Dec
13
Thailand Flooding to Hit Reinsurance Industry
Filed Under Asia, Insurance Company, Reinsurance | 1 Comment
With the flooding in Thailand beginning to abate after it first started in July, the cost of covering all the P&C (property & casualty) insurance claims and other flood-related claims may come to upwards of US$10 billion for the insurance industry.
With the rains during Thailand’s monsoon season causing flooding across many parts of the country over the last few months, the loss of life and property has been devastating and will continue to have long lasting effects. The World Bank estimated in early December that the total damage from the floods was about US$45 billion.
While the estimated overall damages dwarf the damages covered by the insurance industry, estimates coming in from industry observers and reinsurance companies are indicating that insured losses from the flooding could be anywhere between US$8-11 billion dollars. This will further hit reinsurers after a long year full with tragic natural catastrophes around the world.
Asia Capital Reinsurance Group (ACR) has estimated that their losses, before tax but after any reinsurance and reinstatement premiums have been subtracted, add up to US$55 million. Singapore-based ACR’s estimates were based off of 1 percent market share, and were largely calculated from information they were getting from brokers and clients and therefore may be liable to change.
Swiss Re and Munich Re, two of the largest reinsurance companies worldwide both had tremendous insured losses due to the flooding. Swiss Re has estimated that so far its losses stand at US$600 million before tax and net of buying reinsurance on their reinsurance, bringing their total claims this year to US$3 billion for large losses. Munich Re is reporting similar levels of estimated losses at €500 million (US$660 million) net before tax. As with ACR’s estimated losses, these numbers may be due to change as the insurers get more solid information.
The flooding in Thailand has hit reinsurers at the end of a long year marked by large scale catastrophes including the earthquake and tsunami in Japan, the Earthquake in New Zealand and severe storms in the US. Moody’s has pegged 2011 as having “the second-highest level of insured natural catastrophe losses in history.”
Industrial estates in Thailand have been hard hit, with some reports saying as many as 1,500 industrial manufacturing and supply facilities have been damaged by flooding. Approximately 25 percent of computer components for hard drives are made in Thailand, and the interruption in manufacturing and supply is already sparking reports on the effects it may have on shipments of computers in 2012.
Moody’s Investor Services has already said that the global reinsurance industry will be “meaningfully hit” by the losses, but provided there are no further catastrophes, it shouldn’t affect reinsurers’ capital. Some industry observers believe this will help the firming of prices which complimented by the increased awareness of the effects of catastrophes among clients, could lead to an earnings event in the near future for the global reinsurance industry.
Companies Mentioned
Asia Capital Reinsurance
The Asia Capital Reinsurance Group is headquartered in Singapore with branch offices in Korea, Hong Kong, Japan, Taiwan, and India. The company offers reinsurance solutions across a number of lines of business throughout the pan-Asian region.
Munich Re
Munich Re focuses on providing financial stability, and consistent risk management based on its extensive solution-based expertise. It operates in all lines of insurance, with around 47,000 employees throughout the world. Especially when clients require solutions for complex risks, Munich Re is a much sought-after risk carrier. The primary insurance operations are mainly concentrated in the ERGO Insurance Group. ERGO is one of the largest insurance groups in Europe and Germany and 40 million clients in over 30 countries place their trust in the services and security it provides. In international healthcare business, Munich Re pools its insurance and reinsurance operations, as well as related services, under the Munich Health brand.
Swiss Re
The Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life and health insurance as well as special lines such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.
Nov
2
Is the Latin America Health Insurance Market in Good Shape?
Filed Under Aviva, Health Insurance, Healthcare, Insurance Company, International Healthcare, Medical Insurance | 2 Comments
In recent weeks there has been a wave of news from within the international Health insurance industry revealing that Latin America is causing a host of issues for Health Insurance companies.
The leading causes of concern are primarily fraudulent claims being submitted under plans, and massive overcharging by healthcare providers for individuals seeking treatment who are in possession of medical insurance coverage. Both these issues are leading to increased health insurance loss ratios for most companies providing policies to the region, and is placing the continued viability of international health insurance for LatAm in doubt.
This is especially concerning considering the fact that Latin America has weathered the global economic downturn in a fairly robust manner. Brazil, for instance, as a key market for many international insurance companies and a major emerging BRIC economy should present high growth opportunities for insurers.
Despite the perceived opportunities in the Latin American health insurance market insurers are increasingly wary of the region and are slowly beginning to pull out of these markets. One such insurance company planning to leave LatAm is Nordic, the health insurance brand of Europæiske Rejseforsikring A/S; Nordic has revealed that it plans to cease the sale of NHC Americas Health Insurance products.
The company is also moving towards a complete withdrawal from Latin America, and will no longer sell NHC products through Agents or Brokers located in the region.
The move has surprised many industry insiders as it has been known that Latin America was one of Nordic’s biggest markets, and the company was well placed to capitalize on the expansive economic growth of the region over the near term future.
However, Nordic sources have revealed that this withdrawal from the LatAm health insurance market was instigated after an extensive internal review, and is being conducted in order for the company to consolidate its positions in other markets, with Asia being a key focus.
Unlike the recent announcement regarding the complete shutdown of Aviva Global LifeCare Health Insurance products, Nordic has stated that policyholders currently enrolled on an NHC Americas health insurance plan will still be able to renew their policies going forward, and that the plan will be serviced in accordance with existing policy terms.
This means that in contrast to Aviva, Nordic will not completely disable its NHC Americas business, but rather stop the sale of any NHC Americas products to new customers. As such, existing NHC Americas policyholders will be able to receive continuing coverage for any medical conditions they may have developed while on their health insurance plan.
The two companies, Aviva and Nordic, could not have handled the “shut down” of their respective plans in a more contrasting manner. Nordic, unlike Aviva, has shown its commitment to policyholders and has displayed its intent to provide high quality on-going services to members who may have developed serious medical conditions while enrolled on their health insurance plan. Aviva, on the other hand, has shown a complete disregard for the impact of its actions on its clients.
While the Aviva Global LifeCare plans may have been loss making for the company, the position they have placed themselves in by simply ceasing to operate these products could do major damage to the perception of “safeness” which IPMI policies offer on a global level. Facing a similar position, Nordic has elected to stand by its existing customers who may have otherwise faced a difficult proposition in obtaining continuing coverage for this region.
Nordic will not force policyholders off plans which are already in place. This key distinction over the manner in which Aviva is treating existing members is a major insight into the duality displayed by many major Global health insurance providers in the modern age. For the international insurance industry to grow, consumers must have trust in the company they are working with, in that the protection they are purchasing is often intended to provide their medical coverage for the rest of their life. While Aviva may have had a negative impact on the perceived trust levels clients have towards their insurer, Nordic has proven that at least some international insurance companies do care about the people they are protecting, and that these insurers are committed to protecting customers over the long haul.
At present it is still unclear why NHC has made this startling decision. Market Analysts suspect that one of the major contributing factors is due to the company’s Claims Ratio in the LatAm region; future claims development in Latin America for NHC was viewed by insiders as potentially unsustainable.
While the news will undoubtedly come as a blow for individuals in Latin American countries due to the high quality and coverage levels associated with the NHC Americas policy, the fact the Nordic remains committed to continuing service of existing customers will be welcomed by many.
Aug
30
Middle East Insurance Slowdown Sees Development of New Products
Filed Under Expat Insurance, Insurance Company, Middle East, Reinsurance, UAE Insurance, general insurance | 1 Comment
A number of financial reports released by Qatari insurance companies on Monday indicate that the country’s insurance sector may be poised to experience a significant slowdown. Five Qatari insurance companies, operating mainly in the non-life insurance market, have indicated that the sector’s total net profits have risen by only 2 percent during 2011, compared to 9 percent for the same period in 2010.
The companies, which include Qatar Islamic Insurance, Qatar General Insurance and Reinsurance, Al Khaleej Takaful, Qatar Insurance, and Doha Insurance, saw the sector’s net profit for January – June 2011 reach QR 545.96 million (US$ 149.91 million), compared to the QR 537.11 million (US$ 147.48 million) in profits seen for the same reporting period in 2010. The data on the general profitability of these five Qatari insurance companies was released by Qatar Exchange data.
One of the primary reasons cited by the insurers with regards to the lower than expected profits in the first half of 2011 is due to the rise in premiums yielded to reinsurance companies. Reinsurance premium yielding has risen by 8 percent for Qatar’s insurance companies in 2011, with three companies actually yielding more than 55 percent of total written premiums to reinsurers. With the levels of premiums being yielded to reinsurers outstripping the total growth in premium revenue for the market, profits have inevitably come in at lower than expected levels.
Profit growth for the first half of 2011 for the five companies, compared to the same period in 2010, stood at:
Qatar Islamic Insurance: 1.83 percent growth in 2011, up from 0.43 percent in 2010.
Qatar General Insurance and Reinsurance: 1.83 percent growth in 2011, up from -7.31 percent in 2010.
Al Khaleej Takaful: 11.29 percent growth in 2011, down from 46.85 percent in 2010.
Qatar Insurance: 10.74 percent growth in 2011, down from 65.77 percent in 2010.
Doha Insurance: -8.80 percent growth in 2011, down from 60.55 percent in 2010.
While the slowdown of the non-life insurance sector in Qatar does not pose major concerns at present, it has highlighted the need to create innovative policies with which to cover underserved segments of the Middle Eastern insurance market.
One company taking notice from the Qatari slowdown is the Dubai Islamic Insurance and Reinsurance Company, also known as Aman, which is headquartered in Dubai, UAE. Aman’s CEO, Hussein Al Meeza, announced the creation of two new types of protection policy which would focus on affording medical cover to Indian expatriates working in the United Arab Emirates.
The Indian Expatriate Medical Insurance plans from Aman are being run in conjunction with ICICI Lombard, one of India’s leading insurance companies. On creating the plans, Hussein Al Meeza said;
“If you check the structure of the population in the UAE and what relation it has with Emiratis, they are our partners; they are our brothers. They are also the people who (are) behind all the work that has been done here. The relationship that we have with the Indian population was not (built) today or yesterday. Also, we have (an agreement) with ICICI Lombard, which is one of the top names in the Indian market.”
Mr Hussein went on to say;
“Europeans already have the culture of insurance. They have very advanced products. We are looking to see where the opportunities are to provide services. We are looking at the Arab world, Pakistanis, Bangladeshis and Filipinos. It needs a background from the countries, because India has a platform for service providers… The Indian (expatriate population) is a big market and there are a lot of opportunities. Also, we got the right partner for the products.”
The policies, named “Rishtey” and “Health on Return,” aims to give Indian expatriates in the UAE a wider choice with regards to their medical cover than they have previously been afforded. The Rishtey plan would see UAE expatriate workers obtain medical insurance cover for their families in India, while the Health on Return policy would provide health insurance protection to those same expatriate workers in the event that they return to India for a short stay. Additionally, the Health on Return plan also offers the expatriate Indian workers the option of having retirement health insurance cover, creating a far more flexible and comprehensive health insurance product than any which currently cater to this niche market segment.
While a slowdown in Qatar’s general insurance market may pose a concern for the region, industry analysts are aware that there exists significant potential with regards to developing ever more unique products for the GCC insurance sector.
Insurance Companies Mentioned
Qatar Islamic Insurance
Founded in 1995, Qatar Islamic Insurance, also known as QIIC, operates a number of lines of insurance coverage. Offering insurance based on Islamic principles QIIC offers coverage for all risks from Aviation to personal protection.
Qatar General Insurance and Reinsurance
Qatar General Insurance and Reinsurance was founded in 1979, and is a Qatari national company. Qatar General Insurance and Reinsurance offers both individual and business insurance products in Qatar.
Al Khaleej Takaful
Founded in 1978, Al Khaleej Takaful operates primarily in the general insurance and reinsurance markets. Covering risks including Property, Engineering, Liability, General Accident, Marine Transit, and Marine Hull, Al Khaleej has proven time and again to be an innovative insurer.
Qatar Insurance Company
Founded in 1964, Qatar Insurance Company, also known as QIC, is Qatar’s oldest insurance provider. Operating a number of personal and business insurance products across the GCC, QIC is one of the most established insurers in Qatar.
Doha Insurance
One of the younger insurance providers in Qatar, Doha Insurance was founded in 2000. Establishing a Takaful products company in 2006, under the name Doha Takaful Insurance, Doha Insurance company offers a range of general insurance products.
Dubai Islamic Insurance and Reinsurance Company
Dubai Islamic Insurance and Reinsurance Company, also known as AMAN, was established in 2002 to provide comprehensive Islamic insurance products to residents of the UAE. Offering Motor, Home, and Medical Islamic insurance products, AMAN is one of the leading insurance providers in the UAE.
Jun
28
Boosting Big Investments in “BRIC”
Filed Under Health Insurance, Hong Kong, Insurance Company, International Healthcare, Life Insurance, Medical Insurance, USA Health Insurance, Uncategorized | 1 Comment
As the economies of Brazil, Russia, India and China continue to grow, increasing numbers of international insurance and reinsurance companies are seeking to enter into these burgeoning regional markets. As some of the most recent international insurers to tap new country markets have found out, not only must they balance short and long-term strategies, but also provide appropriate and appealing products to local populations, sometimes even in the middle of shifting regulatory environments.
Just last week, at the Insurance Day Conference in Bermuda, Joe Plumeri, CEO and Chairman of Willis Group Holdings, spoke about the importance of maintaining growth in the Indian health insurance market along with the markets of Brazil, Russia, and China, or the “BRIC” countries as they are sometimes called. He stated that due to these countries’ developing populations, “the wealth and insurable value that an exploding global middle class will create will be unprecedented in history. The resulting demand for insurance will dwarf the capital and capacity of today’s insurance market.” Plumeri emphasized that “the new middle class will need brokers that understand them and their industries. They’ll need carriers who are innovative, financially secure, and who are there when they need them-carriers with a reputation for paying legitimate claims quickly.” A report published by Standard and Poor’s this week reaffirmed his opinion, with S&P credit analyst Magarelli stating that India’s “non-life sector, which includes property/casualty and health insurance, has one of the lowest penetration rates in Asia.” Again asserting Plumeri’s opinion on what customers will need from carriers, Magarelli proclaimed that in order to maintain the growth of the Indian insurance market, insurers need to start focusing more on key factors such as customer service, innovation, and efficiency; currently, “the insurers’ persistently poor underwriting performance..could potentially stunt the industry’s growth if it remains unchanged.”
As the demand for insurance in Brazil grows, The Travelers Companies Inc has just purchased 43 percent of Brazilian insurance company J. Malucelli Participacoes em Seguros e Resseguros SA for US$410 million, with the opportunity to increase its stake in the company to 49.9 percent over the next 18 months. As J. Malucelli already commands 30% of Brazil’s largest market, it is no surprise that Vice Chairman and head of Traveler’s Financial, Professional, and International Insurance business segment Alan Schnitzer said that J. Malucelli’s “extensive customer base provides us [The Travelers Companies, Inc.] with an exceptional platform for expanding the joint venture beyond the surety business into the growing property and casualty market.”
In accordance with projections for growth in Malaysia’s insurance sector, Zurich Insurance Company Ltd has just purchased Malaysia’s Assurance Alliance Bhd, a subsidiary of MAA Holdings Bhd, in full. A financial holding company, MAA offers general and life insurance, reinsurance, property management, investment advising, and more; Zurich purchased the general and life insurance sectors of the company. The sale comes a few months after Dan Bardin, Zurich’s chief executive of Global Life Asia Pacific and the Middle East, disclosed that the company was interested in expanding in Malaysia, saying that now is a “great time” to focus on expansion in Asia, although it can be “an enormous task to integrate.” Unfortunately, the sale effectively removed the basis of MAA, resulting in the quick descent of MAA’s shares on the Bursa Malaysia Stock Exchange from 5 sen to 67.5 sen on a volume of 32.63 million shares. MAA is also suffering other monetary issues, as without adequate internal funding, the company may not be able to pay their final principal payment of RM140 million. Whether or not they are able to do so will depend on the profit made from the RM344 million (US$114 million) sale to Zurich.
Bardin has reported that the company is also interested in expanding to Singapore and Taiwan. Contrary to S&P credit analyst Magarelli’s opinion that India has “one of the lowest penetration rates in Asia”, Zurich Regional Chairman of Asia/Pacific and the Middle East Geoff Riddell has reported that the company is currently not looking at expanding to India due to the competing prices caused by large private life insurers entering the market already. In March, Warren Buffett’s Berkshire Hathaway entered the Indian insurance market to sell automobile policies for Bajaj Allianz General Insurance, while New Zealand/Australia insurance giant IAG currently owns a 26 percent share of the Indian sector of its business alongside the State Bank of India.
Managing Director of Swiss Reinsurance’s Corporate Solutions Division Ivan Gonzalez elaborated on Swiss Re’s goals for expansion in the future in an interview last week. With 80% ownership of Brazilian insurance company UBF Seguros, Swiss Re has already gotten a footing in the Latin American insurance market, but they hope to use this ownership to expand in and out of Brazil; to grow the company “as a business”. With an eye on the other three largest Latin American markets-Mexico, Chile, and Columbia, Swiss Re is also opening an office in Miami, in order to “be closer to the Latin America market”, Gonzalez said.
Locally, Hong Kong is also trying to maintain its global financial foothold, as the Hong Kong government has begun to talk about creating an independent insurance authority; its aim will be to enhance “regulation and development of the insurance industry”, the government said. Secretary of Financial Services and the Treasury KC Chan also stated that the authority will “reinforce Hong Kong’s position as an international financial center.”
It is clear that companies will continue expanding into Brazil, Russia, India, and China, but only time will tell if they will be able to provide customer service that will maintain a good relationship between these countries and their new insurers.
Insurance Companies Mentioned:
Zurich: Although its headquarters are in Switzerland, Zurich services customers in more than 180 countries, providing insurance for markets in North America, Europe, Latin America, and the Asia Pacific. In North America, Zurich is the second-largest provider of commercial general liability insurance and the fourth-largest commercial property-casualty insurer.
Swiss Reinsurance: As the second-largest re-insurer in the world, Swiss Re maintains a presence on all continents, providing reinsurance for Property and Casualty and Life and Health related issues, as well as risk management services for corporations.
Bajaj Allianz Insurance Company: A joint venture between global insurance giant Allianz SE and Bajaj Finserv Limited, one of the 2 and 3 wheeler manufacturers in the world, Bajaj Allianz offers health, child, and pension policies in more than 1,200 offices across India.
J. Malucelli Seguradora SA is a Brazilian insurance company that provides surety insurance.
Malaysian Assurance Alliance Holding’s Berhad (MAA Bhd) is a financial holding company that provides financial services and insurance in South Asia, dominating in Malaysia while also establishing a presence in Indonesia and Malaysia.
Berkshire Hathaway: Under CEO Warren Buffet, Berkshire Hathaway manages many subsidiary companies, including Geico Auto Insurance, and can also provide financial planning help.
UBF Seguros: is a small Brazilian insurance company that provides agricultural and surety insurance.
Willis Group Holdings: As one of the world’s leading insurance brokers, Willis provides professional insurance services, reinsurance, risk management, financial and human resource consulting, and more in almost 120 countries.
The Travelers Company: One of the largest American insurance companies and the largest writer of US property-casualty insurance, The Travelers Company provides personal, business, financial, professional, and international insurance and ranks 106 on the Fortune 500 list.
Jun
27
Lloyds moves into Saudi Arabia with RFIB
Filed Under Insurance Company, Middle East, UAE Insurance | 4 Comments
RFIB Group, the international Lloyd’s insurance and reinsurance broker, has been approved for an intermediary license by the Saudi Arabian Monetary Agency (SAMA) to commence its insurance and reinsurance operations in the Kingdom of Saudi Arabia.
RFIB had been active in the Saudi Arabia insurance market for nearly three decades, but renewed regulatory efforts initiated by SAMA last year have required all foreign brokers operating in the Kingdom to attain a license.
Upon the successful receipt of the license, RFIB has now established a branch office in the Saudi capitol city, Riyadh. SAMA also required RFIB Group to select a Saudi Arabian business partner to set up its Riyadh unit. The company has partnered with Bassam Al-Dhabaan, which now owns 40 percent of the local business.
This move follows RFIB’s entrance into the Russian market earlier this year, with the establishment of new Moscow-based retail broker Anglo Russian Insurance Broker (AnRu). AnRu operates as both an insurance broker and an agent targeting corporate retail business. AnRu already has several agency contracts signed with leading local insurance companies, and is expected to rapidly develop in 2011, according to RFIB.
At the outset, RFIB’s new Saudi office will handle reinsurance business, but after its first year of operation the company intends to explore further opportunities in more specialized retail insurance businesses. The Saudi subsidiary will be headed by Anthony Harris, a former British Ambassador to the UAE who been working for RFIB in the Middle East since February 2006.
On the establishment of the new RFIB unit, Anthony Harris said in a statement: “RFIB has been handling reinsurance risks from the Saudi market for nearly 30 years, but our new insurance and reinsurance broking license is the final stage in our establishing a domestic presence in this important and growing market and we would like to thank SAMA for their help in working with us to achieve this license.”
RFIB have also appointed Naji Tamimi, a Saudi national previously at local firm Malath Cooperative Insurance & Reinsurance Company, as the new office’s deputy general manager. Currently the RFIB offices have four full-time staff members and will soon look to ramp up recruitment efforts. The company eventually intends to have at least 50 percent of its staff be comprised of Saudi nationals.
Adrian Spooner, RFIB’s managing director in the Middle East, commented on the company’s expansion strategy: “Naji’s appointment as Deputy General Manager has been invaluable in establishing our new office in Riyadh. His long experience in the market and extensive contacts will be crucial in growing our business in the Kingdom. We now intend to seek further recruits from the local market, working closely with our international team in London to aid staff training and development.”
Saudi Arabia’s labor market has become a sensitive political matter in the Kingdom. In the midst of regional unrest and a considerable 10.5 percent unemployment rate, creating job opportunities for Saudi nationals has become a priority. Various schemes are being discussed by the government that will evaluate the employment of native Saudis by private companies and differentiate between those that have achieved high ‘Saudization’ rates, and others who have not; with stricter limits on foreign work-permits a real possibility going forward. Saudi Arabia employs around 8 million expatriate workers, 6 million of whom work in the private sector.
While foreign employees may not necessarily be in demand, outside capital certainly is becoming more welcome in the MENA region. Insurance House, a recently launched Abu Dhabi based insurance company, agreed at a shareholders meeting to raise the limit on foreign ownership of the business to 25 percent of the company’s paid up equity share capital. The move comes just days after Insurance House’s public listing on the Abu Dhabi Securities Exchange (ADX).
Insurance House provides insurance services to Gulf businesses and individuals from its headquarters in Abu Dhabi, and branch offices in Dubai and Sharjah. It has a listed paid-up capital of Dh120 million (US$32.7 million). Last month the insurer raised an additional Dh66 million (US$18 million) as it sold 55 percent of shares to the public. The share issue was available exclusively to UAE nationals at a minimum subscription of 25,000 shares per investor.
Mohammed Alqubaisi, chairman of Insurance House, spoke admirably of the company’s development. “[The IPO] is another milestone for Insurance House. We will always strive for excellence and will endeavor constantly to create value for our existing shareholders. Additionally, we will give an opportunity to foreign investors to participate in our promising venture by building a successful and established relation with them,” he said in a statement.
The Insurance House’s decision comes after a similar vote last week by First Gulf Bank, UAE’s second largest bank by market capitalization, to increase foreign ownership limits from 15 to 25 percent. UAE firms are seeking an upgrade to “emerging-market” status from “frontier market” by international index provider MSCI.
The MSCI cited the UAE’s tight limits on foreign ownership of listed companies as one of the key barriers currently preventing an upgrade to the market’s status. An upgrade to emerging-market status could drive an increase in international investment in companies throughout the Emirates. The limit for foreign ownership of listed companies in the UAE is 49 percent.
At present, non-Gulf foreigners ownership accounts for 8.5 percent of equities listed on the UAE markets, with holdings of Dh12.4 billion (US$3.37 billion). UAE citizens hold around 91 percent of all equities and the remainder is made up by other Gulf nationals.
Opening up further foreign investment opportunities in Gulf companies is expected to continue, according to market analysts. As more firms go public on local indexes they will need to amplify the visibility of their stock and increasing outside ownership limits is an effective way to get more attention.
Companies Mentioned
RFIB
RFIB Group is an international Lloyd’s insurance and reinsurance broker. The company provides insurance for a variety of risks associated with both facilities and personal casualty. In addition, RFIB offers an assortment of reinsurance products; and acts as broker and consultant to other direct and reinsurance brokers. The company’s clients include corporations, banks, insurance and reinsurance companies, captives, groups and individuals. RFIB was founded in 1980 and is based in London, the United Kingdom with branches worldwide.
Insurance House
Insurance House was launched in May 2011. The company provides a wide variety of insurance products and services to businesses, groups and individuals from its headquarters in Abu Dhabi, in addition to branches in Dubai and Sharjah.
Jun
15
Potential Wave of Mergers & Acquisitions in Global Insurance Industry’s Future
Filed Under Aetna, Insurance Company | 3 Comments
Insurance industry analysts have been anticipating a busy summer season of merger and acquisition activity amongst global insurers and reinsures, as a continued soft market in the wake of prolonged catastrophe losses prompts mid-sized companies to consolidate and gain scale to return sufficient capital for investors.
The US$3.2 billion merger of equals between international reinsurers Transatlantic Holdings Inc. and Allied World Assurance Co, discussed earlier this week, has been accompanied by spate of smaller deals affecting the insurance industry around the world.
Aetna Inc, the third-largest US health insurer, announced on Monday its plans to acquire Genworth Financial Inc’s Medicare-supplement business for about US$290 million, to increase its coverage of the American retiree population.
Medicare supplement insurance, sometimes referred to as ‘Medigap’ plans, offer coverage for deductibles, co-payments and other expenses not provided by Medicare, the universal US government health insurance system for elderly and disabled citizens. The market for supplementary Medicare coverage is expected to grow rapidly as the large ‘baby boomer’ generation of Americans approach age 65 and become eligible for Medicare. The demand for Medicare-supplement services offered by private insurers will increase as the burgeoning ranks of retirees have come to expect similar benefits to those they have enjoyed throughout their career.
Through the acquisition of Genworth’s subsidiary, Continental Life Insurance Co, Aetna will add an estimated 145,000 members to its existing base of Medicare supplement policyholders. The deal is expected to close in the fourth quarter this year with Genworth recording a gain of US$35 million tied to the sale.
This move comes on the back of Indianapolis-based WellPoint Inc’s similar acquisition of California Medicare Advantage plan provider CareMore for a reported US$800 million last week. Medicare Advantage plans offer a comprehensive private-run parallel version of Medicare. WellPoint also citied American demographic trends as a leading factor behind the deal, detailing that for every year until 2030, 1 million more baby boomers will become eligible for Medicare in states which Wellpoint operates its Blue Cross Blue Shield insurance schemes.
North of the border, Royal & Sun Alliance Insurance Group PLC is purchasing Expert Travel Financial Services Inc., one of Canada’s largest travel and health insurance distributors, in a strategic acquisition intended to create a better vertically integrated business model.
Mike Wallace, SVP of Personal Specialty Insurance & Reinsurance at RSA, described the move as a necessary step forward for the company “This is an opportunity to grow in travel insurance by integrating distribution,” he said, adding “This is part of our long-term strategy of consolidating the Canadian insurance industry, and I would say this is not the last one we’ll do.”
RSA is one of Canada’s largest property and casualty (p&c) insurers and in the top three among travel insurers, with US$1.9 billion in direct written premiums in 2010. The Canadian insurance industry has been subject to fervent trading activity, with recent moves including Intact Financial Corp’s US$2.6-billion acquisition of AXA Canada to cement its spot as the largest property and casualty insurer in the country.
Acquisitions have also enabled insurers to diversify their distribution platform and embrace new methods of interacting with clients. This week, Standard Life’s employee benefits consultancy and technology provider Vebnet formally announced a tie-up with Vielife, the online health solutions and wellbeing consultancy acquired by CIGNA in 2006.
Through this partnership, Vebnet declared that employers using the reward and flexible benefits platform could now provide their workforce with an additional service that lets employees measure and monitor their nutrition, stress, sleep and physical activity levels. The service is intended as a support mechanism for employees to maintain healthy lifestyle habits, decreasing potential sickness absences and keeping them engaged with their employer in a positive manner. Standard Life added that the deal would enable employers to identify specific health risks and would lead to more employees becoming engaged with the Vebnet platform.
More complicated industry transactions could encounter other substantial impediments. The previously mentioned merger between Transatlantic Holdings and Allied World Assurance may have already hit a snag. A shareholder in Transatlantic that owns 24 percent of the company, Davis Selected Adivers L.P., has objected to the proposal, filing a statement with the Securities and Exchange Commission stating “serious concerns about the proposed transaction,” and may encourage the company to explore more options before it commits to such an arrangement.
The two companies have thus far declined to comment on this development. Under the proposed US$3.2 billion deal, Transatlantic’s shareholders would wind up with around 58 percent of the new combined company and Allied World’s stockholders with the remaining 42 percent.
The main international credit rating and insurance information agencies have had a mixed response to the proposed merger, which would form a singular insurance and reinsurance entity with US$7 billion in shareholder equity.
Standard & Poor’s (S&P) put Allied World’s financial strength ratings on credit watch with positive implications, saying it expected to raise the ratings by one notch (up from ‘A’) if the merger goes through as is. S&P left Transatlantic’s financial strength ratings unchanged, because despite the noted strengths of the merger, S&P notes “it remains to be seen whether the combined entity will be able to outperform its peers.”
Moody’s responded to the proposed merger by placing Allied World under review for a possible upgrade and also affirming the ratings of Transatlantic Re. “The rating agency believes the merger will provide both franchises with strong benefits,” Moody’s reported.
AM Best left both companies ‘A’ financial strength ratings untouched but remained broadly positive on the deal. “The merged entity is expected to enjoy an enhanced business profile that will likely inure benefits in the form of an improved competitive position. The merged entity should also benefit from broader distribution channels, broader product diversity and the benefits of a significant global presence,” the agency said in a statement.
Companies Mentioned
Allied World Assurance
Allied World Assurance is a global insurance and reinsurance business. The company operates through a worldwide network of offices in several major US cities, Hong Kong, London, Singapore and Zug, Switzerland. Allied World Assurance provide property, casualty, insurance and specialty reinsurance products.
Transatlantic
Transatlantic Holdings Inc. is a leading international reinsurance company, headquartered in New York. Through it’s subsidiaries, Transatlantic offers reinsurance capacity and analysis for a wide array of property and casualty products, with a particular concentration on specialty risks.
Aetna
Aetna international health insurance Aetna is a leading global diversified health care benefits company head-quartered in the U.S., serving approximately 35.8 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, and medical management capabilities and health care management services for Medicaid plans. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans, governmental units, government-sponsored plans, labour groups and expatriates.
WellPoint
WellPoint is the largest health benefits company in USA, with more than 33 million members in its affiliated health plans. As an independent licensee of the Blue Cross and Blue Shield Association, WellPoint serves members as the Blue Cross licensee for California; the Blue Cross and Blue Shield licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio, Virginia, and Wisconsin. In a majority of these service areas, WellPoint does business as Anthem Blue Cross, Anthem Blue Cross Blue Shield or Empire Blue Cross Blue Shield. WellPoint also serves customers throughout the country as UniCare.
RSA
RSA has a proud heritage dating back almost 300 years. The current company structure was created in 1996 following the merger of two of the largest insurance companies in the UK, Royal Insurance and Sun Alliance. In 2008 the company shortened their name to RSA and simplified and refreshed their corporate brand. RSA has over 20 million customers worldwide. The Group currently manages GBP 14.3 billion of investments. RSA is a member of the FTSE4Good Index.
Jun
9
This week, top executives from the global insurance and reinsurance business are attending Standard & Poor’s 27th Annual Insurance Conference 2011 at the New York Marriott Marquis in New York City to discuss and evaluate the various earnings challenges currently facing the industry.
S&P’s series of seminars have thus far revealed some interesting insights on the state of international insurance today. A snap poll conducted at the beginning of the conference found that nearly half of insurance industry executives were more worried about the prospects of the life insurance and annuity sector than of any other product segment in the business. Around a quarter of respondents further revealed that they were most concerned about the reinsurance business, which has faced exceptional losses already this year from the unprecedented frequency of natural catastrophe losses, due in particular to the earthquake and tsunami in Japan and the heavy storms hitting in the United States. More than half of the attendees, 54 percent in total, further commented that the top focus for management now would need to be their company’s risk management strategy, proving much more important to respondents than other administrative issues such as retaining high-profile staff.
Life insurance has remained a sector facing undue pressure by the persistently low interest rate environment. These low rates have impacted the long-term returns life insurers need to sustain their operations. Thomas Marra, chief executive for life insurer Symetra Financial Corp, told conference attendees that the threat of the low-interest rate environment continuing further for a significant length of time was what keeps him up at night. If interest rates stay low, Marra argued, “my company will have a hard time meeting our hurdles,” and while Symetra Financial will work hard to improve its returns on equity, Marra admitted that “it’s going to be tough if interest rates stay in this range.”
Insurance executives representing the property and casualty market have also identified low interest rates and reduced investment returns as key challenges facing the industry. While underwriters are ready for significant price augmentation, a broad shift in the market remains implausible with so much excess capacity left outstanding in the marketplace,
Speaking at the Property/Casualty Sector seminar, David S. Cash, CEO of Endurance Specialty Holdings Ltd., described the current global P&C market as “reasonably disciplined” as individual insurers have begun to exit from business lines they are not seeing adequate rates in.
However, as Michael S. McGavick, CEO of XL Group, noted “the discipline in the market is uneven.” While some insurance segments are showing improvement and more appropriate pricing, McGavick remains concerned about others, such as directors & officers’ liability insurance, where pricing has remained overtly competitive as underwriters hold out for the recent generous reserve returns observed from other business lines.
The disparity in pricing discipline between different insurance markets, absent of macro re-evaluations, could be a long-term issue for the property and casualty industry. McGavick asserted to the seminar audience that in order to realize broad market hardening and raise rates, two significant dynamics must occur: “there must be a psychological change among underwriters [and] there must be a drain of capital.” According to McGavick, the first factor is already happening. Pricing is showing gradual improvement but this shift in underwriting behavior now needs to be matched by a real capacity drain, which has not yet happened.
Carl H. Linder III, co-CEO and co-president of American Financial Group Inc., confirmed that the P&C market is operating in a period of uncertainty. Insurance companies have continued to hold onto their capital reserves in fear they wouldn’t prove sufficient otherwise should market conditions worsen. However, as the American economy starts to recover, claim frequency may increase, Linder explained.
A major storm during the upcoming Atlantic hurricane season could drain capacity and change much of the market, but not all of it, McGavick said. Ultimately it is risks that companies prove not so attentive to that move markets substantially. Conversely, both McGavick and Linder agree that an earthquake similar to those that have rocked the Asia Pacific this year could prove to be such an event. The US earthquake insurance market, despite earthquakes being an infrequent occurrence in the country, is not effectively priced and a sizable event would more dramatically impact the pricing cycle than another summer windstorm.
New US government financial regulations issued in response to the 2008 global financial crisis have also had an adverse impact on the P&C sector. The increased capital requirements imposed on all private financial institutions have hampered insurers’ ability to evaluate risk in particular. McGavick complained that regulators had overreacted towards the insurance industry and that attempts to fix the banking sector could lead to to bad behavior in insurance. “Banking regulators should learn from insurance regulators, and not the other way around,” McGavick added.
Overall, the property and casualty insurance industry has adequate reserves today but, as Cash remarked, “right can turn wrong in a matter of 18 months.” Irregardless, underwriting will remain critical to individual insurer success, particularly in a Western market where economic activity, and as a result premium generation, is downcast and where interest rates remain low.
Other insurance executives at the conference, while recognizing the threat of persistent low interest rates, maintained that they were also concerned the uncertain political situation in the United States.
In another seminar, Craig Mense, chief financial officer for commercial insurer CNA Financial Corp, said “When you have more uncertainty, you are clearly more conservative,” adding “You have tax-policy uncertainty, you have accounting-regime uncertainty and you have regulatory uncertainty. All those things make us more cautious.” James Morris, CEO of life insurer Pacific Life, surmised “there are huge problems in our country and no immediate solutions.”
Companies Mentioned
Standard & Poor’s
Standard & Poor’s (commonly referred to as S&P) is a business branch of publishing house McGraw-Hill. Operating out of 20 countries, S&P provides the investment community with independent credit ratings on important financial vehicles such as stocks, municipal bonds,corporate bonds and mutual funds. In addition to its risk management, investment research and credit rating services, Standard &Poor’s is known for its indexes, in particular the S&P 500 index.
Jun
8
Starr to Buy Major Stake in Dazhong Insurance
Filed Under Chartis, China, China insurance, Insurance Company | 2 Comments
Starr International, a Bermuda-based private insurance holding company, has acquired a 20 percent stake in the Chinese property insurer Dazhong Insurance Co Ltd.
This week, Starr was finally approved by the China Insurance Regulatory Commission (CIRC) to be a strategic equity investor in Dazhong Insurance and acquired an additional 286.5 million ordinary shares in the company. Neither Dazhong Insurance nor Starr disclosed any further financial details on the transaction.
The CIRC’s approval now enables Starr International, through its subsidiary division, Starr Insurance & Reinsurance, to hold a considerable equity position in Dazhong Insurance and become its single largest shareholder.
Maurice Greenberg, chairman and CEO of Starr International, remarked at the signing ceremony that China has been experiencing incredible growth, which in turn leads to an increasing demand for various insurance products and services.
Together, the companies will now look to leverage Starr International’s expertise in insurance product development and distribution to broaden Dazhong’s services and expand within China’s lucrative market.
“We recognize Dazhong as a company with great potential – one that is positioned to emerge as one of the most significant insurance organizations in the region,” Mr. Greenberg added.
Dazhong Insurance was established by 26 individual insurers in 1995, with a registered capital of CNY1.15 billion (US$177 million). The conglomerate provides property insurance and reinsurance in Shanghai and in the provinces of Anhui, Fujian, Jiangsu, Shandong, and Zhejiang. According to the CIRC, Dazhong Insurance had reported CNY463 million (US$71.3 million) in total original premium income for the first quarter of 2011.
The CIRC is also responsible for designating which localities foreign insurance players can operate in. This month, Chartis Insurance Company China, a wholly-owned subsidiary of Chartis, was granted approval to establish a Jiangsu branch in the city of Nanjing. Chartis China now has five branches operating out of Shanghai, Guangdong, Shenzhen, Beijing and Jiangsu, entrenching its position as the largest foreign property and casualty (P&C) insurer in China.
The CIRC further noted that in the first four months of the year, the Shanghai insurance market alone produced total original premium income exceeding CNY24.82 billion (US$3.8 billion). Of that total, property insurance accounted for CNY6.79 billion (US$1.05 billion); life insurance CNY16.29 billion (US$2.5billion); accident insurance CNY517 million (US$79 million); and health insurance CNY1.23 billion (US$189 million).
The Chinese insurance market has been seen as a lucrative investment opportunity for many large multinational insurance companies as well as investors from the financial-services sector. Industry analysts predict China and India will become the main drivers of global insurance premium growth, as persistent economic growth in these large countries will boost the size and purchasing power of their middle class.
Total written premiums in China’s insurance market reached CNY1,452.8 billion (US$221.4 billion) in 2010, a year on year increase of 30.4%.The acceleration of urbanization, increases in per capita income, an improved social security system, enhanced distribution reforms and service level optimization coupled with stronger insurance awareness, are all positive factors contributing to the brisk development of the domestic Chinese insurance industry. As interest rates rise, profitability for insurance companies will also see further improvement.
While China is technically open to foreign insurers, they are faced with more restrictions and a more active regulatory authority than in many other countries. Foreign insurance companies have normally found success in China through investing and operating as joint venture partners with another major local insurance conglomerate.
Some major current multinational Chinese insurance company joint ventures include the Sun Life Everbright and the Aviva-Cofco partnerships. Other notable foreign insurers with partnering agreements in China include Zurich and Generali, with associations involving both New China Life Insurance and China National Petroleum Corporation respectively.
Merger and acquisition activity throughout the rest of Asia is set to maintain significant growth in 2011 due to stronger investor confidence in the market. Insurance business growth in Asia is expected to outperform that of other more mature markets, with India, Indonesia and China leading the way.
Insurance Companies Mentioned
Chartis
A leading property-casualty and general insurance company, Chartis has over 45 million policyholders in 160 countries worldwide. With more than 90 years experience in the insurance industry, and a range of progressive products, Chartis aims to help clients comprehensively manage risk.
Dazhong Insurance
Dazhong Insurance Co., Ltd. provides insurance products and wealth management services. It operates in the delta region of Yangtze River and in east China. The company was founded in 1995 and is based in Shanghai, China. Dazhong Insurance is a subsidiary of China Life Insurance Co., Ltd.
Starr Insurance
Starr Insurance, comprised of CV Starr & Co and Starr International USA, underwrites aviation, marine, energy, property and excess casualty insurance, including risks with international exposures. The company targets industrial, commercial, retail and government entity risks globally.
Apr
27
As Medical Insurance Premiums Rise in the UAE, Many Local Insurers Turn To Takaful to Remain Competitive
Filed Under Health Insurance, Insurance Company, Medical Insurance, Middle East, UAE Insurance | 1 Comment
Medical insurance annual premiums are expected to increase by around 10 to 20 percent this year to catch up with rising healthcare costs in the UAE. This annual increase is expected to continue for years to come.
Many factors have contributed to this price hike, including ones caused by insurers, healthcare personnel, impending legislation, and from individual medical insurance policyholders themselves.
One leading reason is that many hospitals and physicians often prescribe treatments that are not always necessary. A healthcare insurance official commented, “It’s fair to say the local health-care industry has not lagged in prescribing all manners of treatments…even when they are not required. They know that if the patient is covered, it’s more or less a given that the insurer would pay up. Most healthcare operators assume that health insurers are there to facilitate their operating cash flows.”
Although the cost of drugs have decreased or been held in place by authorities, local healthcare personnel may not necessarily prescribe these cheaper alternatives. One insurer expressed his opinion about how lower cost drugs do not necessarily translate to savings, “There is definitely a misuse by certain doctors—and the institutions they represent—by prescribing expensive brands even if cheaper generic drugs are available for the same treatment and with the same results.”
However, local hospitals and physicians are not the only ones to blame for rising costs. Many patients with medical insurance often abuse their policies. A significant number of insurance policyholders go to the doctor for the slightest medical concerns. Since many insurers calculate applicants’ and renewing policyholders’ annual premiums based on the community they live in and their age, as more and more people make claims in an area, the overall premium for everyone in that community will also rise. Insurers hope to check this behavior by raising insurance premiums.
Another reason for the increase in premiums, especially for insurers in Dubai, may have to do with the move to make medical insurance mandatory for all employees in Dubai. Although this proposal has been discussed for several years, it seems highly likely that it will happen this year.
Abu Dhabi is currently the only emirate that has a law that mandates health insurance coverage for all employees. Insurers stand to benefit from this legislation if the premium hikes are made before Dubai passes a similar law.
Dubai insurers, especially, need to find a method of managing their portfolios. Without the government subsidies that Abu Dhabi insurance firms enjoy, it is even more difficult for Dubai insurers to make the business profitable.
The increase also comes as a consequence of years of adopting a low-premium strategy by insurers in order to remain competitive and win business. In the past 4 years, while in- and out-patient treatment costs have increased by 30 to 40 percent, annual health insurance premiums have not reflected this trend.
Often, it is not unusual for an insurer to offer the lowest possible rates in order to secure a large group insurance contract. This strategy may have worked in the past, but now it is no longer feasible.
“Medical insurance has never been a highly profitable line in the UAE and in recent years insurers have been feeling the pinch from substantial—and ever growing—claims outgo, so when the time comes for medical policy renewals, insurers have to rationalize their expenses. The proposed increases in premium is a testament to that,” said Abdul Khader Panakkat, the Nasco Karaoglan’s senior director of claims.
Local UAE insurance firms, which already have trouble competing with more experienced and stable international insurers, suffer the most from these price increases. According to the Business Monitor International (BMI) report, local insurers cannot be competitive with multinational giants of the insurance industry outside of the UAE. Instead of trying to compete in conventional insurance, local firms are now looking towards Takaful, a concept of insurance that is compliant with Islamic law.
BMI reported, “These local firms have little economy of scale and limited access to the resources and skills required to be competitive internationally. Where there is more opportunity for growth is in the development of Islamic financial products. Takaful is a particular area where the UAE could lead the way. It will have to battle through structural problems that still exist, however, such as the general lack of popular understanding of Shariah-complaint products and the shortage of suitably qualified Shariah scholars.”
The UAE Takaful insurance sector looks very different from that of the western world. Instead of a few large multinational giants, the UAE Takaful insurance industry is made up of small, local companies that are often listed affiliates of larger firms, and founded by affluent, well-networked families, as many businesses in the region are.
According to data from the Abu Dhabi and Dubai stock exchanges, the Oman Insurance Company (OIC) is currently the largest local insurer, making up 14 percent of total premiums. The next largest is the Abu Dhabi National Insurance Company (Adnic) and the Islamic Arab Insurance Company.
The UAE insurance market is extremely competitive. There are around nine companies that provide Takaful insurance, and over 50 companies offering conventional medical insurance.
How much the premium rate hikes will be remains to be seen, although it depends at least in part on whether there will be changes in legislation. However, it seems likely that this trend will continue for the next few years.
Apr
19
A+ International Insurance May Not Offer Renewals
Filed Under CIGNA, Expat Insurance, Health Insurance, Insurance Company, International Healthcare, Medical Insurance, Switzerland, Vanbreda | 2 Comments
It has emerged within international private medical insurance industry that A+ International Insurance may not offer policyholders the option of renewing their medical insurance policies in the future.
A+ International Insurance’s decision to not offer clients a renewal on their IPMI policies may be due to Cigna’s purchase of Van Breda International; Van Breda International was integral to A+ International’s plan offerings and policy administration.
Cigna, a leading US based international insurance provider, purchased Vanbreda International in August 2010 in order to access the Belgian insurer’s international reach.
A+ International’s partnership with Vanbreda International is through Justitia NV. Justitia, an independent insurance company within the Vanbreda Group of companies, is responsible for underwriting A+ International’s international health insurance plans.
Justitia NV generated premium collections of EUR 18.5 million (US$ 26.3 million) in 2008.
While A+ is a relatively new entry to the global health insurance market, the company does have a significant number of policyholders worldwide; the potential denial of renewal terms to existing customers may leave a substantial number of consumers without adequate medical insurance coverage.
A+ policyholders are advised to contact the company, or their intermediary, in order to understand their health insurance options in the event that they are not offered a renewal of their current policy.
At present there has been no official confirmation from A+ International Insurance regarding future business, but policyholders who have contacted the company have been informed that there may not be renewal terms on their policies.
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