Insurance news

“While Flood Re is expected to help lower-income households, our results suggest that Flood Re has a weak impact in lower income and more deprived areas but a stronger impact in higher income and less deprived areas,” the Bank of England report said.

“This finding provides a unique insight in examining the effectiveness of Flood Re and the design of future public policies in mitigating climate risk.”

The bank’s research found that households in wealthier areas tended to benefit more in terms of balancing out the negative effect of flood risk on property prices, though all households did benefit overall.

Flood Re “disproportionately” benefits wealthier properties in terms of value appreciation of flood prone properties’ value, the researchers said.

Read more: What UK homeowners need to know about flood insurance

The paper’s findings were, nevertheless, “largely to be expected”, according to Hannah Davidson, Aviva senior home underwriting manager, who renewed the insurer’s calls for more to be done to make sure lower income households do not suffer from an upcoming April rate hike – the first since 2019.

“It will always be the case that in considering the relative value of Flood Re protection of a high-risk property, the value of that protection will be higher where there is greater value at risk,” Davidson said.

“By using a rating mechanism based on council tax band only, it will always appear that those in higher council tax bands, when assumed as a proxy for income, gain more benefit.”

With many lower income households – in 2017/18 42% of adults under 40 in low-income poverty were renting privately versus 26% of non-poor, a proportion that has almost doubled in 20 years, according to data shared in a University of Glasgow paper – renting, this means they are not directly affected by the impact of protection on property value.

“Analysis of our own data suggests a higher proportion of lower council tax banded properties (A-C) are ceded than higher tax bands and this is true regardless of whether the risk is a buildings, contents or a combined policy,” Davidson said.

“The proportion of ceded buildings and combined risks in these bands is significantly higher, suggesting that homeowners in lower council tax bands are benefitting from the Flood Re scheme.”

Prior to taking up her current role, Amanda Blanc, Aviva CEO, authored the 2020 Blanc Review, which recommended that the government should consider “more direct ways” to encourage tenants to take up contents only cover in high-risk flood areas.

This included a call for a review into the impact of Flood Re cover on the affordability of contents insurance for low-income households.

“As highlighted in the Blanc review and in our own Building Future Communities Report last year, we believe more needs to be done at a policy level to encourage take up of contents insurance by tenants and lower income households in high flood risk areas,” Davidson said. 

“This is a multi-faceted issue relating to attitudes towards insurance in general and is not specific to only tenants living in areas of high flood risk.”

Contents only, or renters’, insurance is an “underserved” area that the insurer has recently looked to tackle through its reinsurance partnership with US headquartered insurtech Lemonade, which launched in the UK earlier this month.

Read more: Aviva lifts lid on Lemonade partnership

For Davidson, looking at how Flood Re rate rises in April will affect low-income renters should be a priority.

“The increase in rates next April, for the first time since rates were reduced in January 2019 across all council tax bands will represent an increased cost for households already facing financial challenges in the current cost-of-living crisis,” Davidson said.

“We believe Flood Re could give consideration to the premium charged for contents only risks in the lower council tax bands to ensure Flood Re protection remains accessible to those living in these properties.”

While a greater “bounce effect” may be expected for higher value properties, the report’s focus has left some industry commentators scratching their heads.

“Weak” data, what happens in 2039 when the pooling scheme is intended to end, and the Bank’s understanding of key insurance trends were all key issues in the report flagged by Ethics and Insurance independent ethics adviser Duncan Minty in an October blog post.

Average property premiums in higher risk flood areas have fallen at least 50% since the onset of the scheme, according to Flood Re.

“I would estimate the actual figure to more likely be in the 200% to 500% range,” Minty said.

“That difference matters, for the impact of Flood Re is circa 100 times wider than just those properties with a history of having been flooded.”

Premiums could once again “soar” in 2039, he predicted, dependent on whether flood defences were in place and how well insurers drill down into policyholders’ risk mitigation measures.

“The researchers appear to be working with a mindset that a price that is not fully individualised is a price that is unfair,” Minty said.

“If [the bank] is producing reports that in a particular research niche make sense, but which in the wider landscape of how insurance is changing do not make sense, then I believe it is beholden upon the Bank to take steps to at least recognise, better redress, that imbalance,” he added.

A Flood Re spokesperson said: “Flood Re is a joint initiative between the Government and insurers. Its aim is to make the flood cover part of household insurance policies more affordable.

“Since we were established in 2016, we have reinsured over half a million homes.

“Four out of five households with a previous flood claim saw a price reduction on their home insurance by over 50% and those customers are also able to shop around – 95% of householders with a previous flood claim can now get quotes from 10 or more insurers.”

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Three-quarters (75%) of learners say strong workplace training would have a very high or high impact on their decision to stay with an employer, according to Emergn, a global digital business services firm. And 55% say that learning and development (L&D) programs increase job satisfaction and employee morale.

However, only 23% of learners and 22% of leaders view their organization’s current workplace training as extremely effective, finds the survey of more than 1,200 professionals from the US and UK, conducted in July and August.

“A lot of organizations are used to collecting what we could train our people on… but individuals want to be connected to something, to a mission, to a purpose,” said Steven Angelo-Eadie, head of learning Services, Emergn. “If you don’t know why [the training is] important, then it will feel like it’s a drain on your time and your energy.”

‘Absolute necessity ‘

In Australia, L&D has also grown in prominence for organizations.  Where once upskilling was seen as a ‘nice-to-have’, it’s now an absolute necessity with employees craving personalized, digitized development.

In hybrid and remote work, only the very best tech will do, which is something Arbaz Nadeem, global field and growth marketing manager at Whatfix, understands all too well.

“With the remote and hybrid work culture setting in for most companies, training employees on the complex applications they use every day is becoming a big problem. You can’t bank on physical classroom-led training anymore, hence companies now need to make sure that learning and training are happening in the flow of work and in a way that learners learn in a very personalized manner,” said Nadeem.

And in the great resignation, L&D could be the difference between floundering and thriving. A report from LinkedIn found that 94% of employees would stay with their employer longer if they offered a more comprehensive development program.

Despite this, 49% of workers said they simply don’t have the time to invest in their personal development, an issue that really should be front of mind for Australian employers.

“The pandemic has had a bitter-sweet impact on L&D,” said Nadeem. “L&D is now being valued all over the world and is fast becoming an essential component for companies. With the great resignation taking over, companies are now focusing on, and investing much more in, upskilling and retaining their seasoned employees.”

Key consideration

The evidence is clear, L&D will become part of the DNA of successful organizations and employers.

“It’s an absolute reflection of workers’ understanding that we can no longer give lip service to lifelong learning,” said Richard Wahlquist, president and CEO of the American Staffing Association (ASA) in Alexandria, Va. looking at the results of a recent survey by his organization.

It found that 80% of US workers consider an employer’s professional development and training offerings an important consideration when accepting a new job.

However, just 39% say their current employer is helping them improve their current skills or gain new skills to do their job better, finds the survey of 2,042 US adults.

These days, workers have choices, said Wahlquist.

“Employers are competing, it’s a war for qualified talent. So, when they’re talking to candidates, candidates are much more interested in getting a sense of fit, alignment with values [and] culture, and then investment in addition to pay. One of the key benefits, as our survey indicated, was this investment in ‘me’ and my professional development,” he said.

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Looking back on his tenure to date, Keating highlighted how the association’s recent milestones can be broadly divided into four categories. The first, he said, is the assembling of an exceptional new executive team – a feat that has been recognised in the reception and feedback of members. The second is how the MGAA team has been able to execute the findings of the comprehensive research it carried out in 2021 to determine its members’ requirements and expectations.

“We’ve invested in and spent members’ money in the areas where our members asked us to do so, which is a real achievement,” he said. “And we’ve effectively come to the end of the actions [pinpointed by] that research. Thirdly, it would be remiss of me not to say how pleased I am regarding the growth of the membership across all three tiers. We’re now in total, around 350 members, including MGAs, suppliers and insurer members.

“Our ambition is that we would like all MGAs to want to be members of the association. It’s up to us to approach them but it’s just as important that every MGA wants to be a member of the association. And it’s up to us to make sure that our proposition, our service and everything we do, remains relevant and essentially gives them no opportunity not to want to be part of our association.”

Read more: The capacity challenge – a silver lining for MGAs?

While the association is delighted that it now counts almost 190 MGAs among its members, Keating emphasised that the membership makeup of the MGAA is a tripartite offering. The team will continue to grow its insurer membership, he said, as it’s so critical for MGAs to have the right support from capacity providers – and will also focus on evolving the diversity of its supplier membership which provide such excellent products and services to the market.

The creation of multiple forums in the last two years is another achievement close to Keating’s heart. He highlighted how the introduction of both a technical forum, a claims forum and a personal lines forum had represented standout opportunities to allow all relevant stakeholders across the industry to come together to share knowledge, understand each other’s objectives and earmark opportunities to work together.

These forums showcase the technical expertise, knowledge and professionalism of the sector and offer an opportunity for the community to work more collaboratively going forward. The entire membership across the MGAA has a shared ambition to deliver excellent solutions to customers, he said, but also to deliver positive underwriting earnings to all stakeholders – and these forums provide an excellent conduit for that shared purpose.

As to what’s next on the growth agenda, he noted that the rapid rate of change that has characterised the strategy of the MGAA to date is showing no signs of slowing down.

“Over the next 12 months, we are investing in a significant upgrade on the MGAA website which will give a premium feel for our members,” he said. “It will be far more digital and user-friendly and will give more of a spotlight to our suppliers and their products and services. It needed a significant investment to get it to where the association needs it to be. Because it is our shop window essentially, and I feel it needs to clearly represent what the association, and more importantly, our members represent.

“[…] We will also go out, probably in mid-2023, to our membership again for further research. I think it’s really important that at least every two years, we go out and speak to our membership – especially as it’s growing so much – and ensure that what we’re doing continues to reflect what they actually want us to do, and that we’re investing our members’ money in the right areas for our members. And that’s both for now, but also, critically, for market developments as we go forward.”

Read more: CEO on the key to MGA success in 2022

Keating and his team will also be actively encouraging members to achieve the CII’s Chartered Insurance Underwriting Agent designation, he said, as it’s an achievement that really signposts the professionalism of the market and its players. In addition, the MGAA has a full roster of events, conferences, and learning and development opportunities in its roster.

The association will be introducing ‘Lunch and Learn’ type events around particular subjects of interest to its membership, he said, as it has seen first-hand how smaller, more intimate events are incredibly beneficial to attendees. The MGAA will also be continuing its partnership with I Love Claims and the success of this partnership’s recent conference will see it becoming a permanent fixture in members’ calendars going forward.

“That’s because it’s so important that the MGA community, working alongside I Love Claims, ensures that it keeps a clear focus on ensuring that its claims delivery is the best it can be,” he said. “And on the events front, we’ll continue with our normal events. We had a successful capacity exchange a few weeks ago, and we’ll have our broker ‘Meet the Market’ event, and our conference in July.

“So, we’ve got an increase in events and we’ll continue to use these to reflect what our members require around any educational and informative [opportunities]. And we’ll also look to continue to grow our membership. So, it’s a real blend – we’re doing a lot of strategic things but also a lot of more of the same, providing it remains relevant to what our members require.”

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Allianz-owned LV= General Insurance (LV= GI) is bringing in a broker portfolio pricing director in the form of Nicola George.

Taking effect on November 2, the appointment will see the former intermediary pricing head make the switch from Aviva. At LV= GI, George will be in charge of the insurer’s broker pricing team.

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Munich Re is making a couple of changes to its board of management, including new arrivals.

Dr Thomas Blunck (pictured), who has been with the Munich Re management board since 2005, is succeeding Dr Torsten Jeworrek as chair of the reinsurance committee effective January next year.

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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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