Insurance news

The insurer released its results on Tuesday, reporting consolidated net written premiums of US$41.8 billion. Property and casualty (P&C) net premiums were up 7.7%, or 10.3% in constant dollars.

While net income was down, P&C underwriting income saw a “record” year, at US$4.6 billion, the insurer said in a press release. So too did core operating income, at US$6.5 billion, up 15.9%.

Its P&C combined ratio improve in 2022, at 87.6% compared to 89.1% in 2021.

Chubb saw its investment portfolio face an unrealized loss position of US$7.3 billion, versus an unrealized gain position of US$2.3 billion at December 2021.

Chubb Q4 2022 results

For Q4 2022, Chubb reported net income of US$1.3 billion and core operating income of US$1.7 billion.

“Net income in the quarter was adversely impacted by adjusted net realized losses of US$363 million after tax, principally due to the mark-to-market impact on private equities,” Chubb said in a press release.

Fourth quarter pre-tax catastrophe losses were US$400 million, up on Q4 2021’s US$275 million.

Chubb CEO Evan Greenberg hailed a “strong quarter” for the insurer.

“Our quarterly results included record net investment income, double-digit premium growth, and an excellent underwriting performance with an 88% combined ratio despite a true-up to our annual agriculture results reflecting a below-average crop year,” Greenberg said.

Pricing conditions in P&C “remain favourable”, according to the CEO, and the insurer expects future published growth to improve with the dollar weakening.

“In P&C, North America grew 9.7%, and so did Overseas General in constant dollars while declining 1.3% on a published basis, impacted by the strongest U.S. dollar in 20 years,” Greenberg said.

The insurer is off to a “strong start” in 2023, according to Greenberg.

“While there’s certainly plenty of risk and uncertainty in the operating environment globally – economic and geopolitical, from what we know and can control, ’23 should be a good year in terms of growth and earnings,” he said.

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So, it’s striking that the volume and variety of considerations raised do not obscure the clear-cut underlying message of ‘Managing Risk – Delivering Stability’ – that BIBA is listening to its members. At the launch of the Manifesto, described by BIBA CEO Steve White (pictured left) as “our best yet”, White was joined by Graeme Trudgill (pictured right), executive director at BIBA, and MPs Andrew Griffith (pictured centre, right) and Craig Tracey (pictured centre, left) to discuss its contents – and the renewed spotlight placed on the value of insurance brokers.

The ongoing growth trajectory of insurance brokers

A core takeaway from the Manifesto, and an apt one considering its title, was the insight it gave into the growth journey of brokers. Despite everything the last year has thrown at the industry, Trudgill noted that the broking sector increased its growth by £11 billion – with insurance brokers across all lines leveraging a GWP of £85.8 billion.

MP Craig Tracey, who also serves as chair of the all-party parliamentary group (APPG) on Insurance and Financial Services noted that he always looks forward to the launch of the BIBA Manifesto. Having spent 20 years running his own small brokerage, he said, it’s rewarding to see such a comprehensive breakdown of the key issues facing the insurance market.

“One of the main benefits of the APPG is that even while there are distractions, we can continue to work with groups such as BIBA,” he said. “And over the last 12 months, we’ve carried on that relationship of working together, not least on the Financial Services and Markets Bill. But we also embarked on a virtual tour [which was] a great opportunity for me to get to speak to a number of brokers across the whole of the UK and to hear first-hand the kind of things they were facing and where we could really help.”

Breaking down the challenges facing the broking sector

Region by region, there were individual challenges, Tracey said, but there were also several recurring themes that he was pleased to see were closely reflected in BIBA’s 2023 Manifesto – among them regulatory concerns and challenges around recruitment, which the APPG will take up on behalf of the industry in the months ahead. He highlighted that it was also good to see the emphasis in the Manifesto on financial resilience and the protection of vulnerable customers.

“I think one thing that we learned during the pandemic is that people can become vulnerable at any point,” he said. “And so, it’s never been more important to have a vibrant broking sector, looking after people on the ground… Access to advice and the right insurance products should never be underestimated.

“So, what you brokers do across all our communities, to protect our constituents, particularly those who are vulnerable is greatly appreciated. And I would like to thank you all for the work that you do that often does go under the radar.”

Speaking at the launch, MP Andrew Griffiths, who also serves as the economic secretary to the Treasury, highlighted the value of the broking sector – beyond the traditional value that politicians often discuss in terms of the number of skilled jobs, apprenticeships and contributions to the economy.

The broking sector makes a significant contribution to all those elements, he said, but as somebody who prides himself on understanding and embracing risk as part of the lifeblood of an enterprising economy, he also commends the role of the broker in managing, pricing and creating solutions that help people manage the risks they face.

“That’s the real lifeblood of our economy,” he said, “helping businesses start that would never be able to exist if it wasn’t for your products. And doing that almost alchemistic thing, which is being able to transfer risks between pools of individuals, between different territories, between different classes of risk holders. It’s something we should never take for granted, as we try to strive to create the right regulatory environment where you can do that valuable work.

“We should never take for granted the underlying value of that management of risk function you perform, because it’s not so very far away from here and it’s not so very long ago in time, that societies were not able to transfer those risks. Still, in too many parts of the world, if you are beset by floods, by theft, or by fire – that can set you, your family, your generation back for decades to come.”

The ”magic of the insurance industry”

It is through the “magic of the insurance industry”, Griffiths said, that economies are able to transfer and manage these risks and unlock so many of the benefits that advanced economies and advanced societies rely on and will continue to rely on. So, brokers must take heed not to underplay the core purpose they serve in supporting the societies around them.

Touching on the core theme of the 2023 Manifesto, Trudgill emphasised how brokers have risen to the “growth challenge” posed by recent years. Stability leads to growth, he said, which is why this year’s theme of managing risk, delivering stability is so crucial. Insurance brokers are experts in managing risks and they deliver stability to clients by offering insurance protection against financial loss to protect their balance sheets.

Looking to the future, he said: “We want stability with regulation after a year full of change, and heavy new demands. And we also want stability with the economy and an end to the high levels of inflation, which creates underinsurance risk and puts pressure on claims costs. And we hope we’re in for a period of political stability as well, here in the House.”

What are your thoughts on BIBA’s 2023 Manifesto? Please feel free to share your comments below.

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‘Inclusive economic infrastructure and financial services’

Revealing how the opportunity first came about, Duygun noted it was in October 2022 that she was invited by the Royal Academy of Engineering to join the Frontiers symposium in Addis Ababa, Ethiopia as co-chair for the theme on ‘Inclusive economic infrastructure and financial services’.

“It was a terrific event attended by entrepreneurs, academics, and policymakers with a common interest in promoting inclusive economies in developing countries,” she said. “It was at this event that I met with our project partners Jack Farren, as well as Stephen Waiswa from the United Nations Capital Development Fund (UNCDF).”

As the co-director of INFINITY, the University of Nottingham Inclusive Financial Technology Hub, dedication to promoting financial inclusion is critical to Duygun, and so, she registered the opportunity to utilise the combined strengths of the organisations to develop a product potentially capable of yielding a significant positive impact.

“Fortunately,” she said, “the Royal Academy of Engineering offers seed funding opportunities in support of developing such projects under the Frontiers programme. We feel privileged to have been awarded funding for our research project from such a prestigious funder.”

What is this research project looking to achieve?

Outlining the key ambitions of the project, Farren – one of Insurance Business’s Rising Stars of 2022 – noted that its main objective is to research the effectiveness of both manual and digital delivery methods of financial and insurance education to coffee farmers in the Rwenzori region of Uganda. Rural Inclusion has developed an offline mobile app called Ostrii, he said, which is used by community agents of partner organisations to deliver training to farming communities through the use of animation in local languages.

He added: “Our local partner in the project, Agri Evolve, a coffee company based in the Rwenzori mountains of Uganda, will educate target groups through three methods which will be tested for their effectiveness: Traditional workshops delivered by a community facilitator; Ostrii delivered by a community facilitator; and Ostrii directly accessed by groups.”

The project contains two stages, Duygun said, and as it is currently at the initial stage, the priority is to build a solid foundation for the large-scale analysis implemented at the later stage of the project. This includes partnership-building, routine establishment and familiarisation, and a pilot research project to validate a scalable solution to educate farmers in vulnerable communities in Uganda.

What are the next steps for the teams?

“Moving forward,” he said, “we would like to expand the research project to other countries in Africa. Countries across Africa present different characteristics and face unique challenges. The pilot project in Uganda will provide a firm knowledge base of the best financial inclusion practices that we can serve to formulate comprehensive solutions to promote financial inclusion, we still need to conduct a larger-scale analysis that will take into account a greater range of factors affecting financial inclusion in Africa.”

Meanwhile, for the Ostrii platform itself, Farren said, this project is a significant milestone in its journey, and he believes the results from this project will provide key learnings for Rural Inclusion to improve the development of its solution. Ostrii is currently being used in four countries in Africa and Latin America, and projects such as this, which are researching the effectiveness of the solution, are crucial.

Interest in digital education around financial literacy is certainly increasing, Duygun said, and she believes this is being driven by two major factors. Firstly, policymakers around the world are increasingly seeing the importance of financial education in promoting productivity, addressing financial inequality, and improving the resilience of individuals’ financial health and henceforth the overall economy.

Financial education as a UN SDG

“As such,” she said, “financial education is not only one of the major focuses of the UN Sustainable Development Goals (SDGs) but also among the top issues on governments’ agendas. The second reason is digitalisation. In today’s digitalised society, financial services are becoming much more accessible to many people while also becoming too complex to use for some. The proliferation of mobile services, for instance, enables millions to easily use financial services (e.g., saving, investing and borrowing) with their phones anytime anywhere.”

This trend is being further accelerated by the COVID-19 pandemic, Duygun noted, as many studies suggest that the number of digital service users surged over the past three years. Although digitalisation is a major trend explaining the proliferation and democratization of financial services, online services also increase the risk exposure of individuals who have yet to be equipped with sufficient knowledge to use such tools.

“This opens room for fraud and scams, not addressing but further exacerbating the economic challenges faced by many families,” she said. “Hence, the tension between digitalisation and financial security is another main factor driving the surge of interest in financial education.”

Adding to this, Farren highlighted that while the majority of financial education programmes in Africa are delivered through traditional means, the team at Rural Inclusion understands the importance of developing curriculums that are scalable across countries, while ensuring content that they are relevant and enjoyable to those with a low understanding of financial products and services. This is why the organisation focuses on developing content through animation in local languages, she said, and it’s why it’s seeing a rising demand for such solutions.

Why academics, practitioners, and policymakers are key financial education stakeholders

Having the right partnership in place to facilitate greater awareness of what can be done to improve financial literacy is extremely important. Academics, practitioners, and policymakers are key stakeholders in increasing financial literacy, Duygun said, and each group of stakeholders has unique knowledge and resources that can be deployed to promote financial education.

“Practitioners have first-hand experience of dealing with end users of financial products and services,” she highlighted. “Academics have in-depth knowledge and skills in creating and utilising suitable analytical tools that can help generate impactful scientific insights. Policymakers have access to a wealth of data at the macro-level and have the means to disseminate insights and convert them into practical actions that can benefit society. Combining the respective strengths of these various stakeholders creates significant synergies with tremendous potential in improving financial literacy.”

Such projects represent an enormous opportunity to move the dial on critical social initiatives. For Duygun, the potential to come up with comprehensive solutions to effectively promote financial education in Africa, and equip farmers with essential financial skills to mitigate the risks induced by climate change is ground-breaking.

“Beyond that,” she said, “I believe that our project is a solid foundation upon which to conduct future research on this issue, encouraging new creative research collaborations between a wide range of partners interested in tackling socially and economically significant challenges in Africa, including but not limited to financial education.”

What are your thoughts on the role of insurers in supporting financial literacy? Please feel free to share your comments below.

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Travelers Europe has announced that Peter McConnell (pictured) has been named chief financial officer.

As the new CFO, McConnell succeeds Mike Gent. He will oversee the financial management of Travelers’ European operations and will also take a position on the UK subsidiary’s board of directors – subject to regulatory approval – a release said. He will report to Travelers Europe CEO Matthew Wilson.

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“The increased capacity had softened the market and created an imbalance between demand and supply for reinsurance,” Lot said. “Reinsurers in general, though, haven’t been able to cover their cost of capital, let alone satisfy both shareholders’ expectations and generate new capital to support clients’ needs.”

Mitchell added that terms and conditions had “dramatically deteriorated” over the past decade, with reinsurance structures covering more and more for earnings volatility rather than capital preservation.

“Contract wordings had become broader and have stretched the boundaries of what was intended by reinsurers, as was shown by the disagreements over Covid business interruption (BI) claims,” Mitchell said. “At the same time, the risk environment has become more challenging with globalisation and increased litigation. Wordings need to keep up with these developments.”

Mitchell noted that the financial markets had hesitated to provide new capacity into cat bonds, sidecars, and other alternative capital instruments this year, which spelt disaster – and limited retrocession availability – when coupled with the rising interest rates. To Mitchell’s mind, this was what ultimately caused the tardiness and tension unique to the January 1, 2023 renewal period.

Lot said that Swiss Re’s strategy to support its clients and brokers through the fraught renewal process had been “to be predictable and consistent”. Swiss Re quoted early – generally before Thanksgiving – with meaningful lead shares that helped its clients manage their own stakeholder and board expectations well before the renewal period.

Asked whether Covid losses continued to be a key talking point at this year’s renewals – as it had been in 2020 and 2021 – Mitchell answered in the affirmative, albeit for a different reason than in previous renewal periods.

“Covid was a talking point this year, but more from the perspective of concluding the ongoing discussions about BI claims with partners,” he said. “This really boiled down to a major question on how to accumulate losses.”

Mitchell added that the pandemic had provided the reinsurance market with vital lessons on how reinsurers factored in previously unthinkable scenarios in order to make the world more resilient. It also made reinsurers realise how much clarification their contract wordings needed so that all parties were equally clear on what reinsurance policies did and did not cover.

“Key topics included strikes, riots and civil commotion, and non-damage business interruption, specifically around critical infrastructure,” Mitchell said.

“A number of challenging themes around what and how risks are covered by reinsurance contracts [remains],” he added. “For the industry to attract enough new capital to meet significant demand growth, we need to continue to work to address systemic risk themes.”

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The global broker’s broking segment saw 2022 net earnings of US$1.2 billion (adjusted: US$1.8 billion), an increase from the previous year’s US$1 billion. In the risk management segment, net earnings were US$115.8 million (adjusted: US$120 million), again up on 2021’s $89.5 million.

The net loss in its corporate segment grew from US$151.1 million (adjusted: US$56.8 million loss) in 2021 to US$201.6 million (adjusted: US$221.1 million loss) in 2022.

Revenues before reimbursements for the full year across the business were US$8.4 billion, an increase on 2021’s US$8 billion (adjusted: US$7.8 billion)

AJ Gallagher fourth quarter results

Reported company-wide net earnings for Q4 were US$135.5 million (adjusted: US$331.9 million), representing a boost on Q4 2021’s US$120.9 million (adjusted: US$290.3 million).

Revenues before reimbursements were US$2 billion, an increase from US$1.9 billion in Q4 2021.

“We had a terrific fourth quarter, to cap off another excellent year of financial performance,” said J. Patrick Gallagher, Jr, Gallagher chairman, president and CEO.

“During the quarter, our core brokerage and risk management segments combined to post 16% growth in revenue, of which 11.7% was organic revenue growth.”

Gallagher closed 36 acquisitions in 2022, with 17 of these coming in Q4, the business said in an earnings release.

“We completed 17 new tuck-in mergers in the quarter and our newly acquired reinsurance brokerage operations finished the year ahead of our pro forma revenue and EBITDAC
estimate,” Pat Gallagher said.

Premiums will continue to rise, the broking CEO predicted.

“Global primary P/C renewal premium increases were more than 9% in the quarter, consistent with the first three quarters of 2022,” said Pat Gallagher.

“Our primary carrier partners in many cases are facing higher reinsurance costs and seeing rising loss costs trends, so we believe there is good reason to expect continued premium increases.”

Meanwhile, positive policy endorsements and other mid-term policy adjustments were higher year over year for the seventh quarter in a row, which Pat Gallagher said was “indicative of the underlying strength of our P&C clients’ businesses”.

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The global broker’s broking segment saw 2022 net earnings of US$1.2 billion (adjusted: US$1.8 billion), an increase from the previous year’s US$1 billion. In the risk management segment, net earnings were US$115.8 million (adjusted: US$120 million), again up on 2021’s $89.5 million.

The net loss in its corporate segment grew from US$151.1 million (adjusted: US$56.8 million loss) in 2021 to US$201.6 million (adjusted: US$221.1 million loss) in 2022.

Revenues before reimbursements for the full year across the business were US$8.4 billion, an increase on 2021’s US$8 billion (adjusted: US$7.8 billion)

AJ Gallagher fourth quarter results

Reported company-wide net earnings for Q4 were US$135.5 million (adjusted: US$331.9 million), representing a boost on Q4 2021’s US$120.9 million (adjusted: US$290.3 million).

Revenues before reimbursements were US$2 billion, an increase from US$1.9 billion in Q4 2021.

“We had a terrific fourth quarter, to cap off another excellent year of financial performance,” said J. Patrick Gallagher, Jr, Gallagher chairman, president and CEO.

“During the quarter, our core brokerage and risk management segments combined to post 16% growth in revenue, of which 11.7% was organic revenue growth.”

Gallagher closed 36 acquisitions in 2022, with 17 of these coming in Q4, the business said in an earnings release.

“We completed 17 new tuck-in mergers in the quarter and our newly acquired reinsurance brokerage operations finished the year ahead of our pro forma revenue and EBITDAC
estimate,” Pat Gallagher said.

Premiums will continue to rise, the broking CEO predicted.

“Global primary P/C renewal premium increases were more than 9% in the quarter, consistent with the first three quarters of 2022,” said Pat Gallagher.

“Our primary carrier partners in many cases are facing higher reinsurance costs and seeing rising loss costs trends, so we believe there is good reason to expect continued premium increases.”

Meanwhile, positive policy endorsements and other mid-term policy adjustments were higher year over year for the seventh quarter in a row, which Pat Gallagher said was “indicative of the underlying strength of our P&C clients’ businesses”.

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However, the FCA also found that some firms are further behind in their planning, indicating a risk that they may struggle to apply the Duty effectively once the rules come into force.

The Consumer Duty will bring about a step change in the way #financialservices firms treat their customers and we welcome the work firms are doing to implement it. https://t.co/IEcFefsB8F

— Financial Conduct Authority (@TheFCA) January 25, 2023

“The Consumer Duty will bring about a step change in the way financial services firms treat their customers, and we welcome the work firms are doing to implement it,” Sheldon Mills, executive director of consumers and competition at the Financial Conduct Authority, said.

“Given the scale of the reform, we recognise that some firms need to make significant changes. For firms which are further behind in making the necessary changes, there is time to put that right and for them to show they are acting in the spirit of the new Duty.

“Firms will also see the benefits of the Duty, with increased trust in the sector, more flexibility to innovate, and in time, fewer rule changes.”

Over the remaining six months, the FCA, in its review of the implementation plans, said firms must focus on:

• Prioritising, with a focus on the areas that will make the biggest impact on outcomes for consumers
• Making the changes needed so consumers receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it
• Working with other firms so that they can share information and work closely with commercial partners

The Consumer Duty is a vital part of the FCA’s three-year strategy as it is expected to help the regulator set and test higher standards, and reduce and prevent serious harm. Parliament has given the FCA a mandate to introduce the Duty through the Financial Services Act 2021.

The rules come into force on July 31, 2023 for new and existing products or services that are open to sale or renewal, and on July 31, 2024 for closed products or services.

Mortgage executives react to the FCA’s review

Vikki Jefferies, proposition director at PRIMIS Mortgage Network, said it was great to see positive findings from the FCA’s review of Consumer Duty implementation plans.

“It is important to note, that the new Consumer Duty regulations require a combined effort from lenders, networks and providers, each reliant on one another, to ensure strong positive outcomes for consumers,” she added. “With this in mind, the next six months will be crucial for firms to work with their industry partners to iron out any concerns they may have.

“For brokers in a network, such as PRIMIS, regulatory support is provided on an ongoing basis and networks will be interpreting consumer duty requirements and adapting processes and procedures to meet the required outcomes.”

Stuart Wilson, chairman at Air Club, said that Consumer Duty reforms would reshape how advisers in the later life market do business, with their own research suggesting that 86% of advisers believe they will need to change their operations to comply with the new regulations.

“At Air, we are committed to supporting advisers in the later life lending sector by providing tools and information to help equip advisers in their journey to Consumer Duty implementation,” he said.

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This year – our Manifesto theme is Managing Risk – Delivering Stability, chosen because risk management is what brokers do, and we certainly want stability in regulation, stability in the economy and in inflation and not to mention stability with Government in these challenging times.

Insurance plays an important part in the economic well-being and stability of our society for both individuals and businesses too. It protects a firm’s balance sheet, enabling investment and growth.

The Manifesto has fantastic case studies that showcase the vital role brokers play. Legendary broadcaster ‘Whispering’ Bob Harris needing travel insurance, an inspirational example from charity Myra’s Wells using our Find Insurance Service, and one of our member brokers, who could source travel insurance for their teams to go and drill wells to supply fresh water for local communities in Burkina Faso, as well as Rugged Nature a men’s cosmetics firm which struggled to find insurance after changing their operations – until they found a BIBA broker that is! We have a great story to tell.

So what are BIBA’s key agenda items and broker issues for 2023?

Firstly new research from Aon, and by Premium Credit, highlighted the risks CEOs are most concerned about and gave insight on insurance buying choices. BIBA, with London Economics, conducted a new study which shows that the average regulatory costs (direct and indirect combined) are equal to 8.1% of insurance intermediation fees and commissions. Yes, we did a double take when we saw that and will do our level best to make it more proportionate.

We will be working on issues around the cost-of-living crisis, the hard market, underwriting considerations, flood, inflationary pressures and how that affects underinsurance and claims, careers and apprenticeships, overburdensome regulation, ESG, cyber, service, IPT, financial inclusion, motor, the coming Protect Duty and the review of the Personal Injury Discount Rate. There are also the big ticket issues that continue their progress including:

• The ‘once in a generation’ opportunity in the Financial Services and Markets Bill, to put into statute a new growth and competitiveness objective on regulators – finally holding the FCA’s feet to the fire.
• Working with the FCA to provide brokers with a smoother sales journey through much needed changes to the fair value assessments process.
• Continuing the positive progress made with the FCA on FSCS fee reforms where we are examining the funding class thresholds. We believe the ‘polluter should pay’ and have put forward some alternative proposals ahead of a welcome next level of consultation. 

It makes a pleasing change to have a Manifesto that does not have to focus on COVID or Brexit!

We will continue to burn the midnight oil to ensure that transparency and more insurance solutions are brought forward to leaseholders residing in multi-occupancy buildings with cladding. We met the Housing Safety Minister recently, and good progress is being made.

We are perennially grateful to our members who are so open about feeding their issues into us and to key insurers and other stakeholders and bodies mentioned in the Manifesto for their support on the issues raised.

I hope you will read our 2023 Manifesto, and if anything inside strikes a chord, engage with the BIBA team and perhaps consider joining a BIBA committee (we have lots) to help the cause of broking.

We will be taking the Manifesto with us to discuss these issues, with those of all political persuasions in Westminster, in the devolved administrations, to regulators, party conferences, charities, journalists and will do our level best to progress as many of these points as far as we can get them.

I’m looking forward to working with everyone for the year ahead in what should be another exciting year.

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British holidays group and insurer Saga Plc has confirmed discussions to sell Acromas Insurance Co, the underwriting unit of its wider insurance division, to help pay down its debt. The group declined to give details on the potential buyers or selling price.

Saga’s insurance division, the largest business of the group, has been grappling with rising claims, which led to a half-year loss and a warning on full-year earnings in September. According to Reuters, the company’s net debt was £721.3 million as of July 31, 2022.

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