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Issue 86 - 28nd Jan 2010
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IUMI warns of mounting challenges for marine classes
The Executive Committee of the International Union of Marine Insurance (IUMI) held its annual winter meeting in London this week with a warning that the year ahead was beset with challenges for the sector. The Union will stage its annual conference in Zurich this September and already the topics for the various sessions are taking shape. IUMIU president Deirdre Littlefield said while global businesses had been hit hard by the economic crisis the marine market had been hit harder then most with the sudden fall in international manufacture and trade. The fallout had seen a slump in the number of newbuilding orders for vessels and the cancellation of existing orders as shipowners sought to reduce expenditure. The concerns over the trend were twofold. Firstly the world fleet was seeing a stead stream of new tonnage come into services but it was not being balanced by the scrapping of aging tonnage. It is a worrying trend for the underwriters with the claims levels for vessels 25 years and older far higher then younger vessels. Secondly shipyards which have been booming in the past decade as newbuild capacity was desperately wanted were now turning their hand to vessel repair as the paucity of new order continued. IUMI said the concern was that the yards had little expertise in repairs and as such there were fears over the standards of the repairs which were being carried out. Ms Littlefield also said the international community could not push the responsibility fir meeting the threat of piracy onto the insurance industry. “This is not a problem for the insurance industry alone this is an international problem alongside the likes of terrorism,” she explained. “There is a great deal of emphasis on what the insurance industry is going to do but it is not an issue which can be solved by the business but needs a concerted response from the international community to address far ore wide reaching issues within Somalia for instance.” Port security is now a major issue with the IUMI committee saying that there is a growing concern over the rise the use of violence in terms of cargo theft from ports, terminals warehouses and on the road.
Early Solvency II adoption will be a business winner underwriters told
The International Underwriting Association of London (IUA) hosted a Solvency II seminar for more than 120 delegates from across its members in the London company market this week and said those who were early in meeting the requirements prior to the regulation’s enforcement will steal a march on their peers. The audience was told companies that successfully implement Solvency II may make efficiency improvements and gain a competitive advantage on their rivals, with Nick Lowe, the association’s Director of Government Affairs adding the new solvency regime for insurers in Europe will be an opportunity as well as a challenge. He said. “Firms are now clearly gearing up to meet the Solvency II challenge. Although the final details are not certain, many high level requirements are known since they have been set out in the European Union’s framework directive. That sets out key responsibilities and functions and in some cases departmental structures.” Steven Spano, CFO & COO of Assicurazioni Generali UK and Chair of the IUA’s Accounts, Taxation and Solvency Committee, said: “The new regime is more than just a revised set of capital requirements. It will affect risk management procedures, data storage and audit functions. New roles may need to be created to fulfil the tasks necessary for compliance with Solvency II.” Mr Lowe added: “The IUA is concerned that Solvency II is implemented fairly with realistic expectations about capital charges and the costs of change. But ultimately it should result in greater security and confidence in the European insurance and reinsurance industry. There should also be better cross-border cooperation between regulators.”
Marsh to host National Oil Companies at crucial time for industry
Over 300 members of the world’s national oil companies (NOCs) will head for Dubai next month for the Marsh National Oil Companies’ Conference at a time when energy underwriters are expressing concerns over rising claims. The delegates will hear a range of senior figures from both the insurance industry and the energy markets address a range of topics from the impact of the economic crisis, climate change, the benefits of collaboration with Independent oil companies and the politics surrounding the access to and price of oil. There will also be a discussion on the link between the scarcity of oil and water as the two most sought after commodities on the planet at present. Marsh & McLennan Companies Chairman and CEO Brain Duperreault will make the keynote address on the formal opening day of the event which last from February 22 to 24. It comes at a time when the offshore energy underwriters have raised concerned over the pressure on rates in the market excluding the Gulf of Mexico. Dominick Hoare of Watkins Syndicate at Lloyd’s and a member of the IUMI executive Committee told a press conference this week: “The estimates are that claims excluding the Gulf of Mexico for last year will be in the region of $2 billion. That compares with the estimate premium income for energy risks excluding Gulf of Mexico which is said to have been between $1.5 billion and $2 billion for last year. It highlights the need for underwriters to stick to technical pricing.” IUMI said the concern for many marine and energy underwriters is the growing demands from their parent companies and capital providers to deliver decent underwriting profits as the investment markets continued to struggle.
PartnerRe issues renewals forecast as Paris Re feels the effect of takeover
Paris Re was able to renew 90% of the risks it was willing to underwrite at January 1 as the impact of its takeover by PartnerRe was within expectations according to the group’s Chief Executive. Following PartnerRe’s takeover of the French reinsurer it was decided that this year the two books of business would be renewed separately and figures released this week found that Paris Re experience some fall out from its new status. PartnerRe revealed during the January 1, 2010 treaty renewal season it expected to write and bind approximately $2.6 billion of Non-Life premium. The figure included $440 million in premium from Paris Re and represents a 20% increase over the expiring premium of PartnerRe’s original January 1, 2009 portfolio of $2.159 billion. PartnerRe President & Chief Executive Officer Patrick Thiele said, “Overall, we are pleased with the performance of both the PartnerRe and PARIS RE books of treaty business in the January 1 renewal. Specifically, the PartnerRe book was stable with little change in overall client buying behavior, pricing or terms and conditions.” Mr Thiele added: “Paris Re experienced the normal dislocation and portfolio attrition associated with a change in control. Despite this, Paris Re renewed approximately 90% of the business that met its portfolio objectives. New business remains challenging to achieve given the current stable environment.” On an individual basis PartnerRe recorded an 8% cancellation rate, while Paris Re’s cancellation rate was higher at 20%. Renewal changes represent both changes in pricing as well as changes in participation on treaties. Mr. Thiele added, “Our overall priced technical ratios on the combined book were broadly in line with those in 2009, and we maintained double digit priced ROEs despite the continuation of a low interest rate environment. With PartnerRe’s strong market position and active capital allocation, we believe we can maintain profitability in line with our long-term goal of 13% operating ROE in 2010, barring unusually large loss events. Our larger combined portfolio, backed by our substantially larger capital base, positions us well for 2010 and beyond.” Approximately 60% percent of the combined group’s total annual non-life treaty business renews on January 1. The remainder is comprised of treaty business that renews at other times during the year, in addition to approximately $500 million of combined facultative business that is underwritten throughout the year. PartnerRe said the two books will be consolidated and will renew under the PartnerRe name from mid-year 2010.
Risk Lounge launch delivers specialist platform
Risk management and software service company Russell Group has announced the launch of a new internet portal which aims to provide specialty markets with an analysis and thought leadership hub. The Nottingham-based firm which includes some of the world’s biggest underwriters and brokers on its client list has created Risk Lounge, an interactive website which can provide a range of facilities for both existing clients and those across the specialty and reinsurance markets. The firm says it has been driven by the need for a greater focus on the specialty markets at a time when access to capital and the management risk exposure remain significant concerns for the industry. Russell Group’s Managing Director Suki Basi explained: “Our clients operate in specialised areas of the business and they are in constant demand for information and data in areas which would not be deemed to be mainstream within the market. We are looking to position Risk Lounge as an additional service to our clients and build up an on-line community which can discuss specific topics and provide some thought leadership on issues and the areas which directly affect them.
“We are excited about the potential of the site. The aim is to build a valuable tool for the specialty community.” Among the facilities on the site are the Risk Lounge chat room where visitors can participate in on-line debates on issues concerning both the market and the Russell Group’s latest initiatives, a regular blog by Mr Basi providing his views on the market and the issues and exclusive news and analysis on the major events in the market and how they affect the sector. www.risklounge.com.
Jon Guy
Editor
Global Broker & Underwriter
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