State of emergency declared on East Coast as Earl nears
U.S. President Barack Obama has called for vigilance and calm as a state of emergency was declared in North Carolina as Hurricane Earl. The national Hurricane Centre upgraded Earl to category 4 with sustained winds of 215 km per hour as it made its way past the Bahamas and along the eastern seaboard. AIR Worldwide put its estimate at up to $150m in insured losses in the Virgin Islands, Puerto Rico, St. Maarten, and St. Martin. The estimate includes wind damage to insured onshore properties in the Virgin Islands, St. Maarten, St. Martin and Puerto Rico. Nearly half of the total is attributed to St. Maarten where high winds downed trees and power lines, and peeled off roofs and signage. Dr. Peter Dailey, director of atmospheric science at AIR Worldwide said: “It could arrive on the North Carolina coast as early as Thursday evening, bringing strong winds and tall waves. Some fluctuations in Earl’s intensity are possible as it tracks northward, but it is likely to remain at Category 3 strength for at least 48 hours.” “Earl is currently being impacted by an environment of drier air from the north and increased shear from a trough of low pressure from the southwest,” explained Dr. Dailey. “These conditions will persist for the next day and should limit any further intensification of Earl. However, while some additional decrease in wind speed is possible, Earl should maintain its current intensity as it approaches North Carolina and still be a major hurricane with near 120 mph winds as it passes by that area.” Despite the fact that Earl will start to decay as it turns toward the northeast and moves beyond the Outer Banks, it is still expected to pack winds of up to 100 mph as it moves off the coast of Cape Cod—and it may still be at hurricane intensity when it finally comes onshore in Nova Scotia. According to the NHC’s current most likely track, Earl will pass about 70 miles to the east of Cape Cod and 60 miles from Nantucket.
Fitch warns solvency II will impact reinsurers in the months to come
The implementation of Solvency II will have real implications on the stability of the insurance and reinsurance sector, Fitch Ratings has warned. In launching its 2010/11 Reinsurance Review and Outlook the firm affirmed its stable outlook on the global reinsurance market adding that the coming months will see clear space between the winners and losers in the sector. Chris Waterman, Managing Director in Fitch Ratings Insurance group in London said in addition to the expected pressure on earnings to come over the next 12-24 months, the regulatory issues posed by Solvency II add to what are already challenging times for the insurance and reinsurance market. Mr Waterman, added: “Fitch considers that the next 12-24 months will prove to be a period of notable differentiation between companies”. He said Fitch believes that insurance company solvency ratios in Europe are likely to be lower in aggregate than in Solvency I. Thus, it has advised insurers will be forced to consider capital raising or consolidation along with fundamental changes such as the redistribution of asset portfolios or business mix. Mr Water said the omission of the United States from the first rounds of CIEOPS’ Solvency II equivalence, which includes Bermuda, Switzerland and Japan. Mr Waterman said while there were changes in the US collateralisation system on a state by state basis the potential for any federal change was limited despite the formation of the Federal Insurance Office. The level of merger and acquisition activity has not been as high as Fitch would have expected with the Max Capital- Harbor Point deal to create Alterra the sole notable deal.
Kiln launches Asian treaty operation
The Kiln group has announced it is to open an Asian Treaty unit to be based in its office within the Lloyd’s Singapore operation. The firm has recruited Tay Boon Chuan as treaty underwriter from Asia Capital Re where he has been a senior treaty underwriter. The firm said Boon Chuan would be “spearheading the development of a reinsurance treaty portfolio in the region”. He will be underwriting for Kiln Syndicate 807, the non-marine Lloyd’s syndicate which has a capacity of £140m for 2010. The syndicate began trading in 1979 specialising in reinsurance treaty and property and medical-expense binding authorities. Prior to his role with Asia Capital Re Boon Chaun had worked for several years with Swiss Re Asia. Neil Wray, managing director Kiln Asia, said: “Reinsurance treaty is a class of business in which Kiln has a long and distinguished history and this is the first time it has been written from any of our offices in Asia. Having someone with Boon Chuan’s expertise to underwrite the business in the region makes this a very exciting step for Kiln’s Asia business.”
“This is an important strategic step for Syndicate 807 as we look to use the Kiln Asia platform to develop new treaty reinsurance business from the region,” said Lloyd Tunnicliffe, Active Underwriter Syndicate 807. “ Boon Chuan’s extensive experience and relationships will allow us to service the local markets, accessing business that would not normally be seen in London.”
Marsh in investor warning
Chinese Companies keen to expand overseas have been advised to adopt a think global, act local approach, by broker Marsh. Marsh, has produced the latest in its directors’ reports series, with the latest looking at the risks and opportunities Chinese companies encounter when acquiring, investing and listing in external markets. The report said it found, a growing appetite to expand overseas coupled with low offshore valuations has lead to strong outward Chinese investment in a “volatile, global market”. It added that Chinese merger and acquisitions are likely to intensify in 2010 in a state drive to direct the country’s foreign exchange reserve away from the U.S. dollar. “Global acquisitions are by far the quickest method for Chinese companies to achieve greater economies of scale and expand into foreign markets like the U.S. in an attempt to globalise their brand,” it said. “The global downturn has presented well-capitalised Chinese companies with many attractive M&A opportunities” said Mark Dawson, Leader of Asia Global Client Services (AGCS) at Marsh, EMEA. However, while Chinese companies have been successful in implemented post-merger integration and extracting value from offshore investments, said Paul Wilkins, Greater China CEO for Marsh, they currently employed lower standards of risk management. The report cited that acquiring Chinese companies face a variety of risk issues as regulation is tighter in the U.S. and Europe, taking stricter environmental liability laws and more stringent employee benefit and workers’ compensation regulations as cases in point. Marsh added that whilst many Chinese companies believe that purchasing offshore targets make them competitive, the risks posed by complex, offshore regulation still leaves them with an uphill struggle.
Mr Dawson explained “However, Chinese companies face a completely different risk landscape from what they are used to at home. Issues such as more stringent regulations and cultural integration require these companies to pay particular attention to their overseas risk management and Insurance programmes. Companies planning to list or already listed offshore have the added complexity of IPO liability and statutory reporting requirements”.
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