Reinsurance sector has made remarkable recovery despite global economic headwinds reveals Aon Benfield renewals report

Check your travel insurance with wintry weather on the way

Holidaymakers planning on spending New Year’s Eve abroad may wish to check that their travel insurance covers them against the impact of predicted wintry weather.

With parts of central England already affected by snow, airline Jet2.com has issued an alert forecasting that the wintry conditions will spread northward over the course of December 30th.

This could impact on travellers planning to depart from airports in Leeds or Manchester as the airline anticipates that delays could occur as the heavy weather sets in.

Recent guidance from the British Insurance Brokers’ Association (BIBA) could help to ensure that holiday insurance is effective in covering any such delays or cancellations that may occur.

Earlier this month, BIBA technical and corporate affairs executive Graeme Trudgill urged holidaymakers to consider travel insurance based on the level of coverage it provides and not on price – particularly if they have booked independently and are not covered by industry protection schemes.

Liberty Mutual Group approved to open Zhejiang Branch

Liberty Mutual Group, through its wholly owned subsidiary Liberty Insurance Company Limited, has been granted approval to establish a branch in Zhejiang by the China Insurance Regulatory Commission (CIRC). Headquartered in Chongqing, Liberty Mutual’s Chinese operations received CIRC approval on December 14, 2009 to prepare for a provincial branch in Hangzhou, Zhejiang Province – the third-largest property and casualty insurance market in China.

Liberty Mutual will be the first foreign property and casualty company to operate in Zhejiang, a province of over 47 million people located 700 miles south of Beijing on China’s southeastern coast.  The Zhejiang operation joins the company’s two current operations in China – located in Chongqing and Beijing – in offering personal lines products and a wide range of commercial lines products that focus on the needs of small-to-medium enterprises.

“The continued success of our strategy in China reinforces Liberty Mutual’s reputation as a leading foreign property and casualty insurer among consumers,” said Liberty Mutual Group Chairman, President and CEO Edmund F. Kelly.  “CIRC’s approval of our third location is testament to our reputation and we thank them for their decision.  We are pleased that they share our view of Zhejiang as a market with strong insurance growth potential and we look forward to entering this dynamic region.”

Reinsurance sector has made remarkable recovery despite global economic headwinds

Aon Benfield today releases its annual Reinsurance Market Outlook report, which reveals the main industry trends at the January 1 reinsurance renewals.

The report, Remarkable Recovery, highlights that insurer and reinsurer capital increased dramatically from the lows experienced in March 2009, and that the January 1 catastrophe reinsurance renewals were focused on rate decreases in the market’s peak zones of U.S. hurricane and U.S. earthquake.

Rate on line (ROL) decreases were in line with Aon Benfield’s “light” catastrophe season scenario published in September 2009, which stated that rate decreases for these perils, adjusted for changes in exposure, ranged from -5% to -15%.  The ROL decreases seen at January 2010 renewals were very similar to the ROL increases observed on January 2009 business.

Capacity for the global catastrophe reinsurance market has been restored to near its all time peak of December 2007, and is meaningfully higher than the levels witnessed throughout the January 2009 renewal season.

Global reinsurer capital, which drives capacity and price, increased by 16.6 percent through September 2009, likely fully recovering from the 16.9 percent capital decrease experienced in 2008 by the end of 2009.

Aon Benfield’s outlook for the April, June and July renewal seasons reflects the firm’s expectation that the pace of reinsurer capital growth will decrease, due to share repurchases and more stable investment prices.  The reduced pace of reinsurer capital growth is still likely to outpace the growth in insurer demand for reinsurance.  Therefore Aon Benfield forecasts continued softening over these upcoming renewal periods, assuming no significant reinsured catastrophes occur prior to final negotiations.

Andrew Appel, Chief Executive Officer of Aon Benfield, said: “Aon Benfield continues to redefine the role of a reinsurance intermediary and capital advisor by providing and publishing forward-looking expectations months in advance of key renewal dates. Our size and unmatched level of investment on behalf of our clients allows us to provide this type of advocacy and advice. We believe our insight on risk, foresight, and understanding of the market creates better outcomes for clients of our firm. This level of advocacy has helped Aon Benfield work with clients to develop placement strategies to maximize the capital benefit for their reinsurance spend.”

Other major reinsurer catastrophe zone exposures such as European windstorm, flood and earthquake are reinsured for substantially lower margins than U.S. peak zone exposures.  Rates achieved tended to reflect experience, and changes in exposures and modeling, rather than being tied to fluctuations in reinsurer capital.  Layers impacted by European windstorm Klaus generally saw experience-based ROL increases, while unaffected layers generally held ROLs stable or were reduced by as much as 6 percent.

Bryon Ehrhart, Chief Executive Officer of Aon Benfield Analytics, said: “At January 2010 renewals, reinsurers showed markedly less anxiety than last year and were more focused on gaining the largest possible signings on their reinsurance program authorizations.  The market is again competitive as capacity growth outpaced demand growth, and the global catastrophe reinsurance market softened; however, the market is not soft.  Renewal rates reflected a disciplined view by reinsurers on the balance of risk and return on capital deployed. Reinsurers had the necessary capacity to renew all their cedents’ programs, but could also maintain higher levels of capital if reasonable demand were present.”

Aon Benfield estimates that significant reinsurer capital will not be deployed during the January 2010 renewals, and forecasts that significant reinsurer share repurchases in 2010 will fall in the range of USD10bn to USD15bn. The growth of government sponsored insurers and reinsurance-like entities continues to erode the opportunity for private reinsurers to deploy capacity.

Casualty and specialty insurers continued to benefit from an abundance of reinsurance capacity.  Experience-based rates were the main driver behind most of the renewal pricing, and continual decreases in loss frequency paired with reasonable increases in loss severity meant that insurance and reinsurance rates per unit of exposure continued to decrease.

In some lines, such as directors’ and officers’ liability, there have been historical differences of opinion between insurers and reinsurers over original rate sufficiency. Reinsurers have substantially erred on the side of safety and priced or structured themselves out of a material segment of casualty business.

Outgoing AIG counsel Kelly Anastasia to be paid $2.8 million

A top executive at American International Group Inc has resigned because of pay curbs imposed by the Obama Administration’s pay czar, the insurer said on Wednesday.

Anastasia Kelly, AIG’s vice chairman for legal, human resources, corporate affairs and corporate communications, resigned effective Dec. 30 for “good reason” and is eligible for severance pay under the terms of the company’s executive severance plan, the insurer said.

Kelly stands to be paid about $2.8 million in severance, according to a source familiar with the matter.

Kelly’s resignation comes after Kenneth Feinberg, who is charged with monitoring pay levels at companies that received taxpayer funds, imposed pay caps for AIG’s top executives.

Earlier this month, Feinberg set the compensation structures for the 26th through 100th highest-paid employees at four firms, including AIG, limiting most cash salaries to $500,000.

Feinberg also granted less than a dozen special exemptions from the cash salary cap, including several AIG executives, after being urged to do so by Federal Reserve and Treasury officials.

Kelly met frequently with Feinberg to discuss pay issues as he prepared to rule on compensation at companies that received extraordinary taxpayer bailouts.

She was among five executives reported by The Wall Street Journal to have notified the insurer that they were prepared to resign and collect severance benefits if their pay was cut sharply by Feinberg. Chief Executive Robert Benmosche separately also had considered quitting because of the pay constraints, the Journal has reported.

Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University, said no AIG employee was irreplaceable.

“We have been duped into thinking that these AIG employees have some kind of secret code that no other employee could discover if they were hired to replace them and therefore they are able to basically hold the company ransom,” Hurley said.

AIG had to be propped up with some $180 billion in taxpayer support after its near collapse in September 2008. The U.S. government now owns nearly 80 percent of the company, once the world’s largest insurer by market value.

The government stepped in to rescue AIG after it ran short of funds to meet collateral demands from global banks that had bought credit protection from an AIG financial products unit. The government saw the company’s possible collapse as a systemic risk.

AIG angered many Americans earlier this year when it paid million-dollar retention bonuses — payments simply for staying in their jobs — to executives at a financial products unit that was responsible for its financial implosion.

The insurer also said on Wednesday that Suzanne Folsom, chief compliance and regulatory officer, has left to pursue other opportunities. It was unclear if her departure was related to the pay issue.

It said it is looking for successors for both officials.

AIG to pay millions to departing counsel

AIG is planning to pay its outgoing general counsel, Anastasia Kelly, several million dollars as severance pay.

United Insurance names CFO

US property/casualty insurer United Insurance Holdings has appointed Joseph Peiso as chief financial officer.

Ugandan insurer’s IPO opposed

The academic staff association of Makerere University is looking to secure a court order against the proposed listing of Ugandan insurer National Insurance Corporation.

PMA sells run-off operations to Armour Re

US insurer PMA Capital Corporation has received regulatory approval from the Pennsylvania Insurance Department for the sale of PMA Capital Insurance Company.

Nipponkoa shareholders OK Sompo merger

Nipponkoa Insurance has secured shareholders approval to merge with Sompo Japan Insurance.

New China Life names chairman

New China Life Insurance has appointed Kang Dian as chairman.

Munich Re: climate-related loss to rise

The German reinsurer said in a report that losses caused by natural disasters cost the global insurance industry about $22bn this year.

Mitsui Sumitomo Insurance names new president

Mitsui Sumitomo Insurance has appointed Yasuyoshi Karasawa as its president, effective April 1 2010.

Itaú to sell $62.5m Allianz Brasil stake

Brazil’s Itaú Unibanco will sell its remaining 14.025% stake in insurer Allianz Brasil, for about $62.5m.

ING to sell 50% stake in Chinese insurer

ING Groep is selling its 50% stake in Pacific Antai Life Insurance to China Construction Bank

Fubon gets approval for insurance firm in China

Taiwan insurer Fubon Financial has received approval from China to start a property insurance firm in the mainland.

Florida takes over Magnolia Insurance

Florida insurer Magnolia Insurance has been put under state supervision.

Deep South Insurance CEO to step down

David Disiere, CEO of Dallas-based Deep South Insurance Group, has decided to quit.

China outlines insurance fund rules

The China Insurance Regulatory Commission has outlined rules for the use of insurance funds, which will allow insurers to invest in sectors such as real estate.

Cat bond issuance of $3.4bn for 2009

Zurich Financial Services has completed the placing of a $225m catastrophe bond.

BNP, Taiwan Co-op JV gets regulatory nod

The life-insurance joint venture between Taiwan Cooperative Bank and BNP Paribas’ life insurance unit has been approved by Taiwan’s financial regulator

United Insurance names CFO

US property/casualty insurer United Insurance Holdings has appointed Joseph Peiso as chief financial officer.

AM Best revises Samsung F&M’s outlook

AM Best has changed Samsung Fire & Marine Insurance’s outlook to positive from stable.

Rate cuts in US hurricane and US EQ: Aon Benfield

An Aon Benfield report released today highlights that insurer and reinsurer capital increased greatly from the lows experienced in March 2009, and that the January 1 catastrophe reinsurance renewals were focused on rate decreases in the market’s peak zones of US hurricane and US earthquake.

New China Life names chairman

New China Life Insurance has appointed Kang Dian as chairman.

AM Best cuts Nippon Life issuer credit rating

AM Best has lowered the issuer credit rating (ICR) of Nippon Life Insurance to aa- from aa.

Munich Re: climate-related loss to rise

The German reinsurer said in a report that losses caused by natural disasters cost the global insurance industry about $22bn this year.

Mitsui Sumitomo Insurance names new president

Mitsui Sumitomo Insurance has appointed Yasuyoshi Karasawa as its president, effective April 1 2010.

Allianz names regional CEO

Allianz Group has appointed Manuel Bauer as CEO of central and eastern Europe, Middle East and North Africa.

Measured softening at renewals: Willis Re

Strong reinsurance underwriting profits, a recovery in the global investment markets and a lack of premium growth for primary underwriters have resulted in a disciplined softening of reinsurance pricing in the January 1 2010 renewal season, according to Willis Re.

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