Insurance news

Ranking	UK experts	UK general public
1	Climate change	Climate change
2	Cybersecurity risks	Pandemics and infectious diseases
3	Pandemics and infectious diseases	New security threats and terrorism
4	Geopolitical instability	Cybersecurity risks
5	Natural resources and biodiversity risks	Pollution
6	Social discontent and local conflicts	Natural resources and biodiversity
7	New security threats and terrorism	Chronic illness
8	Financial stability risks	Geopolitical instability
9	Macro-economic risks	Social discontent and local conflicts
10	Risks related to artificial intelligence and big data	Financial stability risks

  

Globally, risk experts see climate change as the biggest risk within the next decade; the general public, pandemics and infectious diseases. For this year’s report, AXA polled 3,448 experts from 60 countries, as well as 19,000 adult members of the public from 15 countries. Of these, 400 experts and 1,001 members of the public were based in the UK.

Commenting on the UK survey results, AXA UK and Ireland chief executive Claudio Gienal said: “At a time when life has been dominated by other important issues, such as the COVID-19 pandemic and economic instability, it is perhaps surprising that climate change would top the list.

“However, this clearly demonstrates that for many people climate change is a very real risk which is fast approaching, if not already upon us. There is no doubt that climate change is one of the most serious and damaging risks we as a global population face, so it’s encouraging that this has been acknowledged as the number one risk in the UK.”

Gienal highlighted that there’s a “real opportunity here for everyone” to collaborate in helping mitigate both present and future risks.

“The message from this report is clear,” added Sean McGovern, chief executive of UK & Lloyd’s market at AXA XL. “UK risk experts and the broader population believe the UK government needs to put climate change front and centre.

“London is recognised around the world for its insurance and risk expertise and is renowned for its experience in addressing the most complex, emerging risks. It has a dual role to play; both by supporting our clients and local communities in tackling the immediate impacts of climate change and – through the work being done within the London market and Lloyd’s – by helping to create climate resiliency around the world. This is an opportunity that we cannot afford to miss.”

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Brit Ltd, a global specialty (re)insurer and subsidiary of Fairfax Financial Holdings Limited, has announced that its group CEO, Matthew Wilson, is taking an indefinite leave of absence due to health reasons.

The Brit team have extended their well wishes to Wilson and look forward to his return. Prem Watsa, Fairfax Financial Holdings chairman and CEO, said: “Our thoughts and prayers are with Matthew Wilson and his family as he begins a program to fully regain his health. He has our full support during this challenging time, and we look forward to his return.”

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“I’m really delighted, and I smile again to report that Lloyd’s successfully repositioned the market for sustainable profitable growth, as evidenced in our strong set of financial results.”

Keese joined Lloyd’s as CFO on April 01, 2019, after a 14-year stint with German insurer Allianz Group, where he was chief financial officer of Allianz Deutschland AG, which handled over €34 billion (£30 billion) in premiums. His appointment came at a pivotal time for the 335-year-old marketplace after two years (2017 and 2018) of poor results, where Lloyd’s was plagued by loss-making businesses and weak investment returns. So, Keese’s mandate was clear: steer the market back to profitability – and so far, things are looking good.

In 2018, Lloyd’s launched its ‘Decile 10’ initiative, aimed at bringing underperforming syndicates and classes of business (including marine hull, cargo and yacht) back to profitability. Failure to do so would result in plans being rejected and classes of business and syndicates being closed down.

“We have worked together with the managing agents and syndicates over the last three years in our Decile 10 remediation program to improve underlying performance and to restore profitability,” said Keese. “The good market conditions gave us tailwinds. [In H1 2021], we recorded a moderate growth [in profit] of around 2%, where rate changes of roughly 10% were offset by remediation portfolio and foreign exchange. We allowed for selective and profitable growth and pushed unprofitable syndicates once again out of the market.”

The market’s underwriting result of £963 million, and investment result of £628 million, resulted in a profit before tax of over £1.4 billion, and a return on equity of 10.3% for the half-year period. Furthermore, its combined ratio – excluding COVID-19 – improved by nearly 5% to 92.2%.

Regarding COVID-19, Keese said the market has paid out 80% of notified claims, and it still holds over 50% of incurred but not reported (IBNR) reserves for losses that could manifest as a result of the pandemic but have not yet materialised or been reported.

“Our combined ratio and return on equity are very much in line with the reported figures of our global peer group,” Keese commented. “The drivers for this much improved underlying performance are the 2% improvement of the attritional loss ratio, and the 1.9% improvement of our expense ratio. The expense ratio improved even by 3.7% since 2017 as a result of the market’s collective efforts to reduce expenses.

“Expense management will remain a key area of focus for our managing agents and syndicates in the upcoming planning season. The restoration of our profitability was driven by our strong management actions over the last three years, and now we must ensure that we continue our cause of decisive management. There will be further action to improve our profitability [as] we are not yet where we want to be.

“We will do more work with the market to ensure all syndicates become profitable. […] We will continue to focus on measuring and managing price adequacy. The current favourable market conditions will not remain forever, and the market must be prepared by developing market-leading pricing tools and cycle management.”

Keese emphasised that it is a combination of rate increases and remediation that has helped to restore underwriting profitability at Lloyd’s. Since 2018, managing agents and syndicates have remediated nearly £7 billion, or 20%, of premiums. In the first half of 2021, the market removed unprofitable business amounting to approximately 6% of premium, which then enabled 4% of volume growth, the CFO explained.

“If we look at the portfolio of syndicates, it is clear that we have moved in the right direction. The top quartile of the syndicates belongs to the best underwriting firms in the world,” he said. “However, at the same time, we won’t tolerate loss making syndicates, particularly in current market conditions. Fifteen per cent (15%) of syndicates do not have the profitability we expect to see, and these syndicates must be remediated or the future at Lloyds is unsustainable.”

The Lloyd’s balance sheet is “in very good shape,” Keese added, showing an increase of 8% in net resources to £36.5 billion in H1 2021 – a total that has been buffered by a five-year £650 million ($897 million) reinsurance cover for its Central Fund, financed by JP Morgan and a panel of eight of the world’s largest reinsurance companies.

“In addition to protecting the Central Fund, the cover will create a significant buffer against adverse solvency developments. It is expected that the new cover will increase Lloyd’s central solvency ratio significantly,” said the CFO. “The capital buffer will also facilitate growth opportunities against the backdrop of current favorable market conditions. This unique and innovative structure will enable us to support market growth ambition over the next few years, while also strengthening the resilience of our balance sheet. Our capital position is now more resilient than ever.

“Our balance sheet is very robust with superior equity, solvency and reserve positions, as well as prudent asset allocations,” Keese added. “Capital management is key and will be continued to maintain our very competitive capital position. Our disciplined underwriting approach, and the continued positive rate momentum sets us up for a strong future. However, we still have work to do and will remain focused on pricing adequacy and further retaliation of unprofitable syndicates.” 

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Read more: Charles Taylor swoops for new chief commercial officer

Based in the firm’s London head office, Fouquet joined Charles Taylor in 2014 having gained experience in handling liability claims within a law firm. At Charles Taylor, she developed an expertise in cyber claims and since 2019 has held the role of the firm’s global head of cyber. 

Meanwhile, La Stella has been with Charles Taylor for over 10 years and has experience in a range of specialty lines claims, and products liability/recall claims, and insurance/reinsurance audit. During his career with Charles Taylor, he has been based in Miami, London, and Rome where he opened Charles Taylor Adjusting’s first Italian office. He recently relocated to Barcelona to open and lead the latest location in the firm’s geographical expansion.   

In a statement, the firm said that its specialty lines practice “offers a unique proposition to the market bringing together financial institutions and commercial crime, professional indemnity, directors and officers, cyber, trade credit and political risks, specie and fine art, and contingency and entertainment specialisms.

“With the launch of specialty lines, we bring together selected class-leading products under the overall direction and leadership of Laetitia Fouquet and Nicholas La Stella,” said Andy Rice, managing director, property, casualty, technical, and special risks at Charles Taylor. “Laetitia and Nicholas are recognised leaders in their respective fields and are well placed to take the business forward and promote the availability of these services to our clients across the globe.”

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Arch Insurance International (Arch) has appointed Silvia Martinez (pictured) as its new general counsel, effective immediately.

With 10 years of legal experience in private practice and in-house roles, Martinez has extensive corporate governance knowledge and expertise overseeing complex corporate and capital market transactions.

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Another parallel between insurance and tractors, he said, is that tractors are remarkably slow and nobody wants to be stuck behind one while out on the road. So, while the importance of tractors is well understood, it doesn’t mean people want their journeys delayed by them. This is much the same with fraud detection. MGAs, brokers, insurers and ultimately consumers, rightly expect robust fraud detection without the claims journey being unnecessarily delayed.

“Like a slow road journey, a slow or cumbersome claims journey is a real turnoff,” he said, “and it’s a barrier to [firms] doing business. But, of course, [the claims journey] is incredibly important and it’s a regulatory requirement. Therefore, none of us should forget about it or ignore it in the pursuit of a great customer experience. It’s certainly not something we should forget about in terms of profitability, or ultimately the endgame of keeping insurance premiums competitive for all of our benefits.”

Read more: Sedgwick boosts claims fraud savings

So, how can firms tackle the problem of catching the vast majority of the bad guys, without end customers being stuck behind that proverbial tractor of a delayed journey? During the MGAA webinar, Carman touched on a variety of conversational touchpoints – including the role that counterfraud technology can play in the financial success of a firm. The insurance industry often thinks about fraud as a claims problem, he said, but enriching underwriting data and investing time in a fraud strategy actually directly translates into underwriting profitability.

Digging deeper into what a strong fraud strategy looks like and why it is so important, Carman highlighted the tougher market conditions currently being faced across the broader insurance piece. The most effective way of navigating a hard market is by demonstrating strong and effective controls, he said, and through partnering with a TPA that takes responsibility for driving that fraud performance. That TPA must place equal importance on people, data and processes – it’s a three-legged stool and if you remove one of those metrics from good fraud detection then it falls over.

“Some TPAs talk a good game about fraud but when you scratch beneath the surface, in terms of what actually exists in terms of counterfraud controls, they may have a counterfraud team or access to a fraud specialist to refer fraud back to the carrier for handling. But they’re at the end of the process,” he said. “And sometimes we as an industry [can be] a bit guilty of this – we think about fraud as the fraud investigators.

“Actually, it’s two steps behind that. It’s about the handlers, it’s about the adjusters and good identification. And that’s the role that a TPA plays. And when we examine TPAs closely, most are still using traditional key fraud indicators and handler training on fraud awareness as a primary means of identifying fraud. And in 2021, there’s got to be a better way of doing things.”

At the foundation of strong fraud performance is meaningful action, ownership and accountability, Carman said – when Sedgwick engages with clients, what comes through loud and clear is a simple message: “we don’t want a fraud tractor, don’t slow down the process and don’t involve our customers in the process.” He noted that he agrees wholeheartedly with this but emphasised the role technology plays in achieving that demand.

Read more: Sedgwick UK COO on talent acquisition in the claims sector

In 2020, Sedgwick set about challenging its own thinking around detection performance and whether its detection strategy represented more a “fraud tractor or a fraud Ferrari”. The firm had already recognised its strong counterfraud function, Carman said, which is great but it is at the end of the process so the real question was rather how strong it was at detecting fraud in its TPA or commercial home or motor operations.

“I think we recognised that we could be better at identifying fraud risk for our clients and we saw an opportunity to take our performance from good to great in the identification piece,” he said. “Technology plays a pivotal role in countering organised and opportunistic fraudsters. In simple terms, the very best technology can compute vast quantities of data and spot the anomalies in a way that humans can’t.”

An individual claims handler who is dealing with maybe 10 cases a day is not going to be able to spot the connections or anomalies between the case they’re dealing with and another they handled 18 months ago from a different policyholder, with a different address on a different claim. It’s simply not possible as humans to trawl through the 1,000s of bits of information we receive every day, he said, and derive meaningful insights from that. So, that is where technology steps in.

“So the claims handler can spot that from a behavioural point of view, there’s an issue here,” Carman said. “But that Big Data perspective and technology [that has] the ability to compute vast quantities of structured and unstructured data, to apply rules, machine learning principles and fraud detection algorithms are crucial weapons in 2021 for detection. Without that, you’re sort of scrambling around in the dark for the bits that you can’t see, and will never get to.”

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The partnership between Z Zurich Foundation and UNICEF aims to benefit 400,000 adolescents and 150,000 caregivers in seven countries by equipping them with information, skills, and strategies on caring for their and others’ mental well-being.

The Z Zurich Foundation will also support a global communication campaign that aims to reach 30 million people and promote positive conversations and connections that increase awareness, knowledge, and action around mental well-being.

Commenting on the partnership, Z Zurich Foundation chair Gary Shaughnessy said: “Today, we are launching a global movement that envisions a world where every young person is supported to achieve positive mental well-being. This is an increasing and vital challenge. Working together, we can turn the tide and help many young people realize their potential. Join us.”

Zurich claims that promoting mental well-being among young people and caregivers is crucial to reducing the rising burden of mental disorders.

However, despite growing awareness about the negative effects and financial costs of mental health conditions on lives and communities, the insurer explained that wide investment gaps persist, particularly for mental health promotion and prevention programs.

As a result, the partnership seeks to build a coalition of public and private sector leaders who are willing to take action to promote the positive mental well-being of young people, including scaling up the programs piloted through the partnership, and supporting global and local advocacy on the importance of investing in mental health promotion and prevention for adolescents.

Charlotte Petri Gornitzka, the deputy executive director for partnerships at UNICEF, said: “Positive mental health helps us to think, learn, and build our lives. But for too many young people, psychosocial distress is disrupting their daily lives, negatively impacting their health, and preventing them from thriving.

“The COVID-19 pandemic has only added to the pressures on young people and their families, putting the mental health of a whole generation at risk. With this partnership, we are kick-starting an urgent response to a crisis that the world cannot afford to leave overlooked and underfunded.”

The global campaign supported by the partnership will launch in early October 2021, in the run-up to World Mental Health Day. The programs supported by the partnership will start in Vietnam, Mexico, Indonesia, Nepal, Colombia, Ecuador, and the Maldives.

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Is your organisation practicing corporate social responsibility that aims to improve its host communities, the economy, or the environment?

In its 5-Star Corporate Social Responsibility showcase, Insurance Business aims to celebrate the insurance companies that have developed effective and comprehensive CSR programs.

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How MGAs fit into the distribution channel

Wholesale brokers act as an intermediary between a retail broker and an insurer, and work with insurers to attain specialised coverage for clients while having no contact with the insured. An MGA is one type of wholesale broker, and operates on the insurer’s behalf while also working closely with clients to attend to their needs. The other type of wholesaler is a surplus lines broker who works with a retail agent and an insurer to obtain coverage for the insured. What makes MGAs unique is their binding authority from the insurer.

An MGA will deliver and service a insurer’s product to both insurance agencies and clients. MGAs can work with several insurers to formulate a specific mix of products to deliver to agents/brokers or directly to insureds.

How MGAs benefit insurers and agents

Working with MGAs is beneficial to insurers because they possess expertise that insurers may not have in their head or regional offices, and which can be costly to develop in-house, according to IRMI. Working with an MGA, companies can pass time-consuming and complicated tasks to an outside entity that already has the knowledge to address them.

MGAs tend to deal in lines of coverage such as professional liability, employee benefits or surplus lines where specialised expertise is needed to underwrite policies, though they can be active in any line of insurance, and work with all types of insurers. If an insurer wants to explore a specialty line of business, but does not want to take on the risks or uncertainty of doing so, they can turn to an MGA to offer up that expertise, and give the MGA the authority to underwrite and issue specialty policies because they are already familiar with the risks. 

MGAs can also write business in geographically isolated areas where insurers do not want to open an office. A small town or rural region might not warrant the opening of a branch for an insurer, but working with an MGA in that area provides the company with access to new customers without spending money on staff or rent.

Similar to insurers, agents can get expertise about a particular product or more competitive pricing by working with an MGA. They can likewise gain entry to markets and insurers that could be difficult to access on their own, and because of the often-smaller size of the MGA business, there are fewer barriers to communication for a broker. MGAs also bring technology to the table, such as online platforms that integrate with wholesale channels or products that speed up the quoting process, that help independent agents provide better services to their clients. Agents can realise higher commissions by working with an MGA that has a diverse network of insurers, allowing agents to review the commission structure and have the option to sell insurers’ products that offer the best rates.

MGAs around the world

Many MGA models were created during the 1990s and 2000s, though the role of the wholesale broker, a category that MGAs fall into, dates back to the 19th century. Associations that represent MGAs in specific regions today include:

• Managing General Agents’ Association (MGAA) in the UK, which was formed in 2011
• American Association of Managing General Agents (AAMGA), which was established in 1926 and has since merged with the National Association of Professional Surplus Lines Offices (NAPSLO) to form the Wholesale & Specialty Insurance Association (WSIA)
• Canadian Managing General Agents (CAMGA), a relatively new association formed in 2017
• Underwriting Agencies Council, based in Australia and formed in 1998

In Australia and New Zealand, MGAs are referred to as underwriting agencies, though they have the same functions as managing general agencies. According to the UAC, its 116 members account for more than AU$6 billion of premiums spent by Australian businesses and consumers annually.

In the UK, the term ‘MGA’ has been adopted by the market to refer to what was once known as a ‘coverholder.’ Today, more than 300 MGAs underwrite over 10% of the UK’s £47 billion general insurance market premiums, according to the MGAA.

Worldwide, MGAs fall into one of the fastest-growing segments of the insurance industry. Global investment firm Conning reported that MGA and program market growth continues to outpace the growth of the property and casualty market, with direct premium growth of 7% higher than the previous year compared to the 5% seen in P/C market growth. The analysis also showed that 21 of the top 25 P/C insurers have relationships with MGAs.

The role of the MGA today

With technology bridging the gap between insurers and clients today, some insurers are moving away from relying on MGAs, which has thrown the identity and future of the MGA into question.

“By virtue, MGUs and MGAs, program administrators, are the middlemen,” said Rekha Schipper, president of Tangram Insurance Services. “How can we make sure we stay ahead, make sure that we take advantage, and make sure that we continue to be relevant and meaningful to a broker, to a insurer, to a tech investor, to say, this entity still belongs in the middle of all of this?”

However, an MGA is a natural outlet for technology solutions to plug into because of its established distribution channels. These agencies can also react to market changes quicker than typical insurance companies because they are smaller businesses that are acting on behalf of larger insurers.

“We can bring programs to the market faster. We can get out to more brokers because they can get on our platform. We can reduce our expenses as an MGU because now we’re automating a lot of things,” explained Schipper, adding that there’s “an unprecedented opportunity” for partnerships between technology vendors and MGUs.

During hard market periods, MGAs can be used by insurers to decrease costs and increase profitability. The MGA model is also flexible. Following the 2008 financial crisis, Ironshore, a Liberty Mutual company, established its managing general underwriting agency as its commercial clients were facing heightened risk since the viability of some insurance insurers that offered high coverage limits across many lines of business for major companies was uncertain. Brokers were meanwhile also under pressure to find alternative coverage solutions. The Ironshore MGU model involved underwriting as well as claims management, the latter of which made it unique from a traditional MGA, which can have limited authority on claims management and payment.

(Updated September 21, 2021)

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Several insurance firms are part of a coalition of over 80 UK businesses that signed an open letter calling on Prime Minister Boris Johnson to show “strong domestic leadership” in acting on climate change.

The letter, coordinated by the Business Group Alliance for Net Zero (BGA), was released just over 40 days before the UN Climate Change Conference (COP26) in Glasgow. In the letter, the businesses voiced their support for climate action and stressed the need for the British government to formulate a coherent, integrated and Treasury-supported plan to achieve net zero carbon emissions.

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