Nov
21
Singapore’s resurgent life insurance sector may finally be showing signs of slowing down, according to a new report.
In their third quarter briefing released this month, the Life Insurance Association of Singapore (LIA) revealed that sales of new insurance products in Singapore slowed to a more ‘moderate’ 18 percent annual growth rate for the three months ending in September, down considerably from the 38 percent growth in sales reported during the first half of the year. The LIA is a non-profit trade body licensed by the Monetary Authority of Singapore (MAS), and represents the interests of 16 major life insurers and 3 life reinsurers who operate in the Southeast Asian country.
According to the LIA, Singapore’s life insurance industry accounted for a total of S$523 million (US$404 million) in ‘weighted’ new business premiums for the third quarter 2011 reporting period. The LIA calculates the weighted new business premium figure by adding 10 percent of the Single Premium Index (SPI) to 100 percent of the Annual Premium Index (API), with an adjustment for premium payment terms of less than 10 years. Overall sales growth has been tempered by cautious market sentiment as investors all over the world continue to worry about the pervasive debt contagion issues affecting the Eurozone and United States. The MAS expect the Singaporean economy to be sluggish in the first half of 2012, but could pick up later in the year if global markets stabilize.
During the period under review, the LIA attributed the life sector’s continued development largely to the performance of the bancassurance distribution channel, with savings-oriented products remaining particularly popular through the second half of the year. From August to September 2011, sales of weighted regular premium products in Singapore reached S$345.7 million (US$266.8 million) , marking a 19 percent quarterly increase over the same period last year. Single premium business meanwhile rose by 16 percent to S$177.3 million (US$136.8 million). Of this amount, the LIA noted that 16 percent of sales were accounted for by the Central Provident Fund (CPF), Singapore’s mandatory pension savings and retirement fund mechanism.
The Singaporean life insurance market is divided between players holding ‘normal’ licenses and those defined as market segment insurers (DMS). DMS insurance companies, currently comprised of the following multinational insurers Friends Provident International, Generali, Royal Skandia, Transamerica and Zurich International, are registered with the MAS to operate in only non CPF-related business and with certain minimum policy size restriction. In 2011, the LIA noted that normal license holders represented 95 percent of new sales, while DMS insurers accounted for the remaining 5 percent.
Singapore’s active life insurance companies have cumulatively paid out a total of S$3.69 billion (US$2.85 billion) to associated policyholders and beneficiaries so far this year. Of these payouts, the LIA detailed that only S$342 million (US$263.9 million) came as a result of death, critical illness or other disability claims, while the remaining S$3.34 billion (US$2.58 billion)came about from maturing policies. The association also noted that, as of second quarter 2011, Singapore life insurers were managing assets worth S$120.7 billion (US$93.15 billion), a 9 percent annual increase, with non-linked business accounting for S$96.4 billion (US$74.4 billion) and investment-linked policies making up the remaining $24.3 billion (US$18.75 billion) in assets. In terms of overall manpower, LIA member companies in the Singaporean life insurance industry now cumulatively employ a total of 5,108 office staff and 12,976 sales representatives.
Explaining the results in the LIA statement, Mr. Tan Hak Leh, the Life Insurance Association President, acknowledged that while the performance of Singapore’s insurance industry could be impacted going forward by ongoing global economic uncertainty, the emerging protection needs of Singaporean consumers should provide insurers active in the market with enough impetus to achieve sustainable premium growth. “Against the backdrop of intensified global economic uncertainties in the third quarter, the life insurance industry achieved a growth in new business of 18 per cent. It is critical that life insurance companies remain vigilant and proactively manage our business to safeguard the long term financial soundness of the industry,” Mr Tan Hak Leh commented.
In addition to gross life insurance sales figures, the LIA interim report also highlighted several other insurance industry trends occurring in Singapore this year. Through the first three quarters of 2011, sales of new health insurance policies in the small Asia Pacific island nation amounted to S$123 million (US$94.9 million), up 7 percent on the corresponding period last year. Of these new health insurance sales, the vast majority, 87 percent, went towards Integrated Shield Plans and associated riders, Singapore’s quasi-equivalent of private Medicare insurance. The growth in new health insurance coverage is driven by a wide-spread recognition of increasing medical costs, which have driven consumers to obtain Singaporean health insurance in greater numbers recently. The LIA was pleased to report that as of 30 September 2011, over 2.45 million lives are covered by health insurance in Singapore, well over half the population, with paid up premiums now totalling over S$842 million (US$650 million).
As for insurance distribution channel trends through to the third quarter, the LIA found that the 12,000-strong tied agency force had contributed almost half of all the new business written by Singaporean insurers for the year, bringing in 48 percent of all weighted new business sales in 2011 so far. This performance was accompanied by an uptrend in insurance products and services sold through banks, also termed bancassurance. Indeed, bancassurance now accounts for 35 percent of all new insurance sales in Singapore, up 8 percent from last year. Financial advisers meanwhile have contributed 13 percent of new insurance sales this year and other channels, including direct sales, have made up the remaining 4 percentage points.
The LIA also noted that consumer preferences for different types of insurance products in Singapore have remained fairly consistent over the past few years. Participating (par) whole-life insurance products have remained the most popular, accounting for 54 percent of new sales, while non-participating annuities and investment-linked products split the remaining business between them. Singaporeans clearly favour the dividend options mutual life insurance companies can provide them with.
In his concluding remarks, LIA president Tan Hak Leh reiterated that while Singapore’s double-digit growth rate in life insurance product sales may not likely continue unabated into the future, robust long term planning and savings options would become more important than ever in this time of global financial market uncertainty. “While we may not face a financial meltdown similar to that in 2008, we can see consumers exercising more caution in taking on additional financial commitments,” said Mr Tan, adding that “Nonetheless we strongly advise that consumers do not shelve plans for life insurance, as it becomes particularly essential in times of uncertainty.”
Nov
10
Manulife and Bank of China Solidify Partnership
Filed Under China, China insurance, Life Insurance | 1 Comment
Manulife Financial Corporation, Canada’s largest insurance company, has signed a new two-year cooperation agreement with Bank of China in a bid to further strengthen their bancassurance distribution network and sell more insurance products in the world’s second largest economy.
The deal was announced at a signing ceremony in Bank of China’s Beijing headquarters on Wednesday. The agreement will expand upon the existing partnership between the two firms, which has begun to bear fruit for both parties over the past 12 months. Through the terms of their updated venture, Manulife and Bank of China will strengthen their cooperative efforts on insurance and bancassurance distribution in Mainland China. At the same time, Bank of China will also be able to realize other business opportunities in North America. The framework of the new partnership agreement come into force immediately and the pact will continue for a minimum of two years.
Manulife has already established a presence in China through its joint venture wealth management and life insurance company, Manulife-Sinochem Life Insurance (MSL), which the Toronto-based insurer formed alongside China Foreign Economy and Trade Trust Co in 1996. Today, Manulife-Sinochem, which remains 51 percent owned by Manulife, has around 11,500 insurance agents, 1,100 employees, and branches in 49 cities throughout China. In May, the company signed an agreement with Bank of China, the country’s oldest bank, to distribute life insurance products through their bank branches in Beijing, Guangdong, Jiangsu, Shanghai, Shenzhen, and Zhejiang. The Bank has also become the custodian bank and distributor for Manulife’s other joint venture fund company in China, Manulife-TEDA Fund Management.
In his speech at the Beijing signing ceremony, Mr. Donald Guloien, President and CEO of Manulife Financial, explained that this new deal would enable both companies to grow their business and would build upon the bancassurance deal signed last May. “As more and more Chinese and Canadian companies and citizens look to each other’s home country for business opportunities, academic pursuits or simply as a holiday destination, we view closer cooperation between Bank of China and Manulife as an opportunity to realize business opportunities together.”
Mr. Guloien also noted that China, with its robust economy and growing middle class, will continue to be an important marketplace for all financial-services firms across Canada, especially considering the stagnant forecasts for growth in their mature domestic insurance markets. Indeed, Manulife’s decision to recommit to Bank of China follows similar moves made Canadian firms this season. In August, Power Corp. of Canada decided to enter China’s emerging fund-management industry with the purchase of a 10 percent stake in China Asset Management Co. for US$271 million. This was followed by Bank of Nova Scotia’s move in September to acquire a 19.99 percent stake in China’s Bank of Guangzhou for US$707 million. For Manulife, the bancassurance partnership between their joint venture life insurance company MSL and Bank of China will be an important source for growth in the future.
Xu Chen, a Bank of China General Manager of the Financial Institution department, was also on hand at the signing ceremony to express a similar degree of confidence in the business arrangement between the two firms. “I strongly believe that, Bank of China will continue to adhere to its customer-oriented banking philosophy, constantly and consistently offering high quality and efficient financial services to all customers. We are confident that this mutually beneficial cooperation will further promote our business development and achieve win-win prospects for both institutions,” Chen said.
China’s insurance industry has experienced rapid growth and development over the past decade and still has ample of room to grow as a result of generally stable economic forecasts combined with an under-penetrated protection market. Despite the volatility of the global financial market, Chinese insurers have remained attractive investment targets for large multinational insurance companies and investors from the financial-services sector. In 2010, total written premiums in the Chinese insurance industry reached US$221.4 billion, a 30.4 percent year-on-year increase. This considerable momentum has been able to continue through 2011 despite persistent international financial market turmoil and record catastrophe losses. According to the China Insurance Regulatory Commission (CIRC) interim report figures, total premium income reported by Chinese insurance companies exceeded US$123.95 billion during the first half of the year, a 13 percent rise on 2010 amounts. At the moment, China is ranked the sixth biggest insurance market in the world and as the second largest in Asia. Many industry observes expect the Chinese insurance market to overtake the United States and become the number one overall protection and investment market, possibly as early as 2020.
Manulife recognizes Asia as the most important market for the company’s future growth. Asia now accounts for over half (55 percent) of Manulife’s total insurance sales worldwide. Over the past nine months, the Canadian company has seen its insurance sales across Asia jump by 22 percent to US$902.4 million, with operations in Vietnam, Indonesia and the Philippines being the particular highlights. Going forward, the Toronto-based company will continue to focus on expanding insurance sales channels in these countries, in addition to innovating the range of their core offerings as the middle class consumer demand in these markets evolves and matures. Further investor involvement in this part of the world is only set to increase, as the emerging insurance markets in Asia are widely expected to outperform those in Europe and North America, with China likely leading the way.
Insurance Companies Mentioned
Manulife
Manulife (International) Limited is a member of the Manulife Financial group of companies. Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 22 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners.
Manulife-Sinochem
Manulife-Sinochem is a joint venture company between Manulife and China Foreign Economy and Trade Trust Company (a member of the Sinochem group). It was the first Chinese-foreign joint-venture life insurance company established in China. Manulife-Sinochem began operations in November 1996. To date the Company has more than 11,000 professionally trained agents and employees, providing financial and insurance services to over 500,000 customers. The company is now has operations in over 40 cities including Shanghai and Beijing, and in provinces including Guangdong, Zhejiang, Jiangsu, Sichuan, Shandong, Fujian, Chongqing, Liaoning and Tianjin.
Oct
21
Asia’s Life Insurance Gap Widens as Risk Aversion Rises
Filed Under Asia, Life Insurance | Leave a Comment
The aggregate mortality protection gap across 12 insurance markets in the Asia Pacific region has expanded significantly over the past decade, from US$16 trillion in 2000 to US$41 trillion in 2010, according to a new study published by global reinsurance company Swiss Re.
Swiss Re’s “Mortality Protection Gap: Asia-Pacific 2011” study is the first of its kind to track the mortality protection gap across multiple developed and emerging markets in the Asia Pacific region. The mortality protection gap is a deficit measurement that represents the difference between the income needed for a working person to maintain living standards for themselves and their dependents versus the actual amount of savings and life insurance in force that would be readily available to beneficiaries when the policyholder dies. Thus the mortality protection gap grows when the proportion of protection needed is not yet covered through either adequate insurance or savings plans. Swiss Re intend for their study to encourage the life insurance industry to better engage with the general public in Asia and to better educate them on the importance of life insurance matters.
Swiss Re found a sizeable gap in mortality protection across all developed and emerging Asia-Pacific insurance markets covered by the study, with China, Japan, India and South Korea tabling the greatest long-term savings deficit estimates. Overall the aggregate mortality protection gap in Asia grew by 10 percent annually over the past decade, from a US$ 16 trillion deficit in 2000 to US$ 41 trillion in 2010. According to the data, the Chinese mortality protection gap has widened the most in this time, moving from US$ 3.7 trillion to US$ 18.7 trillion at an 18 percent compound annual growth rate. India’s mortality protection gap also expanded at double digit rates, rising from US$ 2 trillion to US$ 6.7 trillion during the same period. Of the so-called developed Asian insurance markets surveyed, Japan has consistently posted the largest coverage gap, now at an estimated US$ 8.4 trillion, although South Korea’s deficit is now expanding at twice their pace, moving from US$ 1.8 trillion to US$ 3.6 trillion at a 7 percent annual growth rate in the past ten years. The life insurance gap in Australia meanwhile grew from US$ 540 billion to US$ 927 billion between 2000 and 2010, which was the fifth largest increase seen in the region.
According to Swiss Re, a typical family breadwinner should reserve around 10 times their annual salary towards life insurance protection for their spouse and children. However, the amount of protection currently in place for many Asians is simply not enough to protect their families should the primary wage-earner unexpectedly pass away. If you were to use India’s 2010 data for example, for every US$ 100 in protection income needed there is only on average US$ 7.4 available in savings and insurance, which equates to a massive US$ 92.6 mortality protection gap. Meanwhile, these gaps in coverage present an enormous opportunity for the international insurance industry, with Swiss Re calculating the cumulative value of Asia Pacific’s mortality protection gap to be worth US$ 124 billion in potential premiums.
Concerns about the extent of adequate life insurance protection across the Asia Pacific region have also been reflected in the results of another Swiss Re study conducted between April and May earlier this year. According to ‘Survey of Risk Appetite and Insurance: Asia-Pacific 2011,’ 20 to 40 year olds in the Asia Pacific region have become much more risk averse in the past few years, with medical costs and longevity concerns fuelling the need for greater insurance coverage and financial planning. The survey found that 40 percent of those polled across Asia believed that their families could struggle financially if adverse events, like an unexpected death, transpired. The same respondents identified insurance as an important protection too, despite policy uptake of pure life insurance products remaining quite low in many Asian markets.
As the economies of the Asia Pacific region continue to grow and develop, the demand of sufficient life insurance protection will rise in tow. While the large protection gaps apparent in populous Asian markets like China and India certainly offer significant premium growth opportunities for life insurers, developing attractive products and effective distribution channels is still proving to be a challenge. In the more mature markets such as South Korea and Japan, despite the insurance industry growth potential being more limited, large mortality coverage gaps will work to drive the development of protection and savings insurance products that are targeted at more high net worth customers.
Swiss Re’s research also revealed what life insurers need to do themselves to understand and attract the next generation of consumer in Asia. The main barriers to purchasing insurance in the region are cost and lack of available funds. However while this perception that life insurance is expensive remains, over half of Swiss Re’s survey respondents indicated that they would be willing to pay at or even above market value for a life insurance product that fit their needs. In fact, many respondents revealed that once the underlying cost of cover was known, it was less than what they had expected to pay for insurance. Paul Turner, Swiss Re Head of Client Management, Global Division believes that this gap in customer perception in Asia presents a clear opportunity for the international life insurance industry to promote the benefits of insurance and their strong value propositions in order to meet the specific needs of consumers, who put strong importance on value, reputation and financial security. “This perception gap in customers’ minds is an opportunity for the life insurance sector to reach out and provide greater clarity to consumers on the relative cost and value of pure life insurance, for example, by comparing the cost of insurance with that of a cup of coffee a day,” Turner concludes.
Companies Mentioned
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.
Oct
17
German insurance giant Allianz SE has decided to withdraw from the Japanese life insurance market, effective from next year, in a bid to refocus on more profitable ventures elsewhere. From January 1, 2012 onwards, Europe’s largest insurer will halt the sale of new life insurance policies in Japan and focus only on managing existing contracts in the country.
In a statement released September 30, Allianz outlined its plans to terminate life insurance sales in Japan by year-end. The company reassured all existing policyholders in Japan that their service contracts would remain intact for the duration of their tenure. “There will be no changes for customers that hold an existing contract with Allianz Life Japan. Allianz Life Japan will fulfill all contractual agreements and continue to provide services for all existing insurance products,” the news statement read, adding that the company remained in a strong enough capital position to honor all outstanding obligations. Allianz’s five other units in Japan, including Allianz Fire & Marine Insurance Japan Ltd, will continue to operate as before, the company said.
Allianz had only just begun selling life insurance policies in Japan less than four years ago. The Group’s local subsidiary, Allianz Life Insurance Japan Ltd (Allianz Life Japan) was granted an insurance license from the Japanese Financial Services Agency on March 7th 2008. Allianz already provided property and casualty insurance (first European insurer to be granted a license in 1990), asset management, and a variety of banking services in Japan. The company’s local life insurance unit’s central focus was primarily dealing with single-premium variable annuity and variable whole life products in Japan. In 2009, Allianz Japan Life launched a new variable annuity product, marketed in conjunction with major Japanese financial institutions. According to the latest figures released for fiscal 2010, Allianz’s local Japanese unit added about 17,000 new policies for the year and generated Y127.5 billion (US$1.65 billion) in premium revenues. As of August, Allianz Life Japan employs 233 people locally and holds about 35,000 contracts and total assets worth 228.4 billion yen (US$2.97 billion). The company have reportedly planned to reduce their domestic workforce gradually through an early retirement scheme.
The decision to retreat from the world’s second largest life insurance market by Allianz comes amid a major sales slump since the start of the current fiscal year in Japan due to the prolonged stock market downturn and stubbornly low interest rates. Japanese stocks are projected by Reuters to fall by 12 percent in 2011, which would be the second successive year of losses, due this time to a sharp Chinese economic slowdown and the European sovereign debt crisis. In a depressed economic environment, life insurance companies tens to suffer the most because they are normally unable to adjust and reprice policies annually, as other general insurers can do. Many life insurance products come with a fixed guarantee level of income over the duration of the policy, which could last for 30 years or more given modern medical advances. This guarantee presents a mismatch problem for businesses who write these long-term policies when the economic outlook appeared very different, as is the case in Japan and many other parts of the world.
Another contributing factor has been the continued claims fall out from the record breaking earthquake and tsunami that hit the northeast coast of Japan earlier this year. Japanese life insurers have paid out over 128.7 billion yen (US$1.63 billion) in claims from the March earthquake, including 98.7 billion yen (US$1.25 billion) in life insurance payouts and a further 30 billion yen (US$380 million) in accident related insurance benefits from settling 12,520 claims. Usually these accident benefits would have excluded cover for earthquake-related damages, but the Life Insurance Association of Japan said members had agreed to pay out benefits without applying de jure policy restrictions, a previously unheard of occurrence in Japan. Japanese insurers remain relatively well positioned and capitalized to absorb the net losses from the record-shattering earthquake and tsunami, but the fallout from this catastrophic event could have unpredictable effects on the market going forward. It has thus become important for Japanese insurers to pursue acquisition opportunities overseas, to expand beyond their shrinking domestic market and diversify their risk portfolios to achieve sustainable premium growth.
For Allianz, withdrawing from the unprofitable Japanese life insurance market now gives them an opportunity to streamline their operations, gain a buffer against the impending Eurozone crisis, and to better prepare themselves for the upcoming Solvency II rules, which will require EU-based insurers to hold more capital to match outstanding risks by 2014. The German insurance conglomerate has also been in an acquisitive mood as of late, looking to diversify and invest in emerging economies to offset the stagnant growth prospects in mature insurance markets. Allianz Group has already established a presence in several key emerging Asian economies through joint ventures including: Bajaj Allianz in India, Allianz China Life, PT Asuransi Allianz Utama in Indonesia, Ayudhya Allianz in Thailand and Allianz Lanka in Sri Lanka. These operations have given The Allianz Group prime access to the rapidly developing Asian markets that are driving, in particular, the demand for protection, savings and investment products as the wealth of the substantial populations in these nations grow further. This trend looks set to continue following news that HSBC, Europe’s biggest bank, has contacted the firm about bidding for its lucrative non-life insurance operations in Hong Kong, Singapore, France and Latin America, in what could become a billion dollar deal. Allianz is also reportedly in talks this week about acquiring Poland’s number two insurer Warta SA. Through these moves, Allianz looks to maintain itself at the forefront of the international insurance industry despite operating in a difficult global economic environment.
Insurance Company Mentioned
Allianz
Allianz Group is one of the leading global service providers in insurance and asset management. With approximately 153,000 employees worldwide, the Allianz Group serves approximately 75 million customers in about 70 countries. On the insurance side, Allianz is the market leader in the German market and has a strong international presence.
Sep
20
India looks set to continue being one of the fastest growing insurance markets over the next decade, with rising income levels and awareness of risk management expected to drive a considerable demand for coverage solutions nationwide. Two new industry briefings released by India’s commerce chamber reveal that the country will be one of the few major insurance markets expected to deliver double digit growth rates across both life and non-life product lines, contributing around a tenth of total global premium growth by 2015. Indian insurers could furthermore make a significant mark and compete on the global stage if they are able to refine their business models and capitalize on the tremendous potential available in their home market.
The Associated Chambers of Commerce and Industry of India (ASSOCHAM), released statistics this week that forecast an 18 percent annual growth rate for India’s general insurance industry until 2015, with the market size increasing from US$9.8 billion at present to upwards of US$18.8 billion in five years time. Assocham based their industry projections on the increased consumer base for healthcare and automobiles, growth and investment in domestic small and medium enterprise, and a persistent demand for coverage options. “With this trajectory, India will be one of the fastest growing markets in Asia and globally – next only to China among major markets,” the report said.
According to Assocham, motor insurance will remain the largest business line in the non-life insurance sector, accounting for over 40 percent of the industry’s net premiums for the foreseeable future. India is slated to become the world’s third largest car market by 2020, behind China and the United States, with over 7 million automobiles expected to be sold annually in the country. This surge in supply in conjunction with updated road safety, coverage and infrastructure will drive growth in the motor insurance sector.
Increased spending on healthcare and infrastructure will also be integral to the further development of the general insurance industry in India. Total expenditure on healthcare, through government sponsored schemes and private sector activity, is expected to top US$200 billion by 2015 and this will create significant opportunities for the country’s emerging health insurance sector. According to Assocham Secretary General D.S. Rawat, through substantial investment and government involvement, health insurance may finally be gaining traction in India. “The health insurance segment will grow the fastest and account for close to 30 per cent of total industry premiums by 2015.” He remarked in the press briefing.
The Indian government’s upcoming 5-year economic plan, beginning April 2012, will call for nearly US$ 1 trillion in fresh infrastructure spending, updating and improving upon the country’s vast road, port, railway and power systems. This substantial investment will create many opportunities for the local insurance industry, which will need to provide cover for these new projects. Assocham predicts that engineering insurance coverage for new infrastructure projects will become a particularly important area for growth, and could develop further avenues for expansion across other commercial lines sectors as well. The private sector is also developing briskly, with the number of small and medium enterprises in India projected to rise by 20 to 22 percent over the next decade. The trade body noted that the number of companies competing in the general insurance market had already increased from 16 in 2007 to 24 in 2011, and more would be forthcoming as more government and private sector business opportunities emerge.
India’s life insurance market also presents significant growth potential. In a separate report, Assocham noted that the life sector’s annual gross written premiums of US$5.6 billion would grow by 13 to 14 percent annually and reach US$108 billion by 2015. Over the past decade, India’s life insurers reported a 28 percent rise in new business premiums, 27 percent in rise in annualized premium equivalent (APE) and a 25 percent increase in gross written premiums.
Assocham Secretary General D.S. Rawat, claimed however that while India’s life insurance market had already become one of the ten largest in the world, the local insurance industry still has to improve upon its performance standards. “The level of protection as measured by sum assured to GDP is about 55 percent relative to benchmarks in developed markets of 150 percent to 250 percent,” Rawat noted. India’s domestic insurance industry has been criticized for overtly focusing on selling short-term products and acquiring new business premiums at the expense of maintaining operational efficiency, profitability and customer retention. According to Assocham’s data, between September 2010 and March 2011, the life insurance industry has slowed down considerably, posting negative APE growth rates in successive quarters.
The Indian life insurance industry is of course learning from this. Insurers need to develop sustainable business models to solve their profitability issues and succeed in a more competitive market. Going forward, Assocham expects the industry will broaden their focus to readdress their agency model incentives to encourage selling more long-term savings and protection products to consumers. Insurance industry regulators are also likely to become involved in the near future to ensure that the Indian life market better conforms to international standards.
Assocham concludes their report by highlighting the rapid evolution of the Indian consumer and how this could affect the sale of insurance going forward. The emerging Indian middle class is at the forefront of the digital revolution, adopting the latest mobile technology and spending an increasing amount of their time and money digitally across networks. Over the next five years, mobile and internet driven micro-transactions in the country are projected to grow three to four times over. Thus it has become incumbent on insurers to enter this space to promote the value of insurance to consumers. Assocham believes this could in fact become a positive development for India’s insurance industry. “High-quality and low-cost broadband access through mobile and hand-held devices through 3G and 4G services will provide a unique opportunity to leap front legacy issues and drive innovations which can help unlock growth, reduce costs and enhance service levels.”
Organization Mentioned
ASSOCHAM
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) is India’s premier apex chamber of commerce, with a membership encompassing over 200,0000 companies and professionals across the country. Assocham works to represent the interests of all industry and trade in India. The organization lobbies the national Government on policy issues and interfaces with corresponding international organizations to support bilateral economic interests. Assocham was established in 1920 by promoter chambers and represents all regions of India.
Aug
11
On Wednesday, French insurance group SCOR announced that they had finalized the acquisition of Transamerica Re, a life reinsurance division of Aegon, for US$912.5 million. Life reinsurance is a growing business line that helps individual insurance companies pool their risks, and accounted for almost 40 percent of Scor’s operating profit in 2010. Following final approval from all relevant regulatory authorities, Scor will become the second-largest life reinsurance company in the United States.
The deal, in development since April 26, 2011, sees the Netherlands-based Aegon divest from the majority of its global life reinsurance activities, transferring some US$1.8 billion worth of assets, securities and corresponding liabilities to Scor. Half of the mortality portfolio transferred will be in cash and US treasury bonds with the remainder comprised of investment grade corporate bonds selected individually by Scor. According to a statement released by the Dutch company this week, the total cost of the transaction will be US$1.4 billion after tax, made up of US$900 million in cash from Scor and a further US$500 million in capital released. The select reinsurance businesses still retained by Aegon after this deal will be comprised largely of variable annuity guarantee operations.
Aegon acquired Transamerica Re in 1999 as part of its US$10.8 billion purchase of Transamerica Corporation. The Charlotte, North Carolina-based reinsurance company now covers operations in USA, Europe and Asia and employs 451 people. Transamerica Re annually writes roughly US$2 billion in gross premiums and last year reported underlying earnings before tax of US$105 million. The company has been successful, with nearly a trillion dollars worth of life reinsurance now in force worldwide, and remains a market leader in the annuity, risk management, capital release market and other lines in reinsurance business.
Now that the acquisition has been finalized, Transamerica Re’s existing management and employees will be reorganized and join the Scor Global Life team to form a combined entity, titled SCOR Global Life Americas, which will be managed by former President of Transamerica, Paul Rutledge. Mr. Rutlegedge will also join Scor’s executive committee. The Transamerica Re operations based outside of America will incorporate within their local SCOR Global Life office. Scor have already defined their Global Life operational and functional responsibilities for each market. Scor has been quick to assure both their clients and Transamerica’s that a smooth transition was underway and that policyholders would soon benefit from the reinforced service offered by the combination of their two businesses, without any disruption to existing coverage and support.
According to Scor, the acquisition of Transamerica Re will expand their life reinsurance business considerably, boosting the total volume of premiums by nearly 50 percent overnight. The biggest impact will be felt in the United States, a lucrative reinsurance market that accounted for 87 percent of Transamerica Re’s underwriting business in 2010. Scor has been looking to strengthen its position in major life reinsurance markets like the US as part of the company’s 2010-2013 strategic plan, titled “Strong Momentum.” The plan broadly targets improved profitability and solvency and a rebalance between life and non-life contribution inside Scor’s portfolio. In accordance with this strategy, Scor agreed to sell its US fixed-annuity business for US$55 million in February 2011 in order to free up capital for expansion of its core life reinsurance businesses. The French reinsurer has also recently acquired the entire capital of Solareh SA, in a move to better develop value added services for its insurer clients.
For Aegon meanwhile, the decision to divest from Transamerica Re is consistent with its revamped focus on growth and earnings within their core business of life, pension and asset management, all while improving upon its risk-return profile. Aegon, with significant exposure to mature American and European markets, was one of the hardest hit multinational insurers when the financial markets collapsed in 2007-2008, and called upon the Dutch government for a bailout to avoid a complete collapse. Earlier in the year, Aegon planned to use the funds it would receive from Scor to complete a final €1.12 billion (US$1.61 billion) payback to the Dutch state. However, on July 15 the company announced that all outstanding payments to the state, a total value of €4.1 billion (US$5.89 billion), had already been completed. With that burden now lifted, Aegon can devote its energy and significant resources to both streamline its operations in the West and attempt to capitalize on the rapidly developing insurance markets in the East.
Insurance Companies Mentioned
AEGON
AEGON is present in more than 20 countries in the Americas, Europe and Asia, employing 28,000 people and serving more than 40 million customers. AEGON’s ambition is to be a global leader in helping its customers secure their financial futures and, in doing so, to grow its businesses profitably and sustainably. AEGON products include life, pensions, life reinsurance, individual savings & retirement products.
Transamerica Reinsurance
Transamerica Reinsurance is a division of Transamerica Life Insurance Company, formerly an AEGON company. It is one of the largest life reinsurance companies in the US, offering broad capabilities in risk, capital and expense managements to help companies improve the competitiveness and profitability of their life and annuity products. Transamerica Reinsurance supplies automatic and facultative reinsurance, product consulting and development and alternative underwriting solutions to more than 500 companies in North America, Asia-Pacific, Latin America and Europe.
Scor
Scor is organized through two main businesses – SCOR Global P&C and SCOR Global Life – which are leading underwriting and reinsurance providers. The group writes business in Europe, Latin America, Asia, the Middle East and the USA.
Jul
6
Nippon Life Insurance Company, Japan’s largest life insurer by revenue, has announced plans to expand overseas and invest €500 million (US$725 million) in a unit of Allianz SE, with the transaction expected to close later in the week. This deal marks the Japanese company’s first investment in a European peer, and it is also the first time that the German insurance giant has issued contingent capital through 30-year convertible bonds, an asset class known commonly as cocos.
The purchased Allianz subordinated bonds can be converted into equity within 10 years (and under certain undisclosed conditions apparently even earlier), which would give Nippon Life between a 1.5 to 2 percent stake in the German insurer. Nippon Life also has a venture with Schroeder’s of the United Kingdom, but this would be its first direct investment into a company in Europe.
Speaking on the deal, Nippon Life president, Yoshinobu Tsutsui, told reporters that the transaction was part of Nippon Life’s long-term business strategy to establish more robust overseas alliances as the traditional Japanese life market shrinks: “The objective of this investment is to establish a long-term partnership that is mutually beneficial for both companies,” Mr. Tsutsui said, adding “We are very pleased to have the opportunity to strengthen our relationship with Allianz, which shares similar values and beliefs with Nippon Life regarding the insurance business.”
This considerable acquisition reflects the pressing need for all Japanese insurers to search out alternative sources for growth and extend international operations, given the limited prospects in their domestic market due to both saturation and an aging population. The currency exchange rate would particularly favor acquisition activity in Europe, where the Euro has fallen against the yen by 30 percent since 2007. Despite these market conditions, consolidation efforts in Japan’s life insurance sector have remained relatively slow because most insurers are structured as mutual companies, and can thus be overtly conservative as they are owned, and held accountable, by domestic policyholders
Nippon Life has long recognized the need to generate new premium income outside their home market and have been involved with a series of overseas acquisitions in the past few years. In March, the Japanese insurer agreed to purchase a 26 percent stake in India’s Reliance Life Insurance, a unit of Reliance ADA Group, for US$680 million, which still represents the most significant foreign direct investment in the Indian insurance industry. This followed a period of interest in US-based companies, which included a US$250 million investment in Northwestern Mutual Life Insurance Co. last year, and a US$500 million venture in a Prudential Financial Inc unit in 2009.
Of Nippon Life’s Japanese life insurance rivals, only Dai-ichi Life Insurance have demonstrated similar ambitious expansion plans, recently acquiring a controlling stake in Tower Australian for US$1.2 billion in a move to gain access to the Australian life insurance market. Dai-Ichi has also invested in several emerging Asian markets, including a competitor in India. Non-life insurers from Japan have also been actively expanding their global reach. Last year, MS&AD Insurance Group acquired a 30 percent holding in Malaysia-based Hong Leong Assurance Bhd. and NKSJ Holdings acquired a majority stake in Fiba Sigorta Anonim Sirketi in Turkey, both for about US$35 million (¥27 billion).
For Allianz, the successful sale of €500 million worth of 30-year convertible subordinated notes to Nippon Life will enable the insurer to better prepare itself for the upcoming Solvency II rules, which will require EU-based insurers to hold more capital to match outstanding risks by 2014. Cocos, bonds that can be converted into equity pending pre-approved financial circumstances, are now becoming increasingly popular because they enable the issuers to raise capital reserves and benefit from a better solvency ratio without necessarily forfeiting equity. Michael Diekmann, CEO of Allianz, lauded the insurer’s deal with Nippon Life as a forward thinking move for the company: “With this transaction, we are among the first companies to participate in the growing market for contingent convertible notes,” he said in a statement. More insurers may soon test this new asset class.
Despite ongoing concerns about the economic future of the Euro zone and a fresh €300 million commitment to a second Greek rescue, Allianz Group, as a whole has continued to grow following its sound 2010 performance figures. The financial services conglomerate reported in February that annual net income for Allianz in 2010 had increased by 22.4 percent to total €5.2 billion (US$ 6.94 billion), with revenues reaching €106 billion (US$ 151 billion) and total assets under management of €1518 billion (US$ 2.17 trillion), cumulatively representing the best figures in the 120 year history of Allianz. The company has maintained itself at the forefront of the international insurance and worldwide asset management industry while looking towards mitigating policyholder risks and exploring new opportunities, despite operating in a difficult global economic environment.
While investment from Japan is welcome, other Asian countries have become pivotal markets for European-based international insurers to enter into themselves. Allianz Group has established a presence in several key emerging Asian economies through joint ventures including: Bajaj Allianz in India, Allianz China Life, PT Asuransi Allianz Utama in Indonesia, Ayudhya Allianz in Thailand and most recently, Allianz Lanka in Sri Lanka. These operations give The Allianz Group prime access to the rapidly developing Asian markets that are driving, in particular, the demand for protection, savings and investment products as the wealth of the substantial populations in these nations grow further.
Insurance Companies Mentioned
Nippon Life Insurance
Nippon Life Insurance – Japan Nippon Life Insurance Company was established in 1889 in Japan and through its subsidiaries offers various life and non life insurance products and services. Nippon Life operates in North America, Europe, Oceania, Asia, Central and South America, and the Middle East.
Allianz
Allianz Group is one of the leading global services providers in insurance and asset management. With approximately 153,000 employees worldwide, the Allianz Group serves approximately 75 million customers in about 70 countries. On the insurance side, Allianz is the market leader in the German market and has a strong international presence.
Reliance Life Insurance
Indian life insurance company, Reliance Life Insurance, is an associate company of Reliance Capital. Reliance Capital is one of India’s top 3 financial services companies by net worth. Both Reliance Life Insurance and Reliance Capital are part of the Reliance – Anil Dhirubhai Ambani Group.
Dai-Ichi Life Insurance
Dai-Ichi Life Insurance Company was founded in Tokyo in 1902 and operates in the life insurance market in Japan and overseas. Dai-Ichi Life offers whole life, term insurance, annuities and endowment products. The insurer has operations in Asia, Europe and North America offering saving and protection products for individuals and groups.
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
24
A new report published today by Standard & Poor’s (S&P), the foremost worldwide insurance rating and information agency, affirms the life insurance industry outlook in the Asia- Pacific region as generally stable, although it warns short-term investment risks may arise. S&P now assert that the pronounced economic development in the region combined with macro regulatory improvements regarding solvency requirements, risk management, and corporate governance, will lead to strong long-term growth potential for the life insurance sector in the Asia-Pacific.
In the study, Standard & Poor’s analyzed 11 life insurance markets in the Asia Pacific region, tabulating the insurance industry and economic risk scores, in addition to their market outlooks. The countries reviewed were Australia, China, Hong Kong, India, Japan, Korea, Malaysia, New Zealand, Singapore, Taiwan, and Thailand.
Few statistical changes were made as a result of this report. S&P upgraded Korea’s life insurance market outlook from stable to positive, due to increased profitability projections for life insurers in the country. Based on continued weak economic and investment forecasts for the market, Japan’s outlook maintained its negative status. S&P left the outlooks stable for all other markets examined.
Last month, S&P similarly assessed the performance of non-life insurance markets of Asia-Pacific. Japan and New Zealand’s non-life insurance market outlooks were revised to negative from stable, due to the expected impact the recent earthquakes there will have on reported earnings and capital margins. India’s market was criticized for questionable underwriting performances while China and Malaysia’s markets were upgraded from stable to positive to reflect their solid growth momentum.
Paul Clarkson, credit analyst for S&P, explained the agency’s appraisal of insurance development in the Asia Pacific: “We believe the region still has tremendous growth potential despite challenges. Risks to our outlooks include high inflation, withdrawal of reinsurance capacity, increased pricing and investment market volatility.”
S&P acknowledges that the Asia-Pacific region includes a diverse set of life insurance markets all across different stages of maturity. Despite these variances, the ratings agency has observed enough common positive economic, infrastructure and regulatory indicators to support the stable credit profiles of the region’s life insurance companies.
Despite the generally favorable conditions, the S&P analysis warns however that the current volatile investing environment poses a risk factor for the financial profiles of Asia insurers, as it does in other markets. A shallow investment market combined with a deficit in longer tenor assets to match liabilities will continue to challenge asset-liability management efforts in many Asian life markets, including Japan.
At Standard & Poor’s 27th Annual Insurance Conference 2011, industry analysts confirmed that life insurance has remained a sector facing undue pressure by the persistently low interest rate environment resulting from asset and liability durational disparity. These low rates have impacted the long-term returns and capitalization life insurers need to sustain their operations.
The level of volatility thankfully remains far below that occurring in the aftermath of the 2008-2009 global financial crisis, and S&P reports that multinational insurers have learned valuable fiscal lessons from the event. The further implementation of comprehensive risk management practices and oversight in the insurance industry should mitigate the lasting effects of financial market unpredictability.
Many central banks in the Asia-Pacific region have responded to rising inflationary pressures by raising interest rates. In S&P’s view, higher interest rates could have both positive and negative connotations on performance for the region’s life insurers. A rise in interest rates in mature life insurance markets, where ongoing negative interest spreads impact life insurer profitability such as in Japan, Korea and Taiwan, will result in narrowing the negative carry and improving company earnings. Meanwhile, higher rates could also lead to a spike in surrenders of fixed-interest policies and make liquidity management more complicated for insurers in Asian markets where such policies are popular.
S&P concludes that the solid operating fundamentals in both life and non-life insurance markets in the Asia Pacific can overshadow the challenges facing in the region. Economic development throughout the continent, coupled with positive investment performance and favorable overall operating performance has enabled insurers to strengthen their financial profiles and could rebuild balance sheets enough to weather the next market downturn. In addition to the above factors, S&P has given a stable outlook for most Asia-Pacific insurance markets because there is an expectation of continued strong premium growth due to low penetration rates within all emerging markets, and increased demand due to evolving customer needs in the mature insurance markets.
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
10
Insurer Sues Twitter Phony
Filed Under Life Insurance | 2 Comments
In a case that truly represents the duplicitous times we are living in, American life insurance firm Coventry First LLC has filed a lawsuit this week against an anonymous internet critic who periodically sent out fake Twitter messages which parody the insurer and make them appear to root for the death of its policy holders to boost profits amongst other fraudulent claims, Reuters reports.
The case, ‘Coventry First LLC v. Does 1-10,’ was filed on Tuesday in Philadelphia federal court. Coventry First filed the suit against an anonymous Twitter user known as @coventryfirst on allegations of trademark infringement and unfair competition. The insurer is seeking an order to take down the parody Twitter account as well as monetary damages. Coventry First argues that the online account violates its trademark and the numerous ‘tweets’ about the life settlement industry would cause further confusion in the marketplace. Twitter Inc. is not a party to the suit.
The Twitter account in question, @coventryfirst, has a picture of a dollar sign as its avatar and has published 14 posts so far with farcical messages such as “the faster people die the more coventry first profits! not even cig companies want their customers to die as fast. natural disasters are good for business!” and “horrible weekend … no plane crashes (they make a lot of money), no earthquakes.” The posts first began appearing on May 27, the account currently only has three followers.
Coventry First, which describes itself as the creator and leader of the secondary market for US life insurance, said the use of its trademark in such a fashion “tarnishes the reputation” of the entire company, “as it uses the mark in connection with language derogatory to plaintiff and to the life settlement industry generally, and is of a lesser quality than that which consumers expect from statements being made by plaintiff,” the complaint read. (available here)
In addition to scurrilous statements issued on its behalf, Coventry First maintains that the account’s use of its name and the phrase ‘Don’t miss any updates from Coventry First’ further infringes on its trademark, according to a Law360 article. The US insurer is also filing suit for unfair competition, false designation of origin, violations of the Anti-Cybersquatting Consumer Protection Act, trademark dilution and unjust enrichment. The company has also issued a subpoena towards Twitter, asking the social media firm to disclose the identity of the account holder.
“Consumers are likely to believe that the site is somehow related to plaintiff, when it is not,” Coventry First added, in reference to the Twitter account.
Parody accounts of companies and public figures have become commonplace on Twitter, and often act in opposition to the reputation of their representative at times of great controversy.
Coventry First’s chances of shutting down the offending Twitter account appears uncertain due to US courts’ obligations to balance the right of brand owners against overall free speech values offered in the First Amendment. The courts will require substantial evidence proving commercial use by @coventryfirst before they will be able to determine if an infringement has occurred. To further prove a trademark claim, Coventry will also have to show that the fake Twitter account is leading to actual confusion in the minds of consumers.
There are currently much greater threats to businesses who wish to operate and maintain a presence on the internet. On Thursday, Citigroup Inc., the third largest US bank, disclosed that computer hackers had acquired limited personal information on about 200,000 credit-card holders, the second announced breach they had suffered this week. The financial institution said it would mail new cards to affected customers.
The attack comes amidst a host of cyber intrusions into predominant multinational companies, including Google, Sony Corp, EMC, Lockeheed Martin and L-3.
Online hackers are fast becoming the greatest threat to business today. As commerce continues to move online, the gap between technological innovation and the ability to protect data offers criminals an opening to launch attacks and steal sensitive industry information.
Security experts revealed that the cyber-attack on Citigroup may be a watershed moment for the US banking industry, which until now had suffered fewer direct hacker attacks than other retailers. This event could ultimately drive momentum for a systemic overhaul of the industry’s existing data security measures.
“We’re getting to the tipping point in terms of the number of fraud cases,” said Gartner Research security analyst Avivah Litan. As industry regulators determine whether to require more spending on network security, “this could be the straw that breaks the camel’s back,” she added.
Insurance Company Mentioned
Coventry First LLC
Founded in 1999, Coventry First is a leading player in the secondary insurance market. The company offers investments in high-premium life insurance policies, written on elderly or wealthy executive individuals looking to sell. In a secondary life insurance transaction the policyholder gets a lump sum, Coventry pays remaining premiums, and when the policy is realized, Coventry receives the payout.
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