Insurance news

Leading trade credit insurer Allianz Trade has announced that Aylin Somersan Coqui (pictured) will be stepping up as CEO and chairperson of the board of management of Allianz Trade.

Somersan Coqui, who has served as group chief risk officer of Allianz SE since 2020, will take over from Clarisse Kopff, who will be pursuing a new leadership role outside of Allianz as of November 30, 2022. The change is subject to regulatory approval.

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“Even in the face of challenging weather, we generated meaningful profit with core income for the quarter,” said Alan Schnitzer, chairman and CEO of Travelers, in a statement. “These results benefited from record net earned premiums of US$8.6 billion, up 10% compared to the prior year period, and a solid underlying combined ratio of 92.5%.

“Underwriting income in our commercial businesses was excellent, driven by strong net earned premiums and an aggregate underlying combined ratio for business insurance and bond & specialty insurance of 88.0%.

“Our high-quality investment portfolio generated solid after-tax net investment income of US$505 million despite the significant downturn in the broader equity markets. These results, along with our strong balance sheet, enabled us to return US$722 million of excess capital to our shareholders this quarter, including US$501 million of share repurchases.”

The New York-based insurer is often seen as a bellwether for the industry as it typically reports earnings before its peers.

Hurricanes Ian and Fiona, among a slew of storms that hit North America this year, have driven Travelers’ pre-tax catastrophe losses to US$512 million from US$501 million in 2021.

According to risk modelling firm Verisk, the insurance industry faces up to US$57 billion in losses from Hurricane Ian’s onslaught in Florida and South Carolina.

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Since joining the FCA in 2015, Steward has led the delivery of some of the FCA’s most complex, high-profile, and precedent-setting enforcement cases, with many notable successes against major global financial institutions and individuals.

He also led the conduct regulator’s listing authority and oversight of the UK’s publicly traded markets, a role in which he developed the FCA’s data-led approach to market oversight. Steward has also been at the forefront of the FCA’s anti-scam marketing campaign Scamsmart.

“Mark has brought his formidable experience as a regulator and as a litigator to the FCA, delivering significant enforcement cases across a broad spectrum, as well as the FCA’s data-led approach to market oversight,” Nikhil Rathi, chief executive at the Financial Conduct Authority, said. “That enormous contribution is a result of Mark’s abiding belief in fairness, that markets must be clean if the economy is to thrive and in doing the right thing on behalf of consumers.

Rathi added that Steward has shown that the FCA is willing to take on challenging cases, and will use the full extent of its powers to deliver results that have a real impact for the markets it oversees and for those who rely on them.

“I am hugely grateful for Mark’s leadership, dedication and expertise and wish him the very best for the future,” he said.

Steward, for his part, stated it had been a privilege to “serve the FCA throughout many challenges over the last seven years and to leave behind such a strong team for the future.”

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According to court documents seen by Insurance Business, Stonegate’s insurers don’t dispute that the policies should have paid out, but contend their liability is limited to £17.5 million. The insurers had already paid out £14.5 million of this total, including £12 million for additional increased costs of working. The court began hearing arguments on the case in June this year.

Commenting on today’s outcome which saw insurers win the battle to deduct COVID furlough support from payouts, MS Amlin said the judgement saw the court ‘fundamentally’ support insurers’ positions. The insurer noted that the case considered, among other things, the extent to which losses were caused by cases of COVID-19 and government action within the policy period as well as whether insurers were entitled to credit for furlough payments received by Stonegate.

MS Amlin stated that: “On all of these issues, the court has found almost entirely in favour of insurers.”

Johan Slabbert, chief executive officer, MS Amlin Underwriting Limited said the ruling “brings some genuine clarity to a very complex business interruption case.” He hailed the “positive outcome” for the insurance industry, noting that the ruling will have an enormous financial impact on insurers throughout the UK.

“As an insurer upon whom thousands of businesses rely for support, we have always taken our responsibilities extremely seriously,” Slabbert said in a statement. “COVID-19 created unprecedented challenges for businesses across the country, and our commitment to helping our policyholders remains as strong as ever.”

However, a spokesperson from the Stonegate Group said the outcome of the case was “far from conclusive” and that it intends to appeal the court’s decision, saying the commercial court’s interpretation on several key issues is “out of step” with the approach taken by the Supreme Court in a Financial Conduct Authority-brought test case.

A landmark ruling by the high court in January found that many business-interruption policies should have provided cover against the financial losses from the pandemic. The FCA brought the test case on behalf of 370,000 affected policyholders.

Stonegate operates some 760 pubs, bars, and restaurants across the UK, including popular chains such as Slug and Lettuce and Yates’s.

“While our recovery from the pandemic has been strong, we cannot ignore the significant disruption caused during the last two years. Along with most businesses in the UK, we are now grappling with inflationary challenges and a cost-of-living crisis for the UK consumer. In the circumstances, we, and other businesses, are entitled to look to our insurers to provide the cover promised under our policy,” the Stonegate spokesperson told Insurance Business.

Greggs vs Zurich Insurance

Meanwhile, a spokesperson for Charles Russell Speechlys which acted for Greggs in the landmark BI trial said “today’s judgment substantially accepts Greggs’ primary case for payment of business interruption and related losses caused by Covid-19 and its consequences.”

Insurers’ initial argument that there was only one limit available for COVID BI losses, entitling Greggs to only one limit of £2.5 million for all of its COVID BI losses has been “firmly rejected”, the firm said.

For its part, Greggs argued that it was entitled to access a separate limit of £2.5 million each time the Westminster and devolved governments in the UK adopted a major COVID restriction measure affecting its business, meaning that there were multiple such restrictions and corresponding £2.5 million limits.

Charles Russell Speechlys said the judge accepted the “main thrust” of Greggs’ primary case and ruled that there was a single occurrence at the outset (from March 2020 until May 2020) followed by separate occurrences in each jurisdiction within the UK as the level of major restrictions in place was adjusted from time to time over the course of 2020 and also separate occurrences within each jurisdiction where there were local lockdowns or other restrictions.

The judge also held that those regulations which merely continued existing restrictions or made trivial changes did not provide additional £2.5 million limits.

Charles Russell Speechlys Partner, Manoj Vaghela, commented: “This outcome vindicates Greggs commencing proceedings and has wider implications for all businesses that purchased the Resilience Insurance policies. Insurers’ argument that there was only one limit available for COVID business interruption losses has been firmly rejected. “

Subject to appeal, Charles Russell Speechlys said that the case of ‘Greggs plc v Zurich Insurance plc’ (Case No: CL-2021-000622) will now proceed to phase two, in which insurers and Greggs will calculate the value of the business interruption loss recoverable under the insurance policy.

Various Eateries Trading Ltd vs. Allianz Insurance Plc

For its part, Various Eateries (VE) argued for a ‘per premise’ case in its £16 million claim against Allianz.

In his ruling, the Honourable Mr Justice Butcher laid out the boundaries of the claim with VE claiming that its loss was caused by numerous ‘Covered Events’ which fall to be indemnified under one or all of what were called the ‘Disease Clause’. VE claimed that all its pandemic-related loss is recoverable until the end of the 12- or 24-month Maximum Indemnity Period (‘MIP’), as applicable.

Meanwhile, Allianz’s case was that VE’s business interruption loss (‘BIL’), additional increased costs of working (or ‘AICW’) and claims preparation costs which it is entitled to recover under the policy, were limited to £2.5 million, £400,000 and £175,000 respectively. Allianz said it had paid the £2.5 million and would make payments in respect of AICW and Claims Preparation Costs subject to proof, but had not yet done so in full.

Allianz’s primary case was not one which had a counterpart in Stonegate v MS Amlin, or in Greggs v Zurich. It was based on the proposition that the Divisional Court in the FCA Test Case, in relation to ‘RSA 4’ which was a policy on the Marsh Resilience Form, had rejected a submission that the Disease Clause provided cover only for ‘events’, and extended to providing cover for ‘states of affairs’. Butcher rejected Allianz’s primary case on this issue.

He added that: “Allianz also adopted the case made by Zurich in the Greggs v Zurich action that the policy was only ‘triggered’ by a covered event when there had been interruption or interference with VE’s business as a whole and therefore that there was only one ‘trigger’ of the Disease Clause by reason of the spread of the pandemic.”

He noted that he had given his reasons for rejecting that argument in paragraphs [33-40] of his judgement in Greggs vs Zurich. Meanwhile, he noted that in relation to the Enforced Closure Clause, he considers that the reasoning in his judgement in Stonegate vs MS Amlin [paragraphs 67-69] is applicable.

Summing up the rulings in a LinkedIn message, the law firm 2 Temple Gardens stated:

“The Commercial Court has today handed down judgement in three cases based on the popular Marsh Resilience wording: Various Eateries v Allianz, Stonegate v Amlin and Greggs v Zurich. Butcher J held that the BI losses aggregate around major government action. The judge also adopted a narrower approach to causation of losses than advocated for by policyholders, and further concluded that credit needed to be given by policyholders for furlough payments.”

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Milliner has 25 years of experience in the claims industry, including work as AXA UK’s continuous improvement business manager and as a senior insurance officer in local government. As Kennedys IQ’s account manager, she will focus on promoting the company’s products and enhancing customer experience.

Lawyers Harger and Cunningham will bring their respective work experience from DARAG Group and Linklaters to their new roles at Kennedys IQ, where they will work on Kennedys’ latest product, Reputation Advisor.

The £1.2m project, partly funded by Innovate UK, assesses organisations’ real-time reputational risk in relation to their environmental, social, and governance (ESG) practices by analysing content from corporate documents to publicly available information. Risk Advisor will then assist in underwriting policies, calculating premiums, and predicting potential triggers for claims.

“Recent years have seen a significant, if not seismic shift towards more responsible, sustainable business that extends not just to clients but to investors too,” Kennedys IQ head of product and innovation director Karim Derrick said. “Increasingly, they are unwilling to part with capital if a company’s values don’t align with their own. Reputation Advisor will give them that reassurance, backed up by the most robust and transparent data.”

Reputation Advisor is the fifth Kennedys initiative to be awarded funding from Innovate UK.

“We are proud to be at the forefront of innovation in the market and are delighted to grow our teams with the addition of such talented and experienced new colleagues,” said Kennedys partner and global head of client innovation Richard West. “I’d like to welcome Joe, Alissa, and Melanie to the Kennedys’ family.”

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Five major Greek shipping firms on the database were spotlighted by the Ukrainian government which claimed in its letter that in spring alone, the firms had transported 19 million tons of Russian oil worth $16 billion – a third of all the country’s oil exports over that period and “equal to the cost of launching 2,350 Kalibr cruise missiles”.

The Guardian noted that the latest figures “suggest the total value of oil transported by the Greek shippers now stands at $32 billion.”

The IGP&I responded nine days later to the agency. In a letter, seen by The Guardian, Paul Jennings, chair of the IGP&I, offered “sympathy” over Ukraine’s plight but said Greek shippers were acting lawfully.

“To the best of our knowledge, the ship-owning companies you have mentioned in your letter are engaged in trade that has, to-date, remained lawful under European Union, UK and US law,” Jennings wrote.

“Specifically, under the sixth EU sanctions package there are exemptions to the prohibitions so as to permit some Russian oil cargoes to be transported into the EU and there is also no general prohibition on the transport of Russian oil cargoes to third countries.”

Officials in Kyiv have contrasted this response to a similar request from the Ukrainian agency to the London Stock Exchange Group (LSEG), which did lead to action.

In a letter on August 31 to the agency, Phil Cotter, the head of the data and analytics division at the LSEG, offered “support for the Ukrainian people through this difficult time” and confirmed that “the World-Check database does cover the Ukraine national agency on corruption prevention [by flagging] ‘international sponsors of war’ entity names”.

This response saw each of the Greek shipping companies transporting Russian oil being tagged by the LSEG with a notice on their database that they are on the Ukrainian “international sponsors of war” register and are allegedly “financing terrorism”.

Meanwhile, The Guardian reported that a letter dated September 1 to the IGP&I shows the Ukrainian government agency made a further appeal to the insurers’ body to take responsibility for avoiding the financing of the Kremlin’s invasion.

Oleksandr Novikov, the head of the agency, wrote: “We do not dispute the legality of their actions and their compliance with the current international sanctions regime. Otherwise, the carriers in question would have been placed on the sanctions list right away (so far they are in the International Sponsors of War category, which is not the same).

“Yet, we believe that IGP&I Clubs do have a say in the matter.”

Novikov asked the IGP&I Clubs to send “a message discouraging the members from doing business with Russians or shipping Russian oil”, or otherwise to at least follow a precedent set in 2020 when it had issued a circular advising about the increasing sanctions pressure faced by companies cooperating with the Russian Nord Stream 2 gas pipe.

Jennings reportedly replied that it was likely such a circular would be issued in the future but that discussions over watering down an EU prohibition on the export of Russian oil would probably keep the trade legal.

The Guardian noted that “a subsequent circular issued by the IGP&I Clubs on October 11, five months after the relevant EU sanctions came into force, advised members there was an “extended wind-down period for insurance and reinsurance relating to the transport of Russian products … until February 5, 2023”.”

Officials in the Ukrainian government said that while the LSEG had “found a way to help”, it appeared that the IGP&I Clubs had been “looking for a reason to stay apart” and that its advice would merely enable further transports of oil.

The Guardian highlighted that Novikov said: “Greek shipowners are the first to blame for undermining economic sanctions by moving Russian oil and profiting from the shipment, but they cannot be the only ones worthy of blame.

“The companies – some of them non-profits that classify, register, and insure ships – as well as other actors who appear reluctant to take action, deserve blame too.

“It is very disappointing when the debate on transportation is reframed as one of legality. It is not just about hard-law regulations and sanctions any more; there is a need for a great global unity and there is a lot that can be done by private actors, not just governments.”

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Truss has been facing increasing pressure from within her party to reconsider her economic plans, which included around £43 billion worth of unfunded tax cuts. Her mini budget, delivered by Kwarteng himself, started a chain of events that triggered mortgage market chaos the following week. The pound hit an all-time low, and a number of lenders pulled their mortgage products from the market. The Bank of England then decided to buy government bonds to “restore orderly market conditions” and prevent a “material risk to UK financial stability.”

“Amid the wait for the wheels to screech on another U-turn, the door to no. 11 Downing Street is already groaning on its hinges, with Kwasi Kwarteng exiting the Treasury,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, commented. “The finger of government blame was pointing straight at the Chancellor as soon as he was ordered to dash back to from the US a day early, going straight from arrivals to a humiliating departure.

“His promise of a medium-term fiscal plan to be delivered on Halloween did not provide enough reassurance that the government was in control of economic policy and investors showed signs of taking fright again. But Liz Truss is still facing a rocky horror show of her own making, given that the UK is still hurtling back into a 1970s time warp.

“Even if this embarrassing reshuffle is accompanied with a fresh reversal of policy, as far as the credibility of the government is concerned, significant damage has been done. There will be a long way to go and significant bridge building ahead before the UK risk premium disappears.”

Meanwhile, over at our sister website Mortgage Introducer, property industry experts are saying that the Truss tenure as prime minister is now clearly in trouble.

“This is officially now a government without a mandate, without a plan and without a clue,” Andrew Montlake, managing director of mortgage broker Coreco, remarked. “The Conservatives know that Truss will never be able to turn people around after this and that whenever an election is called, they will be annihilated.

“Their only chance is to install a Sunak and Mordaunt double-act to restore some sense of calm maturity to proceedings to see the country through hard times. This may not be enough, though, as the sense of outrage among the British people will linger for a long time.”

For Lewis Shaw, founder of Mansfield-based Shaw Financial Services, Truss is “a pound shop Thatcher with no mandate from the country.”

“We need a general election now,” he said. “We’re scraping the barrel so hard we’re through the bottom. Just think of the poor joiners whose job it is to get the spur marks out of the wood-panelling in Downing Street.

“The current administration has no ideas or leadership and has torpedoed our economy. If that’s not a good enough reason to turf them out, I don’t know what is.”

Joe Garner, managing director at London-based property developer NewPlace, said the Truss administration has been in “absolute shambles.”

“Truss has no mandate, no control and absolutely no idea how to govern,” he added. “A general election should be called immediately because even the most blinkered Tory voter can see this is doomed to fail.

“In the meantime, it might be an idea to pull Hammond or Osborne out of retirement as a caretaker to at least add some credibility and stability. Truss isn’t fit to govern, has no mandate to govern and unless this government calls a general election, its credibility and that of the UK will continue to be shot to bits.”

UPDATE

According to a BBC report, Jeremy Hunt is set to be installed as the new chancellor imminently.

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With the latest iteration of the fabulous Dive In Festival in full swing – and also advanced plans for running our second week-long course for STEM students – thoughts have been very much on culture at LIIBA these last couple of weeks. And those thoughts have been emphasised by our enthusiastic contribution to the London Market Group’s relaunch of its London Insurance Life campaign. So, it feels a good time to reflect on the work we have done and the work that still needs to be done to build the inclusive market to which we all aspire.

Our STEM course this year, remarkably but very encouragingly seems to have been pretty much fully subscribed before we properly advertised it. Once again, we will bring around 40 school students from under-privileged backgrounds in for five mornings in their half-term week. They will be taken through our industry’s efforts to help clients meet their Environmental, Social and Governance (ESG) challenges – providing specialist risk management consultancy services to help corporations identify and mitigate threats to the businesses which may or may not include the purchase of insurance.  Experts from across the market will talk them through how their job will deliver the right outcome for clients. And at the end, the delegates will get to advise a client. It is an opportunity to showcase the wide range of roles people can find in our industry – a secret we keep depressingly well hidden.

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Alex Lay, CEO of Munich Re Specialty Insurance (UK) Limited, joins IBTV to delve into the high-net-worth market. He looks at how it has developed in recent times, the key trends and what is likely to change over the next 12 months.

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As the proverb goes, the best time to plant a tree is 20 years ago and the second best time is now. So those insurance businesses which planted the foundations of a strong cyber insurance proposition some decades ago are now seeing those roots take hold and flower as cyber risk takes its place at the top of the agenda for C-suite executives across every region and industry.

Find out more: Discover the full range of CFC’s cyber insurance services today

Discussing the current lay of the cyber insurance land and the changing tide of public opinion on cyber insurance solutions, Andrew Marvin (pictured above), chair of Gallagher’s cyber strategy group and Jim Dixon (pictured below), senior cyber underwriter, UK, at CFC highlighted what they are seeing in the market. From discussions with insureds, Marvin said, the biggest risk they are seeing is the ransom piece, largely because it represents such a broad threat to their businesses.  

“That could be business impact caused by encryption, or the exfiltration of data and that data being used for blackmail, or poor PR,” he said. “Or it could be from a manufacturing point of view, with even some smaller manufacturers are starting to see this – that they can’t manufacture because their kit might be controlled by computers, or they can manufacture but they don’t know the logistics of where that’s going, who needs it etc.”

An essential element of Marvin’s role is to work actively with insurers and insureds alike to promote education and knowledge around cyber risk. He highlighted the changing attitude of businesses towards cyber risk. Going back just a few years, he said, most businesses of any size didn’t really understand this risk or their own exposures to the peril but certainly, in the last two years, C-suite executives, in particular, have gained significant insight into the operational impacts of cyber risk.

This is in large part due to the attention paid to cyber incidents by the mainstream press, with every week seemingly bringing new news of a major cyber attack. And it’s conflating down to smaller businesses, he said, which is reflected in the questions now being asked of brokers regarding cyber risk.

“That real increase in awareness of the exposure they’re facing, particularly on the larger end of things, translates nicely across to us as the insurance providers,” Dixon said. “Because it gives us a lot of headroom and the opportunity to field the concerns these businesses have by giving them the protection they need.”

Read more: CFC Response on resetting the dial on truly proactive cyber solutions

As to how CFC is seeing the concerns voiced by businesses translate into notifications and claims, he highlighted that the team is seeing that threat actors are still focused on making money as quickly and easily as possible – with fund transfer fraud and ransomware key areas of focus. But while the end goal is always the same, he said, what is constantly changing is the tactics and procedures that threat actors are using to initiate those attacks.

“That is being reflected in the claims and notifications that we see, which is why we try to focus on staying ahead of them to actually try and reduce the claims and notifications coming through,” he said. “We can look at our claims data and how it changes. And by spotting these trends and specific tactics and procedures, we can use that intel to predict their behaviour on other businesses, and then get ahead of them to actually work with our insureds to reduce those notifications coming through in the first place.”

Looking across the UK market, Marvin noted the increasing penetration rates in existing cyber books, which, within Gallagher, he credits to the broker’s recognition of and investment in knowledge-sharing and education around cyber risk. Creating a holistic overview of a client’s risk profile is vital, he said, and with this in mind, Gallagher has fully brought into this concept of proactive cyber solutions aimed at reducing losses.

“When we talk to our clients, yes it’s about them reducing their risk but it’s also about us helping them reduce their risk,” he said. “We have a 16-strong risk management team who do nothing but help their clients reduce their cyber exposure – whether that be understanding the risk with something like a full penetration test, or bespoke staff training… And staff training and education will become in the future, and to be fair it’s the case now too, de rigueur.”

While getting stronger, Marvin said, there is no doubt that the insurance industry needs to do a better job of educating and informing clients – particularly when it comes to acronym-heavy risk controls and intel. In an effort to combat this, both CFC and Gallagher have produced glossaries of terms to support insureds and prospects in navigating the market.

Looking at the uptake of cyber insurance across the UK, Dixon noted that, particularly among SMEs, there does remain a real gap in the understanding of the exposure that they face, and he reinforced Marvin’s call for increased education around cyber. For while news of high-profile breach incidents may propel larger corporates into action, he said, it can lead to a false sense of security among smaller businesses which do not view themselves as a viable target.

“At the smaller end of the market, SME clients throughout the UK don’t really appreciate their exposure,” he said. “Then you couple that with the fact that most businesses don’t really realise what a cyber policy actually offers and what’s actually available. And there’s such a variety out there, from a very basic cyber insurance policy to what we provide which is an all-singing, all-dancing proactive service that offers real value throughout the whole life of a policy.

“But it’s not just about educating the end client, for us as the insurance provider we know we need to work closer with our brokers to help educate them. Obviously, Gallagher has hit this hard and they’ve deep-rooted expertise and ability, and specialist teams. But if you look at the regional UK market, our job as insurance providers is to help educate those brokers so they can have easier conversations with their clients. So, it is about education – but educating both end insureds and the brokers. And that’s where we’re stepping up.”

Read more: CFC on what’s happening around cyber insurance pricing

The role of the broker is to move with their clients, Marvin said, and to be risk advisors first and foremost, and cyber is a risk that is not going anywhere. Threat actors are not going to just close up shop, and so it’s up to insurance and risk management teams to look after policyholders and provide them with the best coverage and the best risk mitigation solutions.

What’s critical for brokers to understand, he said, is that their responsibility is not going unrecognised by insureds. He highlighted a recent example, wherein a manufacturing business reached out to discuss a coverage concern after their cyber proposal form resulted in their premium jumping from £3,000 to £10,000 – with an exclusion for ransomware.

“No-one had really read the forms and the broker didn’t really understand the forms,” he said. “And with ransomware cover wiped out in this market, it would be the most expensive piece of paper they’d ever bought. As a result, the business had no cover and didn’t understand what they needed to do to get cover, because they and their broker didn’t understand the market.”

Brokers need to register how the market has changed and that it’s constantly moving, he said. And that means actively partaking in any education and development opportunities that will boost their understanding of where it’s going next.

There’s a real wealth of opportunity for brokers to get ahead of the cyber risk piece and provide a true value-add service for their clients around cyber, Dixon said, and looking across the market he is positive about the future of cyber insurance in the UK.

“When you see the number of inquiries that we’re getting for new business, when we talk to our broker partners and see the number of them that are really waking up to this huge opportunity in the UK market – it all looks very promising,” he said. “There’s also the signs of pricing stabilisation and with that comes new entrants in the market. And the more people we’ve got in the market, talking about cyber as a line of business and the threats companies face, the better. So, I think it’s a very exciting place to be right now.”

Find out more: Discover the full range of CFC’s cyber insurance services today

Jim Dixon serves as senior cyber underwriter, UK, at CFC while Andrew Marvin is chair of Gallagher’s cyber strategy group.

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