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Issue 103 - 28th May 2010
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MGA’s warm to task at annual meeting
It may have started off on the coldest May day in recorded history in California’s Palm Desert but the 84th annual meeting of the American Association of Managing General Agents (AAMGA) certainly warmed up. The event attracted over 900 MGAs and a large contingent from the London market and price was not the key discussion for a change. Many MGAs said the London market was holding firm on pricing with “flat the new up” when it came to premiums. More important was the debate over ways in which the MGA market can better report to its underwriters and in London in particular. Much progress has been made and Lloyd’s Head of Delegated Authority Peter Montanaro and the market’s North American team were at the event to speak to MGAs to find out exactly what they wanted. relationships still look to be key with talk of the hurricane season and its likely impact there were many who said that while underwriters have been looking to get back into the property market in the Southern US memories are still sore over those market that packed up and left in the days after Hurricane Katrina. The efforts to cap the well ruptured during the Deepwater Horizon explosions dominated the US television and MGAs were saying how the attorneys had averts on the television seeking potential claimants less then one hour after new of the explosion had been announced. While the Obama administration have laid the blame firmly at the feet of BP the MGAs who work in the southern states have said they believe there will be an unseemly rush from claimants and lawyers to seek to attach to any policy they believe will pay out so ancillary companies to BP and Transocean were now in the cross hairs. On a lighter note you can take the English out of England but never England out of the English. England played a vital pre World Cup game against Mexico on Monday with the kick off at Noon Californian time. There was a sudden rush for taxis at around 11.30 and the nearby sports bar was filled with AAMGA delegates in time for kick off.
2010 hurricane season set to be a blast
With the official start of the North Atlantic Hurricane season on Tuesday the forecasters have been out in force and none of it looks good. Rating agency Fitch has given its view on the forthcoming storm season which according to catastrophe risk modeling firm AIR Worldwide could be exacerbated by the oil slick from the Deepwater Horizon loss. Fitch said insurers were fortunate in 2009 that Atlantic hurricane activity was well below expert forecasts but forecasts for the 2010 hurricane season “call for a more active tropical storm season in the Atlantic basin relative to last year and above long-term historical averages”. It added: “The property/casualty insurance industry is in a modestly better position to cope with large natural catastrophe losses as capital levels rebounded strongly in 2009, due to a recovery in investment performance and improved underwriting results, which reversed steep surplus declines reported in 2008. In addition, recent capital market liquidity would portend a more favourable capital raising environment than one year ago should a major event occur.” Therefore Fitch believes underwriting capacity is currently “abundant, even for catastrophe-prone risks”. It adds that Florida remains in the spotlight due to its significant hurricane risk, regulatory constraints on premium rates, and reluctance of larger insurers to provide underwriting capacity to the states property insurance market. “State Farm, the largest private homeowners insurer in the state of Florida, announced its intention in early 2009 to completely pull out of the Florida homeowners market due to inadequate pricing but subsequently reversed that decision following its settlement with Florida regulators,” it added. “However, because State Farm plans to discontinue a significant number of policies in comparatively higher risk areas, Fitch remains concerned about the potential for additional strain on state run Citizens Property Insurance Company, which insures those who cannot find property coverage on the open market.” AIR Worldwide however warns that the oil slick in the Gulf of Mexico form the shattered Deepwater Horizon well would seriously increase the potential claims from any hurricane which whipped up a storm surge which drive the oil on the US coastal regions. Already having badly affected the region’s fishing and oyster trade AIR said the potential remained for the oil to be driven onto the shoreline by any landfalling hurricane prior to the success of the clean up teams to dissipate the slick. The arrival of tar and oil onto the beaches may turn away the thousands of tourists which visit the Southern United States coast and with in increase the claims against those deemed responsible for the oil discharge.
Extremely active hurricane season warns national experts.
The US National Oceanic and Atmospheric Administration (NOAA) issued its forecast for the 2010 Atlantic hurricane season this week. In its statement the NOAA said it expects an “active to extremely active” hurricane season, projecting a 70% probability of 14 to 23 named storms, eight to 14 hurricanes, and three to seven major hurricanes (category 3 or higher). NOAA’s forecast of an active season is consistent with other 2010 forecasts of hurricane activity which will brig little comfort to the underwriters. Broker Marsh said on the NOAA’s announcement: “According to the US Census Bureau, approximately half of the US population lives within 50 miles of a coastline. As the aggregation of population in coastal areas continues, and exposed property values and infrastructure increase, the total losses from hurricanes and other named storms will increase. At-risk industries include commercial real estate, hospitality, and public entities. The energy industry is also vulnerable, but has managed prior catastrophes, such as Hurricane Ike, relatively well.”
Asia needs to go direct says Burgess
Insurers need to drive the direct model into Asia if the market is to achieve its full potential according to one expert. Charles Burgess, managing director of Whittington Asia Pacific said underwriters needed a closer relationship with their Asian clients and the direct channel would be a vital tool in those efforts. In a speech entitled ‘Optimising Distribution in Asia’ given at the 4th Asian CFO Summit this week, he said Asia’s vast territory meant the insurance markets had widely differing stages of maturity, from what he termed the ‘adolescent’, through to the ‘teenage’ period to the ‘middle aged’. The first period focused almost entirely on premium growth, the second on balancing that with cost efficiencies and the third phase was characterised by the need to better understand customer needs and their risk profiles. Mr Burgess said the first two phases of growth in general insurance across most markets in Asia had seen distribution channels dominated by agents with other forms of distribution such as bancassurance and other affinity groups gaining ground as foreign insurers entered the markets and sought ways to penetrate. “However, regardless of the stage of market development and regardless of the distribution strategy of the players in those markets all general insurers must have a direct channel to customers”, he argued. in many cases throughout the region, both in the emerging and more mature markets, the quality of customer intelligence flowing from distributor to the insurer was limited he added believing that this was critical not only for pricing today’s risk but also for identifying tomorrow’s sale, emphasising that the direct distribution model would provide the multi channel general insurer with access to the ‘street’. “As markets are growing in the region, customers are becoming increasingly familiar with personal lines insurance products,” said Mr Burgess. “The internet has been a key medium for search.” Posing the question: “Can the internet model work in Asia?”, and in a ringing endorsement of the direct model, he said: “Frankly, yes it can”, arguing that the probable hurdles to its development were the question of trust, channel conflict and for the adolescent stage countries, the means of payment.
Lloyd’s team goes for world record
A team of staff from three Lloyd’s market companies have joined forces in an effort to break a world record for rowing across the English Channel. They are all set to undertake the challenge of rowing the 21 miles across the Channel to France in a six-person Thames Cutter Rowing Boat, and in doing so aim to beat the existing world record time of 2 hours and 42 minutes. Kirk Johnson, Ollie Howard, Scott Bradbury and Kevin Iles from Chaucer Syndicates, Martyn Hall from QBE and Michael Harris and Richard Bainbridge from MSF Pritchard make up the team who will attempt to cross the channel in considerably less than three hours. Weather permitting the attempt will be made sometime between 10-13 June. In making the attempt the team will be looking to do its bit for charity and aims to raise £10,000 for the AHOY centre (Adventure Help & Opportunities for Youth), which established a sailing and boating centre at Greenwich Reach, London in 2004, to provide young, disabled and retired people in the community with experience, and opportunities through water-based activities on the River Thames. Scott Bradbury, team spokesman and Aviation Assistant Underwriter at Chaucer Syndicate 1084 said: “There have been few successful Channel crossings in a Thames Cutter rowing boat to date and those that have completed the challenge claim it to be the toughest they have ever faced. We aim to not only become one of the successful crews, but also the quickest and beat the current world record. We would like to express our gratitude to all those that have offered their support to date for this worthwhile charity and would welcome any further sponsorship.”
Jon Guy
Editor
Global Broker & Underwriter
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