “This bill was approved unanimously by the House of Representatives the past two sessions and the early introduction in the Senate offers encouragement that the bill will be approved by the 111th Congress and signed into law.”
The Nonadmitted and Reinsurance Reform Act (NRRA) measure is aimed specifically at streamlining and reducing barriers in state regulation of surplus lines insurance and reinsurance. It would create a uniform system, while preserving the role of the state regulator."
For Source and Full Article Visit: NAPSLO BLOG
Risk: Gulf wind and energy
Risk: Gulf wind and energy: "Like the oil platforms that were ravaged by hurricane Ike, the Gulf of Mexico wind storm book lies in ruins, writes Lauren MacGillivray.
It wasn’t supposed to be like this. By the time Ike hit land in September 2008, it had weakened to a Category 2 storm, according to the Saffir-Simpson hurricane scale. But it blew hurricane winds over a 125-mile radius and tropical storm winds over a 255-mile radius.
Fifty-four oil platforms were destroyed and a further 95 damaged as Ike overtook hurricane Ivan as the third most expensive insured loss in the past 10 years, at $15bn or £10.8bn (see bar chart, overleaf).
With the market’s capacity expected to be about 30% lower than it was last year – depending on fresh capacity from Berkshire Hathaway – broker Willis has used its latest Energy Market Review to warn that the future of Gulf of Mexico wind storm insurance is in jeopardy. As the report notes, these policies account for a quarter of upstream insurers’ premiums (see chart, right).
“Faced with an even more limited and expensive product, we understand that some energy companies are likely to question the viability of continuing to purchase this cover,” says the report. “Given the potential disconnect between supply and demand for Gulf of Mexico wind insurance products, it is little wonder that market pessimists are forecasting the end of Gulf of Mexico wind as a viable insurance class.”
The report adds that several energy insurers have found their initial loss estimates to be “wholly inadequate”, concluding that Gulf of Mexico risk is “more confused, volatile and expensive than ever before”.
“It is clear that Ike was no normal Category 2 storm and, in terms of the number of platforms damaged, this is a very sizeable event,” says Paul Dawson, underwriter for energy at Beazley Syndicate. “We shouldn’t be surprised that we will be paying a substantial claim.”
On top of this, reinsurance capacity for direct insurers in this market is set to be as little as 70% of last year’s total.
What’s the solution? Willis believes one answer is to introduce a capital market instrument. This would allow reinsurance companies to transfer risk into the capital markets via private investors, allowing them to generate more capacity to the direct market, which may fix the supply and demand imbalance."
For Source and Full Article Visit: Insurance Times
It wasn’t supposed to be like this. By the time Ike hit land in September 2008, it had weakened to a Category 2 storm, according to the Saffir-Simpson hurricane scale. But it blew hurricane winds over a 125-mile radius and tropical storm winds over a 255-mile radius.
Fifty-four oil platforms were destroyed and a further 95 damaged as Ike overtook hurricane Ivan as the third most expensive insured loss in the past 10 years, at $15bn or £10.8bn (see bar chart, overleaf).
With the market’s capacity expected to be about 30% lower than it was last year – depending on fresh capacity from Berkshire Hathaway – broker Willis has used its latest Energy Market Review to warn that the future of Gulf of Mexico wind storm insurance is in jeopardy. As the report notes, these policies account for a quarter of upstream insurers’ premiums (see chart, right).
“Faced with an even more limited and expensive product, we understand that some energy companies are likely to question the viability of continuing to purchase this cover,” says the report. “Given the potential disconnect between supply and demand for Gulf of Mexico wind insurance products, it is little wonder that market pessimists are forecasting the end of Gulf of Mexico wind as a viable insurance class.”
The report adds that several energy insurers have found their initial loss estimates to be “wholly inadequate”, concluding that Gulf of Mexico risk is “more confused, volatile and expensive than ever before”.
“It is clear that Ike was no normal Category 2 storm and, in terms of the number of platforms damaged, this is a very sizeable event,” says Paul Dawson, underwriter for energy at Beazley Syndicate. “We shouldn’t be surprised that we will be paying a substantial claim.”
On top of this, reinsurance capacity for direct insurers in this market is set to be as little as 70% of last year’s total.
What’s the solution? Willis believes one answer is to introduce a capital market instrument. This would allow reinsurance companies to transfer risk into the capital markets via private investors, allowing them to generate more capacity to the direct market, which may fix the supply and demand imbalance."
For Source and Full Article Visit: Insurance Times
Aon Leads Captive Managers
Aon Leads Captive Managers: "Managing 1,269 of the world's 5,211 captives, Aon Global Insurance Managers, the captive management arm of Aon Global Risk Consulting, continues to lead the captive arena with a market share of 24 percent, as published in the March 8 Business Insurance Captive Spotlight Report.
Aon finished well ahead of Marsh and Willis, with 1,120 and 298 captives, respectively. With 42 Protected Cell Companies, AGIM is ranked as the leading PCC manager, followed by Marsh with 40 and HSBC and Willis with 22 PCCs each.
'The Business Insurance survey demonstrates that AGIM continues to be the market leader in the captive arena,' said Clive James, group managing director of AGIM. 'Despite the slowdown in growth of new captives, AGIM has produced over 50 captives and leads the way in cell captive formations through its innovative solutions to risk financing.'
AGIM manages insurance vehicles in more than 30 locations worldwide, generating total premiums of more than $19 billion per year through managed insurance vehicles with total assets in excess of $50 billion."
For Source and Full Article Visit: dBusinessNews
Aon finished well ahead of Marsh and Willis, with 1,120 and 298 captives, respectively. With 42 Protected Cell Companies, AGIM is ranked as the leading PCC manager, followed by Marsh with 40 and HSBC and Willis with 22 PCCs each.
'The Business Insurance survey demonstrates that AGIM continues to be the market leader in the captive arena,' said Clive James, group managing director of AGIM. 'Despite the slowdown in growth of new captives, AGIM has produced over 50 captives and leads the way in cell captive formations through its innovative solutions to risk financing.'
AGIM manages insurance vehicles in more than 30 locations worldwide, generating total premiums of more than $19 billion per year through managed insurance vehicles with total assets in excess of $50 billion."
For Source and Full Article Visit: dBusinessNews
Aviation Insurers Reportedly Remain Confident in Boeing 777 Engines
Aviation Insurers Reportedly Remain Confident in Boeing 777 Engines : "In light of several recent aviation insurance claims, the question of whether specific planes and/or specific engines are more prone to incidents is becoming relevant to aviation underwriters. According to a recent report in Insurance Day, aviation underwriters “remain confident in the insurability of Boeing 777s” despite the possibility that there could be a repeat of the mechanical fault that caused a crash landing at Heathrow Airport in January 2008.
According to reports, the potential mechanical fault is limited to the Rolls Royce Trent 800 engine, which is used in approximately one-fourth of the Boeing 777 worldwide fleet. This engine appears to be susceptible to ice build-up in the fuel heat exchanger in very cold conditions, possibility involving flights over polar routes. Airlines [or is it manufacturers?] have implemented new operating procedures, decreasing the likelihood of business interruption claims as the result of future losses. There is, however, potentially more pressure on the product components market in terms of potential loss settlements.
According to media reports, Rolls Royce has announced that it is developing a modification to the heat exchanger that promises an improvement on the ability to prevent the build-up of ice. Click here for more information about Rolls Royce’s modifications of the Trent 800 engine."
For Source and Full Article Visit: InsureReinsure.Com
According to reports, the potential mechanical fault is limited to the Rolls Royce Trent 800 engine, which is used in approximately one-fourth of the Boeing 777 worldwide fleet. This engine appears to be susceptible to ice build-up in the fuel heat exchanger in very cold conditions, possibility involving flights over polar routes. Airlines [or is it manufacturers?] have implemented new operating procedures, decreasing the likelihood of business interruption claims as the result of future losses. There is, however, potentially more pressure on the product components market in terms of potential loss settlements.
According to media reports, Rolls Royce has announced that it is developing a modification to the heat exchanger that promises an improvement on the ability to prevent the build-up of ice. Click here for more information about Rolls Royce’s modifications of the Trent 800 engine."
For Source and Full Article Visit: InsureReinsure.Com
S&P downgrades Everest
SS&P Downgrades Everest: "Standard & Poor's Ratings Services has lowered its counterparty credit ratings on Bermuda-based Everest Re Group Ltd. and its US-based intermediary holding company, Everest Reinsurance Holdings Inc., to BB+ from A-.
The ratings agency Standard & Poor's also said that it lowered its counterparty credit and financial strength ratings on operating subsidiaries Everest Reinsurance (Bermuda) Ltd., Everest Reinsurance Co., and Everest National Insurance Co. to A+ from AA-.
In addition, Standard & Poor's removed all of these ratings from CreditWatch, where they were placed on December 19, 2008, with negative implications.
The outlook on all these companies is stable.
'The downgrade stems from Everest's inability to exploit its competitive position to generate sustainable, strong underwriting and operating results commensurate with the former rating,' said Standard & Poor's credit analyst Taoufik Gharib.
S&P added that the rating action was also a result of the company's continuous adverse reserve developments, which have plagued earnings. In addition, Everest's enterprise risk management (ERM) program is adequate, but the implementation of a more robust programme has been slower than expected.
The ratings on Everest are based on its strong competitive position with a global market reach, very strong capital adequacy, and strong financial flexibility, the ratings agency added.
The stable outlook reflects S&P's view that Everest will maintain its strong competitive position with a global presence.
'Premium writings will likely grow modestly in 2009, benefiting from hardening prices, mainly in property reinsurance,' the S&P statement added. 'Its international business will likely increase as a percentage of total writings as it continues to diversify its geographic business mix.'
S&P expects Everest will produce a healthy combined ratio of 93% to 95% and a return on revenue of about 15 percent. Supporting these results are rate increases, mainly in the property reinsurance, and the investment income from its large invested asset base.
'Considering the recent downgrade, a revision of the outlook to positive is unlikely in the next 12 to 24 months,' Mr. Gharib added. 'However, if the company cannot sustain strong earnings or suffers further material adverse reserve developments, we could revise the outlook to negative.'"
For Source and Full Article Visit: The Royal Gazette
The ratings agency Standard & Poor's also said that it lowered its counterparty credit and financial strength ratings on operating subsidiaries Everest Reinsurance (Bermuda) Ltd., Everest Reinsurance Co., and Everest National Insurance Co. to A+ from AA-.
In addition, Standard & Poor's removed all of these ratings from CreditWatch, where they were placed on December 19, 2008, with negative implications.
The outlook on all these companies is stable.
'The downgrade stems from Everest's inability to exploit its competitive position to generate sustainable, strong underwriting and operating results commensurate with the former rating,' said Standard & Poor's credit analyst Taoufik Gharib.
S&P added that the rating action was also a result of the company's continuous adverse reserve developments, which have plagued earnings. In addition, Everest's enterprise risk management (ERM) program is adequate, but the implementation of a more robust programme has been slower than expected.
The ratings on Everest are based on its strong competitive position with a global market reach, very strong capital adequacy, and strong financial flexibility, the ratings agency added.
The stable outlook reflects S&P's view that Everest will maintain its strong competitive position with a global presence.
'Premium writings will likely grow modestly in 2009, benefiting from hardening prices, mainly in property reinsurance,' the S&P statement added. 'Its international business will likely increase as a percentage of total writings as it continues to diversify its geographic business mix.'
S&P expects Everest will produce a healthy combined ratio of 93% to 95% and a return on revenue of about 15 percent. Supporting these results are rate increases, mainly in the property reinsurance, and the investment income from its large invested asset base.
'Considering the recent downgrade, a revision of the outlook to positive is unlikely in the next 12 to 24 months,' Mr. Gharib added. 'However, if the company cannot sustain strong earnings or suffers further material adverse reserve developments, we could revise the outlook to negative.'"
For Source and Full Article Visit: The Royal Gazette
US Treasury's Geithner: AIG must pay back bonuses
US Treasury's Geithner: AIG must pay back bonuses: "U.S. Treasury Secretary Timothy Geithner on Tuesday said insurer AIG would have to promise to compensate taxpayers for $165 million in employee bonuses as a condition for receiving a planned $30 billion expansion of its government bailout.
'We will impose on AIG a contractual commitment to pay the Treasury from the operations of the company the amount of the retention awards just paid,' Geithner said in a letter to congressional leaders.
In addition, the Treasury will deduct $165 million from that $30 billion in additional taxpayer funds announced for American International Group (AIG.N) on March 2, Geithner said.
The AIG bonuses, which were agreed early last year before the government moved to rescue the insurance giant, has ignited a furor on Capitol Hill. House of Representatives Speaker Nancy Pelosi said on Tuesday that legislation to recover the funds could come up within days.
The government, which now holds about an 80 percent stake in AIG, has moved to bail out the company three times, to the tune of up to $180 billion.
Geithner said the Treasury was working with the Justice Department to determine whether provisions of a recently passed economic stimulus bill covering compensation for bailout recipients might be useful in clawing back the bonuses."
For Source and Full Article Click: Reuters
'We will impose on AIG a contractual commitment to pay the Treasury from the operations of the company the amount of the retention awards just paid,' Geithner said in a letter to congressional leaders.
In addition, the Treasury will deduct $165 million from that $30 billion in additional taxpayer funds announced for American International Group (AIG.N) on March 2, Geithner said.
The AIG bonuses, which were agreed early last year before the government moved to rescue the insurance giant, has ignited a furor on Capitol Hill. House of Representatives Speaker Nancy Pelosi said on Tuesday that legislation to recover the funds could come up within days.
The government, which now holds about an 80 percent stake in AIG, has moved to bail out the company three times, to the tune of up to $180 billion.
Geithner said the Treasury was working with the Justice Department to determine whether provisions of a recently passed economic stimulus bill covering compensation for bailout recipients might be useful in clawing back the bonuses."
For Source and Full Article Click: Reuters
Why London is not fashionable
Why London is not fashionable: "London is in danger of falling even further out of favour as a place to do business for the insurance industry. This week, after announcing its annual results, Brit Insurance said it is moving headquarters to the Netherlands.
Brit cited London’s fiscal instability as the reason for its move. “We have said for quite a while that the fiscal instability of London, i.e. our inability to plan long term around tax is a big issue. We have tried to get more certainty and we just don’t get what we require. What we need to be certain is that the overall tax rate for the company is competitive with our competitors based in Bermuda, Switzerland, Dublin or elsewhere and we believe that the combination of the infrastructure, regulatory regime, fiscal stability and business outlook for the Netherlands is a good place to put our company headquarters,” said Dane Douetil, chief executive officer of Brit Insurance Holdings PLC.
Jonathan Drake a partner at law firm Ashurst speculates on further reasons for Brit’s move to the Netherlands: “If you set up in Holland you have access to the rest of the EU via insurance passporting. It does have a stable legal system and a favourable tax regime.”
Brit’s intention to move to the Netherlands comes after Beazley moved its headquarters to Dublin, and Hiscox’s move to Bermuda. The Association of British Insurers (ABI) criticised the government for not doing enough to make the UK more competitive. “In 2006/07 tax year the UK insurance industry contributed £9.7bn in taxes, of which £2.9bn was corporation tax, the third highest of any sector,” said the ABI. “The decision by Brit Insurance to leave the UK, the second insurer to do so in a month after Beazley, shows the government cannot take for granted the UK’s position as a global leader in insurance. It is vital the government acts now to ensure the UK is an internationally competitive location.”
Drake feels it unlikely that another insurer will follow Brit’s footsteps soon, but he warns that insurers are now constantly reviewing their reasons for staying in London. “Certainly this issue has been pushed up in the agenda over the last two to three years,” he said."
For Source and Full Article Click: Insurance Times
Brit cited London’s fiscal instability as the reason for its move. “We have said for quite a while that the fiscal instability of London, i.e. our inability to plan long term around tax is a big issue. We have tried to get more certainty and we just don’t get what we require. What we need to be certain is that the overall tax rate for the company is competitive with our competitors based in Bermuda, Switzerland, Dublin or elsewhere and we believe that the combination of the infrastructure, regulatory regime, fiscal stability and business outlook for the Netherlands is a good place to put our company headquarters,” said Dane Douetil, chief executive officer of Brit Insurance Holdings PLC.
Jonathan Drake a partner at law firm Ashurst speculates on further reasons for Brit’s move to the Netherlands: “If you set up in Holland you have access to the rest of the EU via insurance passporting. It does have a stable legal system and a favourable tax regime.”
Brit’s intention to move to the Netherlands comes after Beazley moved its headquarters to Dublin, and Hiscox’s move to Bermuda. The Association of British Insurers (ABI) criticised the government for not doing enough to make the UK more competitive. “In 2006/07 tax year the UK insurance industry contributed £9.7bn in taxes, of which £2.9bn was corporation tax, the third highest of any sector,” said the ABI. “The decision by Brit Insurance to leave the UK, the second insurer to do so in a month after Beazley, shows the government cannot take for granted the UK’s position as a global leader in insurance. It is vital the government acts now to ensure the UK is an internationally competitive location.”
Drake feels it unlikely that another insurer will follow Brit’s footsteps soon, but he warns that insurers are now constantly reviewing their reasons for staying in London. “Certainly this issue has been pushed up in the agenda over the last two to three years,” he said."
For Source and Full Article Click: Insurance Times
Armed guards at AIG offices after death threats over bonuses
Armed guards at AIG offices after death threats over bonuses : "A wave of popular anger over the $165 million (£118 million) in bonuses received by executives of American International Group (AIG) is threatening to engulf the insurance company and cause deep damage to President Obama’s infant Administration.
Armed guards have been stationed outside the Connecticut offices of AIG Financial Products (AIGFP), where death threats have been pouring in and some employees have resigned or have refused to turn up for work.
Yesterday it emerged that 11 AIG workers who had received retention bonuses of $1 million or more had already left the company, stoking the anger on Capitol Hill, where Congress was threatening to introduce taxes to claw back the $165 million bonus payment to 400 staff at the division that caused its near-collapse."
For Source and Full Article Click: Times Online
Armed guards have been stationed outside the Connecticut offices of AIG Financial Products (AIGFP), where death threats have been pouring in and some employees have resigned or have refused to turn up for work.
Yesterday it emerged that 11 AIG workers who had received retention bonuses of $1 million or more had already left the company, stoking the anger on Capitol Hill, where Congress was threatening to introduce taxes to claw back the $165 million bonus payment to 400 staff at the division that caused its near-collapse."
For Source and Full Article Click: Times Online
FEMA says 90% of U.S. natural disasters are floods
FEMA says 90% of U.S. natural disasters are floods: "The Federal Emergency Management Agency and the National Oceanic and Atmospheric Administration launched an educational campaign this week to teach Americans about the dangers of flooding, the nation's most common natural disaster. Officials say many people disregard the risk of flooding because they don't live near a river or other body of water, but 25% of flood insurance claims come from outside of high-risk areas. Officials also are trying to eradicate the myth that only property owners need flood insurance because renters also often lose valuable property in floods. Montgomery Advertiser (Ala.) (03/16)"
For Source and Full Article Click: NAMIC dailyLead
For Source and Full Article Click: NAMIC dailyLead
Report: Man-Made Cat Losses Hit USD7 Billion in 2008
Report: Man-Made Cat Losses Hit USD7 Billion in 2008: "Guy Carpenter on March 10 issued a document entitled Report: Man-Made Cats Hit USD 7 Billion in 2008 which cites statistics compiled by Swiss Re indicating that insured losses from catastrophes of a manmade and technological nature totaled $7 billion during 2008, some 46 percent higher than the annual average of $4.8 billion.
The report cites 19 events in which insured losses exceeded $50 million and 11 countries which experienced man-made cat losses that ranged from $80 million to $2 billion, including:
· The Apache Energy gas plant explosion and fire in Australia that resulted in loss totaling $1.8 billion
· BHP Billiton business interruption loss from flooding that stopped production at Australian coal mines totaling $1.2 billion
· Severstal steel plant blast furnace explosion in Dearborn, Michigan resulting in loss totaling $400 million
· Universal Studios fire in Los Angeles resulting in loss totaling $400 million
· Channel Tunnel fire in the English Channel resulting in loss totaling $230 million
· ISAB power plant fire in Italy resulting in loss totaling $300 million
· Mumbai terrorist attacks in India, resulting in loss that could total $600 million"
For Source and Full Article Click: Insurance Law Center
The report cites 19 events in which insured losses exceeded $50 million and 11 countries which experienced man-made cat losses that ranged from $80 million to $2 billion, including:
· The Apache Energy gas plant explosion and fire in Australia that resulted in loss totaling $1.8 billion
· BHP Billiton business interruption loss from flooding that stopped production at Australian coal mines totaling $1.2 billion
· Severstal steel plant blast furnace explosion in Dearborn, Michigan resulting in loss totaling $400 million
· Universal Studios fire in Los Angeles resulting in loss totaling $400 million
· Channel Tunnel fire in the English Channel resulting in loss totaling $230 million
· ISAB power plant fire in Italy resulting in loss totaling $300 million
· Mumbai terrorist attacks in India, resulting in loss that could total $600 million"
For Source and Full Article Click: Insurance Law Center
BRIT cancels £150m rights issue
Brit cancels £150m rights issue: "Brit Insurance has abandoned plans for a £150m rights issue, The Sunday Telegraph reported.
The paper said “people close to the company” said on Saturday night that the issues would not proceed.
Reuters said Brit was refusing to comment. 'I'm afraid the company is declining to comment on this,' a spokeswoman said."
For Source and Full Article Click: Insurance Times
The paper said “people close to the company” said on Saturday night that the issues would not proceed.
Reuters said Brit was refusing to comment. 'I'm afraid the company is declining to comment on this,' a spokeswoman said."
For Source and Full Article Click: Insurance Times
PICC to raise solvency margin via subordinated debt
"PICC Property and Casualty Co. Ltd. [77633], the largest n domestic nonlife insurer in China, said it will issue not more than 8 billion yuan (US$1.2 billion) in 10-year subordinated term debt securities to raise its solvency margin, subject to shareholder and regulatory approval.
The insurer said the decision has been made after ?conscientiously comparing various proposals' to meet itscapital needs and considering ?the current low interest rate environment.?
PICC said the terms and conditions of such an issue, including issue date, issue size and interest rates, will be determined by the board of directors after taking into account ?the market conditions and all other relevant factors,? according to an announcement filed with the Hong Kong Stock Exchange.
Pandora Leung, an equity analyst at KGI Group in Hong Kong, told BestWeek Asia/Pacific that PICC has decided to issue such debt mainly due to the recent sharp drop of PICC?s share price, wich present the company with financial risk. The share price drop negatively affects PICC's financial situation as the insurer?s capital size is probably ?inadequate? to support its financial stability, she said.
Leung said the insurer?s existing solvency margin is ?too low? at 105.2 by the end of June 2008, far below the Chinese regulator?s solvency margin requirement of 150 -- another reason for its debts issuing.
Leung said the issuing of 8 billion yuan in subordinated debt could help PICC ?ease its financial stress.?
Beijing-based PICC also confirmed that it has decided ?not to participate in the intended capital increase of its associated company, PICC Life.? The insurer did not provide further information about its decision.
According a separate announcement filed with the Hong Kong Stock Exchange, PICC's equity interests in PICC Life ?will be diluted to approximately 14% of the registered capital as enlarged by the capital increase from 28%.?
The proceeds raised from PICC Life will be used for ?business development and satisfying regulatory requirements,? said PICC in a statement.
PICC Life in a joint stock limited company established in China and is mainly engaged in life insurance, health insurance, accidental injury insurance and the related reinsurance business in the country, as well as insurance fund applications.
PICC Life is a subsidiary of the People?s Insurance Company (Group) of China, the controlling shareholder of PICC, which currently holds 51% of the registered capital of PICC Life directly."
For Source and Full Article Click: Bestwire via Individual.com
The insurer said the decision has been made after ?conscientiously comparing various proposals' to meet itscapital needs and considering ?the current low interest rate environment.?
PICC said the terms and conditions of such an issue, including issue date, issue size and interest rates, will be determined by the board of directors after taking into account ?the market conditions and all other relevant factors,? according to an announcement filed with the Hong Kong Stock Exchange.
Pandora Leung, an equity analyst at KGI Group in Hong Kong, told BestWeek Asia/Pacific that PICC has decided to issue such debt mainly due to the recent sharp drop of PICC?s share price, wich present the company with financial risk. The share price drop negatively affects PICC's financial situation as the insurer?s capital size is probably ?inadequate? to support its financial stability, she said.
Leung said the insurer?s existing solvency margin is ?too low? at 105.2 by the end of June 2008, far below the Chinese regulator?s solvency margin requirement of 150 -- another reason for its debts issuing.
Leung said the issuing of 8 billion yuan in subordinated debt could help PICC ?ease its financial stress.?
Beijing-based PICC also confirmed that it has decided ?not to participate in the intended capital increase of its associated company, PICC Life.? The insurer did not provide further information about its decision.
According a separate announcement filed with the Hong Kong Stock Exchange, PICC's equity interests in PICC Life ?will be diluted to approximately 14% of the registered capital as enlarged by the capital increase from 28%.?
The proceeds raised from PICC Life will be used for ?business development and satisfying regulatory requirements,? said PICC in a statement.
PICC Life in a joint stock limited company established in China and is mainly engaged in life insurance, health insurance, accidental injury insurance and the related reinsurance business in the country, as well as insurance fund applications.
PICC Life is a subsidiary of the People?s Insurance Company (Group) of China, the controlling shareholder of PICC, which currently holds 51% of the registered capital of PICC Life directly."
For Source and Full Article Click: Bestwire via Individual.com
General Liability Losses and Expenses to Rise
General Liability Losses and Expenses to Rise: "Just how the recession will affect different lines of insurance is a common topic of discussion these days. A new study by Conning Research and Consulting suggests that the general liability line of insurance will see accelerating growth in losses and expenses in the next couple of years due in part to the recession. According to Conning, the general liability insurance line has produced industry-wide combined ratios below 100 percent for the past two years, but this profitable underwriting performance is unlikely to continue. While premium reduction is expected to moderate and even see a modest increase by 2010, Conning says losses and expenses are forecast to grow more quickly, with combined ratios expected to reach 107 percent by 2010. A press release quotes Stephan Christiansen, director of insurance research at Conning: “History has shown us a cyclical increase in general liability losses in periods following recessions. At the same time, longer term secular trends point to an increase in both smaller claims and larger mega risks.” To meet the challenges to profitability Conning suggests insurers will need to monitor trends in costs – particularly losses – and demand. Longer term, the best prospects for general liability insurers may come from an expanding specialist focus."
For Source and Full Article Click: III Insurance Industry Blog »
For Source and Full Article Click: III Insurance Industry Blog »
17 March 2009
Stabilizing Signs on Commercial Lines Insurance Pricing
Stabilizing Signs: "More signs of market stability are indicated in the latest commercial lines insurance pricing and profitability trends survey (CLIPS) from Towers Perrin. The survey found that commercial insurance prices declined just 3 percent during the fourth quarter of 2008 — their smallest reduction in the past eight quarters. According to Towers Perrin, product lines and market segments experiencing the greatest reductions in pricing over the last two years, such as workers compensation, property and large accounts, may have begun to stabilize. A press release cites Jeanne Hollister, Towers Perrin managing principal and property/casualty insurance practice leader for the Americas: “Although the property/casualty industry remains strongly capitalized in the aggregate, we expect that the surplus declines in 2008 will result in increased conservatism in companies’ risk appetite and that this, in turn, will cause general price firming to occur in 2009.” The survey comes just a week after online insurance exchange MarketScout reported an average property/casualty rate decrease of 8 percent in February 2009, compared to a double-digit rate decrease of 14 percent a year ago."
For Source and Full Article Click: III's Insurance Industry Blog
For Source and Full Article Click: III's Insurance Industry Blog
Campbell joins Glacier
Campbell joins Glacier: "Glacier Insurance AG, part of the Switzerland-based Glacier Group, has appointed Alex Campbell as senior property underwriter, based in the company’s London office. In his new role, Campbell will further develop Glacier Insurance’s property UK portfolio and work in tandem with its network of offices on international business. He has 22 years of industry experience in various senior roles and joins the insurer from Arch Insurance Company (Europe), where as vice president he established Arch’s underwriting presence in Europe. Before joining Arch, Campbell led a team of underwriters writing large multinational industrial risks at Allianz Global Risks. Prior to this, he was chief UK underwriter at Skandia Assurance Company."
For Source and Full Article Click: Insurance Day
For Source and Full Article Click: Insurance Day
In a Turbulent Market, London's Top Insurers Seek Growth Beyond the City
In a Turbulent Market, London's Top Insurers Seek Growth Beyond the City: "he top London market insurers weathered storms both financial and natural in 2008, showing results that are not too bad, all things considered.
The financial risks posed in 2009 by a continuing global economic downturn looks like it will provide some underwriting opportunities, but investment risks will force the likes of Chaucer, Hiscox and Brit to balance on a knife's edge, testing their respective skills as perhaps never before. With all business decisions on the table, these insurers are hinting that London's position as a global insurance center might itself be on the line.
In a variety of ways, all three are looking to expand beyond London's trading floors in a business world in a great deal of flux.
Holding Fast Chaucer Holdings plc reported a pretax loss of 26.2 million pounds in 2008, compared with pretax profit of 89.4 million pounds a year earlier. Gross premiums rose 26.9%. Chaucer reported investment losses of 71 million pounds opposed to gains of 41.7 million pounds in 2007, For Brit Insurance Holdings, pretax profit fell 54% to 89.2 million pounds, as gross premiums rose 4.2%. Brit managed investment returns of 7.4 million pounds, compared with 137.4 million pounds a year earlier.
Hiscox plc was also profitable in 2008, though pretax profit fell 55% to 105.2 million pounds. Gross premiums fell 4.3%, and Hiscox reported an investment loss of 80.6 million pounds, compared with investment income of 99.7 million pounds in 2007.
All three insurers see good prospects for rates in their major property/casualty line in 2009, though tight capital markets may make it difficult to take advantage of some opportunities. Brit predicted that the international insurance market will be affected by ?capacity concerns,? which it believes will likely drive rates up.
?Insurance capital has been eroded by the combined elements of significant catastrophe related claims during 2008 and by the varied and significant effects of economic turbulence,? said Brit.
Chaucer sees ?very encouraging? underwriting prospects, and said it is hoping for an average 2009 premium increase of 5.4%. ?The hardening market should gather pace through 2009 and 2010,? Chaucer said, adding that rates should rise in energy, marine, U.K. automobile and catastrophe-exposed property lines.
Loosened Bonds Brit also said it is looking into redomiciling in the Netherlands, citing unfavorable business conditions in the United Kingdom. According to Brit Chief Executive Dane Douetil, the U.K. government has been in the position to assist U.K. businesses, but ?they haven?t done so,? he said. ?And, more particularly, they haven?t created a stability of long-term planning.? Hiscox also suggested the center of gravity may be moving away from London. In its 2008 statement, Hiscox said its Global Markets team 'has recognized that business no longer flows to London as a right, and in 2007 invested in creating teams who were located mainly in Paris and New York.' The Global Markets had since last September 'taken advantage of the disruption caused by the financial crises by recruiting people and working with our USA business' to open new offices in Boston, Kansas City, Lexington and Miami. Hiscox expects to open an office in Los Angeles this year.
Hiscox added that it still considers the London market important in an overall international strategy, but hinted that continued activity through London would have to be justified by cost-cutting and efficiency improvements. 'The key to success in London is a continued investment by Hiscox, and the market as a whole, in efficiency and improving infrastructure,' the insurer said. But this, Hiscox means the hoped-for success of the newly announced Lloyd's Exchange, an electronic trading platform.
Among the goals Chaucer states in its 2008 statement are plans for 'further distribution channel development to complement the Lloyd?s presence in both major and growing markets with our own presence.' The insurer noted that it has successfully done this in Singapore, where 'we continue to support the Lloyd?s Asia platform, which saw further development in 2008.' Chaucer further noted that 'the broking fraternity has followed suit and we have benefitted from the influx of both London and local broking talent to Singapore. The addition of new lines of business, supported by the appointment of a specialist lines underwriter and a property and power team, should support further development of Chaucer Singapore in 2009.' Chaucer also acknowledge that it 'has received a number of take-over approaches,' all of which it is examining. Like fellow London market insurer Kiln, which was acquired last year by Japan's Tokio Marine, Chaucer may find its horizons broadened by a new parent or partner."
For Source and Full Article Click: BestWire via TMC
The financial risks posed in 2009 by a continuing global economic downturn looks like it will provide some underwriting opportunities, but investment risks will force the likes of Chaucer, Hiscox and Brit to balance on a knife's edge, testing their respective skills as perhaps never before. With all business decisions on the table, these insurers are hinting that London's position as a global insurance center might itself be on the line.
In a variety of ways, all three are looking to expand beyond London's trading floors in a business world in a great deal of flux.
Holding Fast Chaucer Holdings plc reported a pretax loss of 26.2 million pounds in 2008, compared with pretax profit of 89.4 million pounds a year earlier. Gross premiums rose 26.9%. Chaucer reported investment losses of 71 million pounds opposed to gains of 41.7 million pounds in 2007, For Brit Insurance Holdings, pretax profit fell 54% to 89.2 million pounds, as gross premiums rose 4.2%. Brit managed investment returns of 7.4 million pounds, compared with 137.4 million pounds a year earlier.
Hiscox plc was also profitable in 2008, though pretax profit fell 55% to 105.2 million pounds. Gross premiums fell 4.3%, and Hiscox reported an investment loss of 80.6 million pounds, compared with investment income of 99.7 million pounds in 2007.
All three insurers see good prospects for rates in their major property/casualty line in 2009, though tight capital markets may make it difficult to take advantage of some opportunities. Brit predicted that the international insurance market will be affected by ?capacity concerns,? which it believes will likely drive rates up.
?Insurance capital has been eroded by the combined elements of significant catastrophe related claims during 2008 and by the varied and significant effects of economic turbulence,? said Brit.
Chaucer sees ?very encouraging? underwriting prospects, and said it is hoping for an average 2009 premium increase of 5.4%. ?The hardening market should gather pace through 2009 and 2010,? Chaucer said, adding that rates should rise in energy, marine, U.K. automobile and catastrophe-exposed property lines.
Loosened Bonds Brit also said it is looking into redomiciling in the Netherlands, citing unfavorable business conditions in the United Kingdom. According to Brit Chief Executive Dane Douetil, the U.K. government has been in the position to assist U.K. businesses, but ?they haven?t done so,? he said. ?And, more particularly, they haven?t created a stability of long-term planning.? Hiscox also suggested the center of gravity may be moving away from London. In its 2008 statement, Hiscox said its Global Markets team 'has recognized that business no longer flows to London as a right, and in 2007 invested in creating teams who were located mainly in Paris and New York.' The Global Markets had since last September 'taken advantage of the disruption caused by the financial crises by recruiting people and working with our USA business' to open new offices in Boston, Kansas City, Lexington and Miami. Hiscox expects to open an office in Los Angeles this year.
Hiscox added that it still considers the London market important in an overall international strategy, but hinted that continued activity through London would have to be justified by cost-cutting and efficiency improvements. 'The key to success in London is a continued investment by Hiscox, and the market as a whole, in efficiency and improving infrastructure,' the insurer said. But this, Hiscox means the hoped-for success of the newly announced Lloyd's Exchange, an electronic trading platform.
Among the goals Chaucer states in its 2008 statement are plans for 'further distribution channel development to complement the Lloyd?s presence in both major and growing markets with our own presence.' The insurer noted that it has successfully done this in Singapore, where 'we continue to support the Lloyd?s Asia platform, which saw further development in 2008.' Chaucer further noted that 'the broking fraternity has followed suit and we have benefitted from the influx of both London and local broking talent to Singapore. The addition of new lines of business, supported by the appointment of a specialist lines underwriter and a property and power team, should support further development of Chaucer Singapore in 2009.' Chaucer also acknowledge that it 'has received a number of take-over approaches,' all of which it is examining. Like fellow London market insurer Kiln, which was acquired last year by Japan's Tokio Marine, Chaucer may find its horizons broadened by a new parent or partner."
For Source and Full Article Click: BestWire via TMC
IFEX announces first full year hurricane risk trading figures
IFEX announces first full year hurricane risk trading figures: "Climate Change PLC has announced it’s full year figures for 2008. As the owners of the Insurance Futures Exchange (IFEX) they have numbers to share on how well the hurricane risk trading facility (housed at the Chicago Climate Futures Exchange) has performed in the first full year of windstorm futures trading.
They report that the year has been slow although not dissimilar to how other asset classes trade in their first years of existence. However, the volumes seem to have increased as the year progressed, December 2008 saw record volumes with 4,000 contracts exchanged in that month alone. The total traded volume for 2008 was 10,375 contracts, with open-interest at year end reacing 8,550 contracts with a value of $85m. It would be interesting to see if there is a correlation between the slow down of the catastrophe bond market and the increase in trades on the IFEX towards the latter part of the year, perhaps event-linked futures were being snapped up as an alternate form of capacity to both cat bonds and industry loss warranties?
The Insurance Futures Exchange (IFEX) has done a great job of creating a liquid, electronically traded marketplace for hurricane futures. If they want this growth to continue they really do need to make data more accessible, easy to visualise and easier to find; all successful electronic markets are fully transactable online these days and this is one area where the reinsurance and risk transfer industries fall behind."
For Source and Full Article Click: Artemis.bm
They report that the year has been slow although not dissimilar to how other asset classes trade in their first years of existence. However, the volumes seem to have increased as the year progressed, December 2008 saw record volumes with 4,000 contracts exchanged in that month alone. The total traded volume for 2008 was 10,375 contracts, with open-interest at year end reacing 8,550 contracts with a value of $85m. It would be interesting to see if there is a correlation between the slow down of the catastrophe bond market and the increase in trades on the IFEX towards the latter part of the year, perhaps event-linked futures were being snapped up as an alternate form of capacity to both cat bonds and industry loss warranties?
The Insurance Futures Exchange (IFEX) has done a great job of creating a liquid, electronically traded marketplace for hurricane futures. If they want this growth to continue they really do need to make data more accessible, easy to visualise and easier to find; all successful electronic markets are fully transactable online these days and this is one area where the reinsurance and risk transfer industries fall behind."
For Source and Full Article Click: Artemis.bm
Federal reinsurance regulation gains support
Federal reinsurance regulation gains support: "Support for allowing reinsurers to choose federal rather than state regulation may be growing on Capitol Hill.
During a Tuesday hearing on insurance regulation before the Senate Banking, Housing and Urban Affairs Committee, two senators said federal regulation might make sense for reinsurers.
And the committee's ranking member and former chairman—Sen. Richard Shelby, R-Ala.—said problems with American International Group Inc.'s securities lending operations 'raises some serious questions about the adequacy of state regulation.'
Banking Committee Chairman Christopher Dodd, D-Conn., opened the hearing with a blast at AIG's decision to issue bonuses to employees of its financial products division, whose credit default swap transactions are blamed for much of AIG’s current financial crisis. As the committee heard witnesses speak in favor of and in opposition to allowing insurers to choose federal regulation in place of the current state regulatory regime, some lawmakers voiced support for allowing reinsurers and life insurers to choose federal regulation."
For Source and Full Article Click: Business Insurance
During a Tuesday hearing on insurance regulation before the Senate Banking, Housing and Urban Affairs Committee, two senators said federal regulation might make sense for reinsurers.
And the committee's ranking member and former chairman—Sen. Richard Shelby, R-Ala.—said problems with American International Group Inc.'s securities lending operations 'raises some serious questions about the adequacy of state regulation.'
Banking Committee Chairman Christopher Dodd, D-Conn., opened the hearing with a blast at AIG's decision to issue bonuses to employees of its financial products division, whose credit default swap transactions are blamed for much of AIG’s current financial crisis. As the committee heard witnesses speak in favor of and in opposition to allowing insurers to choose federal regulation in place of the current state regulatory regime, some lawmakers voiced support for allowing reinsurers and life insurers to choose federal regulation."
For Source and Full Article Click: Business Insurance
Willis Launches Facultative Reinsurance Unit
WSH Willis Launches Facultative Reinsurance Unit: "Willis Group Holdings said it has launched Willis Facultative, a new unit that combines the individual facultative units of Willis and Willis Re and consolidates the group?s specialist facultative advocates around the world into a single global business.
The newly formed unit will have responsibility for the development of facultative business globally within the Willis Group (NYSE: WSH). It will also provide a clear entry point for facultative solutions to insurance company clients worldwide.
Willis Facultative will be led by Matthew Keeping as chief executive officer. Reporting to Keeping will be Gianmarco Tosti, who has been appointed managing director of Willis Facultative International, and will be responsible for the development and management of all facultative business outside of the United States. Rich Macrane, managing director of Willis Facultative North America, will be responsible for the development and management of facultative business in North America.
'For the last five years, we have been growing our facultative business consistently through a number of underlying business units, using a decentralized strategy. By centralizing our core teams, we have an opportunity to bring together a range of specialist products under one management structure for the benefit of Willis cedent customers in every corner of the world in a consolidating marketplace where there are now only three global facultative intermediaries,' Keeping said in a statement.
Earlier this month, Willis announced plans to rename the iconic Sears Tower in Chicago the Willis Tower later this year. The London-based insurance broker said it will consolidate five area offices and move nearly 500 employees into the Tower, initially occupying more than 140,000 square feet on multiple floors (BestWire, March 12, 2009).
Chicago is home to the headquarters of Aon Corp., the largest broker in the world based on 2007 brokerage revenue, according to the Best?s Review ranking of global brokers. Willis is the third-largest broker, according to the Best?s Review ranking.
Willis opened its new 28-story global headquarters in the middle of the City of London last year (BestWire, May 13, 2008).
Shares of Willis Group Holdings were $21.51 in morning trading on March 16, up 0.51% from the previous close."
For Source and Full Article Click: Bestwire via Trading Markets
The newly formed unit will have responsibility for the development of facultative business globally within the Willis Group (NYSE: WSH). It will also provide a clear entry point for facultative solutions to insurance company clients worldwide.
Willis Facultative will be led by Matthew Keeping as chief executive officer. Reporting to Keeping will be Gianmarco Tosti, who has been appointed managing director of Willis Facultative International, and will be responsible for the development and management of all facultative business outside of the United States. Rich Macrane, managing director of Willis Facultative North America, will be responsible for the development and management of facultative business in North America.
'For the last five years, we have been growing our facultative business consistently through a number of underlying business units, using a decentralized strategy. By centralizing our core teams, we have an opportunity to bring together a range of specialist products under one management structure for the benefit of Willis cedent customers in every corner of the world in a consolidating marketplace where there are now only three global facultative intermediaries,' Keeping said in a statement.
Earlier this month, Willis announced plans to rename the iconic Sears Tower in Chicago the Willis Tower later this year. The London-based insurance broker said it will consolidate five area offices and move nearly 500 employees into the Tower, initially occupying more than 140,000 square feet on multiple floors (BestWire, March 12, 2009).
Chicago is home to the headquarters of Aon Corp., the largest broker in the world based on 2007 brokerage revenue, according to the Best?s Review ranking of global brokers. Willis is the third-largest broker, according to the Best?s Review ranking.
Willis opened its new 28-story global headquarters in the middle of the City of London last year (BestWire, May 13, 2008).
Shares of Willis Group Holdings were $21.51 in morning trading on March 16, up 0.51% from the previous close."
For Source and Full Article Click: Bestwire via Trading Markets
A.M. Best Affirms Ratings of Evergreen Reinsurance Company, Ltd.
A.M. Best Affirms Ratings of Evergreen Reinsurance Company, Ltd.: "A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Evergreen Reinsurance Company, Ltd. (Evergreen Re) (Bermuda). The outlook for both ratings is stable.
These ratings reflect Evergreen Re’s excellent capitalization, consistently strong operating performance and its unique role as the primary insurance carrier for its ultimate parent, Evergreen Group. These positive rating factors are derived from the company’s conservative underwriting standards, low cost operating structure and multiple product line book of business and broad geographic exposure base.
Partially offsetting these positive rating factors is Evergreen Re’s exposure to earthquakes and typhoons in the Asia/Pacific region, though the risk is mitigated by policy sublimits, prudent reinsurance and the wide geographic dispersion of assets insured. Furthermore, the majority of its book of business is generated from one source – Evergreen Group. Nonetheless, the group’s business is diverse in scope, complexity and in its risk profile. In addition, management places great emphasis on risk control and carefully monitors its writings in order to avoid a concentration of risk.
The ratings also reflect the strong level of commitment on the part of the Evergreen Group, whose management incorporates Evergreen Re as an integral component in the overall risk management program of the group. Moreover, Evergreen Re gains from its parent’s global scope and business relationships. These commitments have been developed over the last several years and encompass risks located in a number of countries in East and Southeast Asia. Overall, Evergreen Re benefits from its parent’s strong management experience and market presence, as well as Evergreen Group’s adherence to a philosophy of providing a stable market for global insurance and reinsurance for the Evergreen Group and its operating subsidiaries."
For Source and Full Article Click: BusinessWire
These ratings reflect Evergreen Re’s excellent capitalization, consistently strong operating performance and its unique role as the primary insurance carrier for its ultimate parent, Evergreen Group. These positive rating factors are derived from the company’s conservative underwriting standards, low cost operating structure and multiple product line book of business and broad geographic exposure base.
Partially offsetting these positive rating factors is Evergreen Re’s exposure to earthquakes and typhoons in the Asia/Pacific region, though the risk is mitigated by policy sublimits, prudent reinsurance and the wide geographic dispersion of assets insured. Furthermore, the majority of its book of business is generated from one source – Evergreen Group. Nonetheless, the group’s business is diverse in scope, complexity and in its risk profile. In addition, management places great emphasis on risk control and carefully monitors its writings in order to avoid a concentration of risk.
The ratings also reflect the strong level of commitment on the part of the Evergreen Group, whose management incorporates Evergreen Re as an integral component in the overall risk management program of the group. Moreover, Evergreen Re gains from its parent’s global scope and business relationships. These commitments have been developed over the last several years and encompass risks located in a number of countries in East and Southeast Asia. Overall, Evergreen Re benefits from its parent’s strong management experience and market presence, as well as Evergreen Group’s adherence to a philosophy of providing a stable market for global insurance and reinsurance for the Evergreen Group and its operating subsidiaries."
For Source and Full Article Click: BusinessWire
Reinsurer premiums up in 2008
Reinsurer premiums up in 2008: "Property/casualty reinsurers wrote $23.9 billion in net premiums in 2008, an increase of $1.2 billion compared with 2007 results, according to a survey by the Reinsurance Assn. of America.
The Washington-based RAA surveyed 19 U.S. property/casualty reinsurers and reported that the 2008 combined ratio for the group was 101.8%, up from 94.7% during the same period a year ago. The deterioration of the combined ratio was attributable to a 71% loss ratio and a 30.7% expense ratio, the RAA said in a statement.
While several of the reinsurers surveyed reported underwriting gains during 2008, a few companies had notable underwriting losses, according to the RAA's underwriting report. They included Munich Reinsurance America Corp., which reported a net underwriting loss of $364.3 million; Swiss Reinsurance America Corp., which reported a net underwriting loss of $228.1 million; and White Mountains Reinsurance Co. of America, which reported a net underwriting loss of $134.4 million.
Additionally, the RAA reported the reinsurers' policyholders' surplus was $64.4 billion at the end of 2008, down from $75.9 billion at 2007 year-end."
For Source and Full Article Click: Business Insurance
The Washington-based RAA surveyed 19 U.S. property/casualty reinsurers and reported that the 2008 combined ratio for the group was 101.8%, up from 94.7% during the same period a year ago. The deterioration of the combined ratio was attributable to a 71% loss ratio and a 30.7% expense ratio, the RAA said in a statement.
While several of the reinsurers surveyed reported underwriting gains during 2008, a few companies had notable underwriting losses, according to the RAA's underwriting report. They included Munich Reinsurance America Corp., which reported a net underwriting loss of $364.3 million; Swiss Reinsurance America Corp., which reported a net underwriting loss of $228.1 million; and White Mountains Reinsurance Co. of America, which reported a net underwriting loss of $134.4 million.
Additionally, the RAA reported the reinsurers' policyholders' surplus was $64.4 billion at the end of 2008, down from $75.9 billion at 2007 year-end."
For Source and Full Article Click: Business Insurance
PartnerRe completes $250 million tender offer
PartnerRe completes $250 million tender offer : "Reinsurance provider PartnerRe Ltd. said Monday it completed its tender offer to buy $250 million of 6.44 percent junior subordinated notes due 2066, and will buy about 75 percent worth of those notes.
PartnerRe (nyse: PRE - news - people ) said the deal reduces debt by $186.6 million and used $96.7 million of cash on hand.
A gain of $56.8 million will be reflected in Bermuda-based company's first-quarter results.
A total of $63.4 million in principal of the capital efficient notes remains outstanding and will mature in 2066.
Shares of the company fell 48 cents to close at $59.34."
For Source and Full Article Click: Forbes.com
PartnerRe (nyse: PRE - news - people ) said the deal reduces debt by $186.6 million and used $96.7 million of cash on hand.
A gain of $56.8 million will be reflected in Bermuda-based company's first-quarter results.
A total of $63.4 million in principal of the capital efficient notes remains outstanding and will mature in 2066.
Shares of the company fell 48 cents to close at $59.34."
For Source and Full Article Click: Forbes.com
A.M. Best Assign Ratings to Maiden Reinsurance Company
A.M. Best Assign Ratings to Maiden Reinsurance Company: "A.M. Best Co. has assigned a financial strength rating (FSR) of A- (Excellent) and issuer credit rating (ICR) of “a-” to Maiden Reinsurance Company (Maiden Reinsurance) (Maryland Heights, MO) following receipt of the approved intercompany quota share reinsurance agreement with its affiliate, Maiden Insurance Company, Ltd. (Maiden Insurance) (Hamilton, Bermuda). The outlook assigned to these ratings is stable.
Maiden Reinsurance’s predecessor entity, GMAC Direct Insurance Company (GMAC Direct) (Maryland Heights, MO), was purchased as a shell by Maiden Holdings, Ltd. (Holdings) (Hamilton, Bermuda) [NASDAQ: MHLD] from Motors Insurance Corporation (Southfield, MI), the lead member of GMAC Insurance Group (GMACI). Subsequent to the acquisition, GMAC Direct was renamed Maiden Reinsurance Company.
The ratings reflect Maiden Reinsurance’s strategic importance to Holdings in forming a dedicated U.S. reinsurance platform providing treaty, accident and health and specialty facultative reinsurance. Additionally, the ratings reflect Holdings’ financial commitment and strong balance sheet, as well as management’s commitment to maintain underwriting discipline as former GMAC Reinsurance business is written through Maiden Reinsurance. In support of the transaction, Holdings’ management raised approximately $260 million through a trust preferred offering, which $129 million was infused into Maiden Reinsurance."
For Source and Full Article Click: BusinessWire
Maiden Reinsurance’s predecessor entity, GMAC Direct Insurance Company (GMAC Direct) (Maryland Heights, MO), was purchased as a shell by Maiden Holdings, Ltd. (Holdings) (Hamilton, Bermuda) [NASDAQ: MHLD] from Motors Insurance Corporation (Southfield, MI), the lead member of GMAC Insurance Group (GMACI). Subsequent to the acquisition, GMAC Direct was renamed Maiden Reinsurance Company.
The ratings reflect Maiden Reinsurance’s strategic importance to Holdings in forming a dedicated U.S. reinsurance platform providing treaty, accident and health and specialty facultative reinsurance. Additionally, the ratings reflect Holdings’ financial commitment and strong balance sheet, as well as management’s commitment to maintain underwriting discipline as former GMAC Reinsurance business is written through Maiden Reinsurance. In support of the transaction, Holdings’ management raised approximately $260 million through a trust preferred offering, which $129 million was infused into Maiden Reinsurance."
For Source and Full Article Click: BusinessWire
Overcapacity will delay premium hikes claims advisory group
Overcapacity will delay premium hikes claims advisory group: "Recession hit businesses are not making the most of over capacity in the market to seek cost savings, according to a financial advisory group.
Robert Cholmondeley, director of the corporate insurance division of Taylor Patterson, added insurance companies are still being flexible with prices in order to keep a share of a market.
He continued: “I am expecting premiums to increase in time. However, there is still a lot of capacity resulting in a number of companies out there fighting for market share. This means competitive premiums are still available.
“A recession is a perfect time to have a spring clean of costs but many businesses often fail to look at their insurance premiums which can, in some cases, be reduced without harming the level of cover obtained.”"
For Source and Full Article Click: Post Online
Robert Cholmondeley, director of the corporate insurance division of Taylor Patterson, added insurance companies are still being flexible with prices in order to keep a share of a market.
He continued: “I am expecting premiums to increase in time. However, there is still a lot of capacity resulting in a number of companies out there fighting for market share. This means competitive premiums are still available.
“A recession is a perfect time to have a spring clean of costs but many businesses often fail to look at their insurance premiums which can, in some cases, be reduced without harming the level of cover obtained.”"
For Source and Full Article Click: Post Online
Cuomo details AIG bonus payments
Cuomo details AIG bonus payments: "Seventy-three employees of American International Group Inc. received bonuses of more than $1 million dollars out of the more than $160 million in bonus payments that sparked widespread outrage this week, according to New York Attorney General Andrew Cuomo.
In a letter Tuesday to Rep. Barney Frank, D-Mass., chairman of the House Committee on Financial Services, Mr. Cuomo detailed some of the bonus payments that AIG paid out to members of its financial products subsidiary last week.
Mr. Cuomo urged Rep. Frank to use the information, compiled as a result of his office's ongoing investigation into executive compensation at AIG, when the committee takes up the issue at a scheduled hearing Wednesday.
'These payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG,' Mr. Cuomo said in the letter. 'Something is deeply wrong with this outcome,' he said.
The highest bonus was $6.4 million, with six other employees receiving more than $4 million, and 22 individuals receiving bonuses of $2 million or more, according to Mr. Cuomo. In addition, he said, 11 of the individuals who received 'retention' bonuses of $1 million or more are no longer working for AIG.
Mr. Cuomo issued a subpoena to AIG on Monday seeking the names of individuals who received the bonuses. In a letter to AIG Chief Executive Officer Edward Liddy earlier on Monday, Mr. Cuomo demanded the names of the employees, their positions, their job descriptions, information on their performance, and details of their employment contracts.
According to Mr. Cuomo, his office has also obtained the contracts under which AIG decided to make the payments, which include a 'shocking' provision that required most individuals’ bonuses to be equal to their 2007 bonuses 'despite obvious signs that 2008 performance would be disastrous in comparison to the year before,' he said.
AIG has argued that it had to pay the bonuses because of existing contracts. AIG declined to comment."
For Source and Full Article Click: Business Insurance
In a letter Tuesday to Rep. Barney Frank, D-Mass., chairman of the House Committee on Financial Services, Mr. Cuomo detailed some of the bonus payments that AIG paid out to members of its financial products subsidiary last week.
Mr. Cuomo urged Rep. Frank to use the information, compiled as a result of his office's ongoing investigation into executive compensation at AIG, when the committee takes up the issue at a scheduled hearing Wednesday.
'These payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG,' Mr. Cuomo said in the letter. 'Something is deeply wrong with this outcome,' he said.
The highest bonus was $6.4 million, with six other employees receiving more than $4 million, and 22 individuals receiving bonuses of $2 million or more, according to Mr. Cuomo. In addition, he said, 11 of the individuals who received 'retention' bonuses of $1 million or more are no longer working for AIG.
Mr. Cuomo issued a subpoena to AIG on Monday seeking the names of individuals who received the bonuses. In a letter to AIG Chief Executive Officer Edward Liddy earlier on Monday, Mr. Cuomo demanded the names of the employees, their positions, their job descriptions, information on their performance, and details of their employment contracts.
According to Mr. Cuomo, his office has also obtained the contracts under which AIG decided to make the payments, which include a 'shocking' provision that required most individuals’ bonuses to be equal to their 2007 bonuses 'despite obvious signs that 2008 performance would be disastrous in comparison to the year before,' he said.
AIG has argued that it had to pay the bonuses because of existing contracts. AIG declined to comment."
For Source and Full Article Click: Business Insurance
Capital Management: Zero in: Target Capitalization
Capital Management: Zero in: Target Capitalization: "Capitalization means choice, and freedom can be a burden. In selecting the sources from which to acquire capital - and in what proportions - insurers and reinsurers implicitly shape many future decisions. Each type of capital comes with specific advantages and disadvantages, and quirks that can influence a carrier’s strategy. Thus, determining a target capitalization that balances cost, flexibility, and growth potential should be a principal concern for insurance and reinsurance management teams.
Carriers tend to diversify capital sources. In this effort, four major types of capital are typically evaluated:
* Equity issuances (public and private)
* Debt issuances (public and private)
* Retained earnings
* Reinsurance
In establishing their target capitalizations, insurers and reinsurers are forced to balance the costs and limitations of a particular type of capital against its advantages.
Most insurers and reinsurers prefer equity capital. This source of long-term capital is permanent (i.e., it does not have to be repaid, as debt capital does), and as an asset, it corresponds to a shareholders equity entry on the balance sheet-not a liability. This advantage is not cheap. Public and private equity issuances are usually the most expensive ways to raise capital. Further, the cost of equity capital tends to be highest when you need it most.
Debt issuances are less expensive than equity … but for good reason. Because returns are less uncertain, investors do not expect the profits from debt securities that they do from equities, and they have their principal returned after a fixed period of time-capital is merely rented out to insurers and reinsurers. Thus, this form of capital is transient. The asset entry from the capital infusion has a corresponding liability. Leverage and financial risk are increased … but return on equity (ROE) is, too. Debt can make a smaller amount of equity more productive, but it requires a tradeoff.
In the current economic climate, debt capital is not as easy to acquire as it was in the past. The ongoing financial crisis began in credit markets, which is where the effects continue to be most pronounced.
Retained earnings, unlike equity and debt, have been “acquired” already. This form of capital tends to be less expensive than outside sources, but its availability depends on firm profitability and shareholder expectations of dividends and buybacks. Decisions pertaining to the use of retained earnings usually involve availability rather than cost. While retained earnings may seem like the optimal form of capital for insurers and reinsurers, remember that:
* Profits may not be predictable, making third-party capital easier to acquire consistently
* The use of retained earnings may erode surplus
* There must be sufficient retained earnings available to satisfy the firm’s investment need
There should always be a place for retained earnings in a firm’s target capitalization, but it should be determined carefully.
Often overlooked as a form of capital, reinsurance can be particularly effective. The price of this form of capital does vary; perils, ratings, and risk profiles can influence the cost of reinsurance capital for a particular insurer or reinsurer. The overwhelming advantage of this type of capital, though, is that the terms and forms available are quite flexible. Carriers can get almost exactly what they need quickly and easily. This is especially true when the insurer is hit by a big loss that the reinsurance pays but would otherwise impair capital, further increasing the costs of raising new capital and even the incentives to do so.
More than just another form of capital, reinsurance can make capital from other sources more productive. For example, securing protection via reinsurance can protect earnings, ensuring the availability of retained earnings to fund growth, reducing the chance of having to raise costly new outside capital and ultimately increasing firm value.
When juggling these different forms of capital, each of which has a place on a carrier’s balance sheet, the overall objective should be to maintain a sensible distribution of sources. The exact mix will vary from one firm to the next, but should maximize the productivity of equity, use debt judiciously, and rely on retained earnings only as appropriate. Reinsurance capital should be engaged to manage volatility and secure some predictability."
For Source and Full Article Click: GCCapitalIdeas.com
Carriers tend to diversify capital sources. In this effort, four major types of capital are typically evaluated:
* Equity issuances (public and private)
* Debt issuances (public and private)
* Retained earnings
* Reinsurance
In establishing their target capitalizations, insurers and reinsurers are forced to balance the costs and limitations of a particular type of capital against its advantages.
Most insurers and reinsurers prefer equity capital. This source of long-term capital is permanent (i.e., it does not have to be repaid, as debt capital does), and as an asset, it corresponds to a shareholders equity entry on the balance sheet-not a liability. This advantage is not cheap. Public and private equity issuances are usually the most expensive ways to raise capital. Further, the cost of equity capital tends to be highest when you need it most.
Debt issuances are less expensive than equity … but for good reason. Because returns are less uncertain, investors do not expect the profits from debt securities that they do from equities, and they have their principal returned after a fixed period of time-capital is merely rented out to insurers and reinsurers. Thus, this form of capital is transient. The asset entry from the capital infusion has a corresponding liability. Leverage and financial risk are increased … but return on equity (ROE) is, too. Debt can make a smaller amount of equity more productive, but it requires a tradeoff.
In the current economic climate, debt capital is not as easy to acquire as it was in the past. The ongoing financial crisis began in credit markets, which is where the effects continue to be most pronounced.
Retained earnings, unlike equity and debt, have been “acquired” already. This form of capital tends to be less expensive than outside sources, but its availability depends on firm profitability and shareholder expectations of dividends and buybacks. Decisions pertaining to the use of retained earnings usually involve availability rather than cost. While retained earnings may seem like the optimal form of capital for insurers and reinsurers, remember that:
* Profits may not be predictable, making third-party capital easier to acquire consistently
* The use of retained earnings may erode surplus
* There must be sufficient retained earnings available to satisfy the firm’s investment need
There should always be a place for retained earnings in a firm’s target capitalization, but it should be determined carefully.
Often overlooked as a form of capital, reinsurance can be particularly effective. The price of this form of capital does vary; perils, ratings, and risk profiles can influence the cost of reinsurance capital for a particular insurer or reinsurer. The overwhelming advantage of this type of capital, though, is that the terms and forms available are quite flexible. Carriers can get almost exactly what they need quickly and easily. This is especially true when the insurer is hit by a big loss that the reinsurance pays but would otherwise impair capital, further increasing the costs of raising new capital and even the incentives to do so.
More than just another form of capital, reinsurance can make capital from other sources more productive. For example, securing protection via reinsurance can protect earnings, ensuring the availability of retained earnings to fund growth, reducing the chance of having to raise costly new outside capital and ultimately increasing firm value.
When juggling these different forms of capital, each of which has a place on a carrier’s balance sheet, the overall objective should be to maintain a sensible distribution of sources. The exact mix will vary from one firm to the next, but should maximize the productivity of equity, use debt judiciously, and rely on retained earnings only as appropriate. Reinsurance capital should be engaged to manage volatility and secure some predictability."
For Source and Full Article Click: GCCapitalIdeas.com
Chicagoans In Disbelief A Day After Announcement That Sears Tower Will Become Willis Tower
Chicagoans In Disbelief A Day After Announcement That Sears Tower Will Become Willis Tower - : "The Sears Tower will be known as the Willis Tower in a few months, and Chicagoans are in disbelief a day after the announcement.
As CBS 2's Mike Parker reports, the iconic tower of steel and glass has anchored the city's skyline for more than 35 years, and almost looks like it was constructed in tribute to the city's big shoulders. But with the name change looming, few Chicagoans seemed to be willing to shrug it off.
What do you think of the name change?
The managers of the iconic building announced on Thursday that its name will be changed to the Willis Tower, effective this summer. The London-based insurance broker Willis Group Holdings Ltd. announced Thursday that 500 of its employees now scattered throughout Chicago are moving in, and will gain naming rights as part of the deal with the owners of the building.
On Thursday, all through the floors of the Sears Tower, the phones jangled all day with complaints."
For Source and Full Article Click: cbs2chicago.com
As CBS 2's Mike Parker reports, the iconic tower of steel and glass has anchored the city's skyline for more than 35 years, and almost looks like it was constructed in tribute to the city's big shoulders. But with the name change looming, few Chicagoans seemed to be willing to shrug it off.
What do you think of the name change?
The managers of the iconic building announced on Thursday that its name will be changed to the Willis Tower, effective this summer. The London-based insurance broker Willis Group Holdings Ltd. announced Thursday that 500 of its employees now scattered throughout Chicago are moving in, and will gain naming rights as part of the deal with the owners of the building.
On Thursday, all through the floors of the Sears Tower, the phones jangled all day with complaints."
For Source and Full Article Click: cbs2chicago.com
Shelf Offerings 100% of 2008 Cat Bond Issuances
Shelf Offerings 100% of 2008 Issuances » Print: "Shelf offerings have become increasingly common in the catastrophe bond market. First introduced in 2002, this concept of creating a platform for multiple note issuances evolved from the medium-term note programs developed for corporate debt issuers in the capital markets. The advantages of shelf offerings are substantial when compared to the serial approach to catastrophe bond issuance which preceded this innovation. Issuers appear to value the structure, as 100 percent of the catastrophe bonds issued in 2008 used the shelf offering structure. This unanimity among issuers is a profound endorsement of shelf offerings.
The catastrophe bond shelf offering platform was introduced in 2002 with the Pioneer transaction, which accounted for USD386.5 million of risk capital via three takedowns during the year. Once introduced, however, the use of shelf offerings began to grow. Two of seven issuances in 2003 were shelf offerings, accounting for 24 percent of the total risk capital issued. Despite a drop in the number of issuances in 2004, from seven to six, shelf offerings held steady at two (representing 34 percent of risk capital issued). After a short dip in 2005, the shelf offering “share” of total risk capital issued increased to 54 percent in 2006, 70 percent in 2007 … and finally, in 2008 100 percent of risk capital issued.
It is hardly surprising that issuers have been drawn to shelf offerings, as their multi-peril issuance capability enhances risk and capital management. Using a shelf offering, an issuer can construct an issuing platform that mirrors its portfolio of risk perils, which can then be used for price discovery of any (or all) of the perils covered. This also supports a flow of communication that can facilitate reverse inquiry issuances. Because a substantial portion of issuance costs have been paid once (up front), incremental usage of the program amortizes this fixed cost over many issuances. In recent years, the incremental cost and time required to create a “reusable” shelf program (relative to a non-shelf, single issuance facility) has fallen. Accordingly, catastrophe bond sponsors have elected to use shelf programs to secure a substantial improvement in protection utility in exchange for a nominal increase in expense.
However, it is important to note that frictional cost management is often over stated as a motivation for shelf program usage. On a more strategic level, shelf programs have more to do with opening new and consistent alternatives to securing the most competitive capacity available. Critically, shelf programs enable sponsors to access additional capacity opportunistically. Instead of going to the market with a fixed issuance amount and potentially paying an extra premium to clear a large deal, sponsors can approach the market over the course of several (individually smaller) issuances that could aggregate to a larger targeted amount.
Because shelf offerings encourage repeated interactions between sponsors and catastrophe bond investors there is ample opportunity for increased familiarity (and trust) between market participants to develop. Often the benefits of this familiarity can manifest themselves through improved pricing and terms for consistent repeat issuers, and more favorable secondary market pricing for existing bonds in the aftermath of a potentially significant catastrophe event.
The reduced cost and increased flexibility afforded by shelf offerings have advanced the utility of catastrophe bonds for risk and capital management. In 2008, issuers perceived the benefits and voted for this structure with their capital. Generally steady growth since 2002 has confirmed the advantages of shelf offerings, but the market does not stand still. Risk transfer instruments will evolve alongside issuer demand for new ways to protect their capital.
*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product."
For Source and Full Article Click: GCCapitalIdeas.com
The catastrophe bond shelf offering platform was introduced in 2002 with the Pioneer transaction, which accounted for USD386.5 million of risk capital via three takedowns during the year. Once introduced, however, the use of shelf offerings began to grow. Two of seven issuances in 2003 were shelf offerings, accounting for 24 percent of the total risk capital issued. Despite a drop in the number of issuances in 2004, from seven to six, shelf offerings held steady at two (representing 34 percent of risk capital issued). After a short dip in 2005, the shelf offering “share” of total risk capital issued increased to 54 percent in 2006, 70 percent in 2007 … and finally, in 2008 100 percent of risk capital issued.
It is hardly surprising that issuers have been drawn to shelf offerings, as their multi-peril issuance capability enhances risk and capital management. Using a shelf offering, an issuer can construct an issuing platform that mirrors its portfolio of risk perils, which can then be used for price discovery of any (or all) of the perils covered. This also supports a flow of communication that can facilitate reverse inquiry issuances. Because a substantial portion of issuance costs have been paid once (up front), incremental usage of the program amortizes this fixed cost over many issuances. In recent years, the incremental cost and time required to create a “reusable” shelf program (relative to a non-shelf, single issuance facility) has fallen. Accordingly, catastrophe bond sponsors have elected to use shelf programs to secure a substantial improvement in protection utility in exchange for a nominal increase in expense.
However, it is important to note that frictional cost management is often over stated as a motivation for shelf program usage. On a more strategic level, shelf programs have more to do with opening new and consistent alternatives to securing the most competitive capacity available. Critically, shelf programs enable sponsors to access additional capacity opportunistically. Instead of going to the market with a fixed issuance amount and potentially paying an extra premium to clear a large deal, sponsors can approach the market over the course of several (individually smaller) issuances that could aggregate to a larger targeted amount.
Because shelf offerings encourage repeated interactions between sponsors and catastrophe bond investors there is ample opportunity for increased familiarity (and trust) between market participants to develop. Often the benefits of this familiarity can manifest themselves through improved pricing and terms for consistent repeat issuers, and more favorable secondary market pricing for existing bonds in the aftermath of a potentially significant catastrophe event.
The reduced cost and increased flexibility afforded by shelf offerings have advanced the utility of catastrophe bonds for risk and capital management. In 2008, issuers perceived the benefits and voted for this structure with their capital. Generally steady growth since 2002 has confirmed the advantages of shelf offerings, but the market does not stand still. Risk transfer instruments will evolve alongside issuer demand for new ways to protect their capital.
*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product."
For Source and Full Article Click: GCCapitalIdeas.com
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