- M&A deals remain hidden at Monte Carlo meetings
- Endurance sale to Sompo validates Charman strategy
- Why are cedents buying more reinsurance?
- Samsung's Note 7 losses said to be uninsured
- Lloyd's Beale notes huge coverage gap
- Roger wonders about the value of a name
- Quick Bytes: ILS said to be more reliable on claims; grumbling about PPL; PRA to hold disaster drill; Lloyd's broker "roll-up" speculation; Scor to continue CCR fight; new Blenheim will be Lloyd's only writer; airline execs most worried about IT failure and motor insurance predicted to lose 80% in premium
Princeton: +1 609-683-0888
London: +44 (0)20-7816-2691
The short time between the
Monte Carlo meetings and
Baden Baden always seem to be a challenge when preparing the October newsletter. We can only imagine how
difficult it must be for underwriters and brokers to process the information gleaned from Monaco into hard proposals for Baden Baden.
CATEX will be represented in Baden Baden and has several follow-up appointments scheduled as a result of our Monte Carlo meetings and we do hope that the weather will be cooler.
will also be at the
Intelligent InsurTECH Europe conference in London on Wednesday, November 16th. We will be attending the conference and will have a booth in the exhibition area and hope to see you there.
Who would have known that while the industry was
meeting in Monaco there were several prominent M&A efforts nearing culmination? The conventional wisdom in Monte Carlo had it that major M&A deals for 2016 were over until next year.
The one big deal that did occur, the acquisition of
Endurance by Sompo, bears reviewing and we look at that in light of the effort over the past three years by Endurance to expand its insurance book.
We also reviewed the
Samsung Galaxy Note 7 recall but not for the reasons you might think. We wonder why Samsung is said to not have its recall-related losses insured.
column is here too. This may be one of those columns that we point to as proof that we exercise no editorial control over what Roger writes although on balance we understand his point!
As always if you have any questions or comments about CATEX Reports, or want more information about CATEX, or our products, please feel free to contact me.
Thank you very much.
Stephanie A. Fucetola
Senior Vice President/CATEX
Monte Carlo calm belies M&A discussions
At the very hot tables outside the Café de Paris in Monte Carlo last month the usual round of one-on-one speed dating meetings continued unabated. Despite the fact that meeting participants were often bathed in sweat, with forearms sticking to the tables, meeting notes were taken and business cards exchanged. In spite of the warm weather it all seemed like business as usual.
Appearances can be deceiving as we have often learned. Three
"known unknowns" that we have now learned about indicate that significant activity was occurring below the "business as usual" surface.
We've learned that far away from the sweaty scene at the noisy Café de Paris
serious talks between a number of large reinsurers were nearing the end game. Negotiations, presumably conducted by phone from one corporate headquarters to another and followed up as needed by face to face meetings in quiet, air conditioned suites in Monaco, nearly ended up with a total of three very big deals in the reinsurance mergers and acquisition space.
that did occur was a bit of a
John Charman's Endurance
was acquired by
for a price
45% higher than its listed share price
on the NYSE for a total of
. The deals that didn't occur would have ranked as blockbusters too.
until talks ended in late September. Apparently, too, according to market
there had also been high level talks between
regarding a possible merger.
Again, these are the "known unknowns". What else was or is being discussed falls within the
category. (Indeed, we are channeling our inner
for this metaphor.)
Monte Carlo last month did seem particularly un-newsworthy. There was a sense of what the British would call
"soldiering on" by reinsurers and brokers who were determined to put the best face on a market that has suffered
declining premiums and
expanded competition from ILS capital. Americans would have categorized the activity as just "grinding it out" and waiting until conditions changed. The only group that actually seemed pleased were buyers who once again found themselves very popular.
Not once in our many meetings did we hear a hint of further M&A activity for 2016. Any speculation in that direction
would have been dismissed as folly because of the proximity of the January renewals. Risk bearers who had recently acquired other companies, or who had recently been acquired themselves, signaled that ongoing integration work of systems and business teams was occupying their time.
It just goes to show that companies will do what they need to do if opportunity presents itself. It's no secret that bigger is better and the more diversified your risk profile is the better opportunity you have to make money. Somehow, and appearances seemed to confirm this, it seemed as if the industry was just planning on sticking to its knitting for the rest of 2016.
The deal that did go through
During the meetings in Monaco there was a sense that, despite the hopes of reinsurers,
no pricing floor on premiums
was going to be reached for the January, 2017 renewals. Presumably, underwriters arrived in steamy Monte Carlo hoping against hope that the diminished flow of alternative capital into the market and several noticeable loss events would begin to turn the market. This hope seemed to be unfounded and both
warned that they would
from business if the price wasn't right.
Certainly we've heard these warnings from industry participants in the past but to be frank someone must be listening.
, even in these dark times the
"Big 4" continental reinsurers
seem likely to recover their cost of capital. JP Morgan
that "with normal hurricane losses three of the reinsurers we follow will at least achieve their target ROE, and comfortably exceed cost of capital of we estimate 8% for each group." Morgan excluded
because it is bearing restructuring in connection with its
primary unit but included
Scor, Swiss Re and Hannover Re
Admittedly there is that caveat of
"normal hurricane losses"
included in the JP Morgan prediction. What's normal? Losses incurred over the last ten years or longer term historical losses? Refraining from that debate you can be sure that for those few days when it was possible that
or higher reinsurers were once again faced with the possibility that the storm could be another
fire-sized loss, large enough to
wipe out quarterly profits
but not raise rates, or whether it would be an
sized loss wiping out annual profits but probably starting discussion of increased rates.
Talk about mixed feelings. It's an unenviable position to be watching a storm path when one of the outcomes is either continuation of the falling market, but erasure of quarterly profits, and another outcome is the possibility of an increase in rates but elimination of much more than a single quarter's profit. As it turned out it was none of the above. Matthew seems to have done
relatively little damage in Florida
barely scraping reinsurance limits
, so the status quo will continue --but with quarterly profits intact, at least as a result of Matthew related claims. The
flooding damage in North Carolina
is likely to be covered, if at all, by the
J.P. Morgan's observation is even more impressive when set in context of the current market condition. If Morgan believes that Scor, Swiss and Hannover are going to cover their cost of capital in a time of falling rates and negligible investment returns that can only mean that
they are writing at an underwriting profit
. And that means that
they are turning down business
unless they get the price they need. It's a very fine line though as we saw when the $3.6 billion insured loss from Ft. McMurray
wiped out quarterly profits
for several reinsurers.
But there is more to an underwriting profit these days than just declining business as we realized in connection with the Sompo-Endurance deal. We have not been the only ones noticing that reinsurers are
moving down the food chain
to get closer to the risk and that they have become increasingly active in underwriting insurance. One of
was to consider the "acquisition of an insurance company with strength in the insurance business in developed and emerging countries." By acquiring Endurance, Sompo was able to do just that.
When John Charman took over Endurance in
he quickly made it clear that he was going to
the company's appetite for risk and move quickly into the insurance space. Think back to those times, it wasn't that long ago, but well before
Ajit Jain's Wall Street Journal quote
of last summer about Berkshire "moving down the food chain."
Of course Berkshire had already put its money where its words would be in 2013, two years before Ajit's quote, with the creation of
Berkshire Hathaway Specialty Insurance
aimed at the insurance market in an effort that
(page 12) is on its way to being one of the world's leading P&C insurers.
At that same moment, in 2013, Charman jumped in with both feet at Endurance and
"I am hell-bent on making sure that Endurance becomes a great global insurance and reinsurance franchise over the next three years." At the time Endurance was earning $2.5 billion in GWP and pretty much stuck to its traditional focus of reinsurance and crop insurance.
Charman made it clear that Endurance would become a fundamentally different company within the next three-to-five years in terms of scale, geographies, products and people, "and absolutely in profitability". So what happened?
Over the next three years the amount of GWP from reinsurance rose only a bit over 10%. However the amount of GWP from then existing insurance books for US financial institutions, PI and facultative when combined with new lines of business introduced by Charman, such as excess and surplus lines (E&S) casualty, US-based primary casualty and commercial property insurance, and aviation, produced an increase of 138% in GWP. Overall Endurance's GWP jumped in only three years from about $2.5 billion to about $3.25 billion an increase of about 30%.
Clearly the bulk of the increase was attributed to insurance premium. Charman and Endurance were among the first to recognize that there was value to be gained for reinsurers further down the food chain in the insurance markets.
We've often noted that reinsurers tend to follow the same path. Every month there are more articles about the insurance market being invaded by reinsurers as they seek to replace declining premium. Artemis notes that "Specialty reinsurance was one of the first lines to suffer after reinsurers looked to replace dwindling property CAT premiums, followed by casualty and then primary insurance lines, as reinsurers sought out improved returns to boost their RoE's."
We think back to what Steve DeCarlo of Amwins might have meant at the NY InsiderScope meeting in May when he said "Capital decides distribution and always chooses its means of deployment" in terms of capacity. There is a long list, aside from Endurance and Berkshire, of carriers augmenting their reinsurance books with insurance premiums. We've written, for example, about efforts by Everest, Arch, Nephila, to name a few, moving down that food chain (yes, that food chain
be a busy place) to try to capture more of the original premium. As DeCarlo notes these are
conscious decisions made by reinsurer management
as to how to deploy their underwriting capital.
But what we may have overlooked is that there is an additional play here in terms of adding tremendous value to those carriers who have embarked on that path. For years we've been hearing the
of pundits about how
essential it was for reinsurers to begin to develop sources of premium originating other than from reinsurance
. Those warnings generally are in connection with the triple whammy effect of declining premiums; additional capacity in the market; and negligible investment income. The thinking is that those who don't diversify in some way will eventually wither and die.
But there is
another effect that we now see too. A company that has taken these steps, and has established a multi-platform offering, becomes
particularly appealing to a potential acquiror. In the case of Endurance,
Sompo was clear that it had been attracted by its insurance component and in particular its US platform.
In one sense it's what Steve DeCarlo said about
"capital deciding the distribution" isn't it? Sompo already owns reinsurer Canopius in London but wants to expand into insurance and is interested in obtaining an American platform. Their interest aligned with Endurance's profile and the interest was keen enough that Sompo was willing to pay a 45% premium over the undisturbed Endurance stock price.
We perhaps should have remembered DeCarlo's quote while in Monte Carlo. There were
numerous comments overheard while there about the absence of M&A activity.
"Most of the executives we met shared our surprise over the lack of M&A in 2016, with most attributing the pause to widening bid-ask spreads."
Boiled down this means that buyers were unwilling to pay the price demanded by sellers. The potential for deals though was right in front of us. Reinsurers on their own were adjusting their appetites to capture more profitable premium. It's not surprising that Sompo would simply swallow one reinsurer that had made the adjustment to satisfy its own interest in capturing more profitable premium.
is a well known in the risk business prompting many stories about his most recent success and what it means to him personally. Here is the
if you're interested but you have to give credit when credit is due. This is a big one for him.
Cedents buying more reinsurance
We have noticed a trend that seems to be a normal outgrowth of supply and demand. As reinsurance has
become less expensive its buyers seem to have begun to buy more of it
. It's noticeable. According to
the 20 largest cedents in
Europe ceded 17% more in 2015
than in 2014. An analysis from
cession rates in the US grew for the first time since 2011
in 2015 from 12.9% to 13.7%.
The two reports
that the US cession rate increased then by about 6% while one measure of the European cession rate reflected an increase of 17%. Conventional thinking is that the
soft market is enabling insurers to take advantage of low prices
risk on favourable terms. We already have seen that several large cedents have
centralized their reinsurance buying strategy
over the past few years both for efficiency and in preparation for better managing group wide reinsurance purchases.
Analysts have also suggested that, in addition to just simple supply and demand, there is a concern held by insurers buying more reinsurance about earnings volatility noting that
"a few large losses could disproportionately affect quarterly results".
These are among the
basic reasons companies buy reinsurance. Smoothing out earnings volatility, reducing exposure, and benefiting from a good price are very valid reasons to purchase reinsurance. Of course, by ceding a portion of its exposure an insurer is also ceding part of its premium, and premium as we all know is hard to come by these days.
In this competitive market insurers ceding risk usually are able to negotiate
that compensate somewhat for the premium paid to the reinsurer. In the end the insurer gets the portion of the risk
off its book
that it doesn't want and receives a ceding commission from the reinsurer
to help make up the premium it has to pay the reinsurer
to lay off the risk. As we've noticed in recent issues
ceding commissions have increased
and this, too, is not unexpected. A buyer has more than one reinsurer option and will look for the most attractive terms.
Nothing unexpected, we thought, so far. Basic supply and demand dynamics. Then we saw this explanation as to a possible reason why buyers are choosing to "de-risk" their revenues by accepting ceding commissions over underwriting risk. Matt Carletti at
, an industry equity analyst,
increase in cession rates portends trouble ahead
. He said "Generally speaking, we believe that
primary insurers know more about the risks they write than their reinsurers
do and when they shift to laying off more of the risk, there is usually a good reason why."
That's an interesting remark and immediately made us think of the long running
underwriting discipline discussion. We don't know of any chief underwriter at any insurance company who would say anything other than that his or her underwriters are highly disciplined and obtain the required rates for coverage or do not insure them.
There is another possible pitfall here though. The insurers laying off exposure to reinsurers in larger amounts this year than last are
writing the same business that a number of the reinsurers themselves are moving down the food chain to insure.
We're not sure what this means but to see even a hint introduced that the increase in cession business was anything more sinister than a seemingly good business decision based on the laws of supply and demand was troubling. Hopefully, if JMP's analysis is correct, the same reinsurers which assume portions of exposure that primaries are eager to dispose of aren't picking up similar business, which may be inadequately priced via their "down the food chain" strategy.
Samsung's Galaxy Note 7 losses said to be uninsured
If you've been on a plane recently you know everything you need to know about the
Samsung Galaxy Note 7
phone. We had begun to notice the
issue in June when the
cell phone fire
on a plane over the Pacific. That phone was apparently somehow crushed when it was wedged in a passenger seat reclining mechanism
caught fire. Press reports have not identified the manufacturer of the phone involved in the June incident.
For Samsung, the Note 7 phone saga has been a nightmare. According to a recent New York Times article Samsung engineers still remain uncertain about the cause of the fires and have still been unable to replicate the fire in tests.
When the first incidents of Note 7 fires were reported Samsung engineers focused on the lithium battery as a suspected cause and quickly ring-fenced phones supplied with batteries from a specific battery supplier. Unfortunately more phones began to ignite and these phones had batteries from different suppliers.
There are reports that the sheer complexity of the Note 7 stymied Samsung engineers who were frantically trying to determine the cause of the fires in the midst of a frenzy at the company. The complexity of the Note 7, which one observer said "had more features and was more complex than any other phone manufactured -- in a race to surpass iPhone, Samsung seems to have packed it with so much innovation it became uncontrollable.", caused Samsung to waste precious response time focusing on possible battery defects.
Samsung has discontinued the Note 7 essentially giving up on the phone. The Insurance Insider reported that the recall will cost Samsung $2.3 billion and that number doesn't include the thousands of hours of product development, or the lost business opportunities it now faces by not having a competing product for the latest Apple iPhone. And of course it doesn't include reputational damage to the company itself.
By possibly including the expanded scope of potential costs other analysts estimate that Samsung could lose as much as $17 billion from the fiasco. Samsung has a market capitalization of more than $235 billion and nearly $70 billion of cash reserves.
The Insider also reports that "Samsung has no product recall policy in place for the exploding batteries in its Galaxy Note 7". In total about 4 million of the Note 7s, which each had a retail value of $885, ended up recalled by Samsung. Presumably a risk manager in South Korea at some point had weighed the existence of the $70 billion in cash reserves with the prospective premium associated with purchasing insurance and chose to go it alone.
These types of decisions may be among those "challenges" that the insurance and reinsurance industry are being called on to meet in the 21st century as the industry is urged to become more relevant to current and prospective clients. In Monte Carlo, XL Catlin's Mike McGavick said of reinsurers "Our solutions have almost nothing to do with the risks that are being created by the unique dependence of society on technology. It is around 70% of GDP and our solutions do not even touch it."
If you read the Insider article you will see that in addition to the $2.3 billion loss estimate there is a discussion about talk in the market about exactly what type of coverage would or could have applied to the Samsung recall. It's not particularly clear and you can begin to sympathize with the Samsung risk manager.
There is a TV commercial running now in the US for an insurer called American Home Shield that provides coverage for damage to home appliances. The commercial begins with an insured, who has sustained a loss to a home air conditioning unit, sitting in an office across from a claim processing type person. The insured is told by the insurer employee that his claim is not covered but, lucky for him, his air conditioner would have been covered had it been damaged as a result of "earthquakes, volcanoes or a zombie apocalypse." Meanwhile, in the background outside the window of the office about a dozen ghoulish looking zombie types appear smearing their faces across the office window.
It's a catchy commercial and interesting in that the ad's creators have picked up on public discontent in dealing with insurers. Without commenting on that sentiment imagine if the premium for a Samsung recall cover for the Galaxy Note 7 was substantial but the risk manager was not 100% comfortable with what was and wasn't covered. It is hard for an insurer to enumerate every possible loss scenario associated with the global release of a complicated brand product like the Note 7. Rather than risk a coverage gap it seems Samsung decided to save the premium and go it alone.
Not to pile on but we also noticed stories about
instances of exploding Samsung washing machines.
Lloyd's Beale notes that insurers cover only 10% of risks faced
We read comments that Lloyd's CEO Inga Beale made in New York last week that follow along the discussion of the Samsung issue. Beale said that research indicated that insurers provide insurance solutions for less than 10% of the risks faced.
At first we weren't too surprised with the comment. After all the Lloyd's Vision 2025 plan indicates that there could be $2 trillion dollars of risk needing coverage in just nine years. We're not that quick on math and assumed that Beale was referring to that whole universe of uninsured risk which will supposedly guarantee the industry's relevance for generations to come.
But then we saw Beale's observation that
in 1965 the insurance industry paid up to 90% of the losses in the wake of Hurricane Betsy
which devastated Florida and the Gulf Coast. She
"If you fast forward every decade,
the percentage that the insurance industry has paid for each catastrophe in the US has reduced
." Ms. Beale noted that for
Superstorm Sandy in 2012 the industry only paid about 20% of the total bill
The US natural CAT market underserved? This got our attention and then we noticed the article
"US CAT risk demands more attention: Lloyd's"
US NatCat risk is generally thought of as a pretty
juicy target for insurers and reinsurers aside from the fact that premium rates have been declining of late. But the
sophistication of models for US exposures and the availability of historical data generally means that insurers and or alternative capital can usually find an underwriting profit.
But Beale was just beginning. She noted that the
US CAT exposure situation was similar to flood risk in the UK which she said was being "palmed off" by insurers
to a government-backed scheme. The US, of course, has the NFIP in place which just last month actually
began to trickle a tiny bit of its exposure to the private market
but much, much more exposure remains being borne ultimately by the taxpayer.
Beale said that the
world is globalizing at an unprecedented rate with more and more people moving to urban areas. The result, she noted, is that "You've got this concentration of assets that we really haven't seen before, and for us as insurers, we have to figure out how we cope with that."
Here is the challenge statement: "A lot of our risks used to be very geographically bounded, they were physical things that happened and you could put a boundary on it.
Nowadays with something like cyber, it's totally boundless--it doesn't care about geographic boundaries."
We couldn't help think of Inga's comments in light of
. The company faces a loss of anywhere from $2.3 billion to $17 billion.
to the Insider
Samsung "had bought the product recall cover across its range of products in previous years
but had no such cover in place" currently for the lithium batteries.
Is Samsung's lack of coverage any different than what Beale notes in the US natural CAT market? If reports are true, and Samsung does not have the coverage, surely that's an even more direct failure of the industry in not being capable of designing an appropriate coverage at a convincing price point and being able to adequately provide a clear and concise enumeration of what types of losses are covered. How far does this zombie apocalypse extend?
We were reminded of
Aon Benfield's Eric Andersen's
words of over two years ago when he
industry needed to respond to unsatisfied demand
on the part of prospective clients. He said
ompanies find it almost impossible to buy coverage for auto product liability, pharmaceutical product liability, financial institution professional liability, drilling risk for energy companies and liability risk for shale oil rail tank cars.
As Andersen noted, according to our notes of his talk, since businesses can't find coverage, should a company be required to pay even one claim in any of these areas it could mean "turning the lights out" and the bankruptcy of the business. Fortunately Samsung seems to have the ability to pay such claims but Andersen's points are on the mark.
Roger ruminates on a most personal component of the "all politics is local" adage
Brian O'Hara, Mike McGavick's predecessor as CEO of XL Catlin, once explained to me the importance of staffing overseas offices with locals. The same policy was employed by two other CEOs, Cornelius Vander Starr and Hank Greenberg, the only two to hold that rank at AIG from 1919 to 2005.
It might sound obvious: locals know their markets better than imported foreign management might. And not just markets: the way of life, the rhythms, the unique local practices that would first amuse, then enrage, any sane person.
That would apply anywhere. Developments this year in France, however, have added new dimensions to the paradigm. In the words of the Romans who tried to subdue the village occupied by Asterix, Obelix, and their pals, these Gauls are crazy.
A few examples will suffice.
A French woman named Marion was instructed by her boss to change her name to Marie, since the company already had a Marion. The second Marion felt that her surname being different from the other Marion's made the request unreasonable. What's in a name? The Marion who wouldn't change hers was fired.
Adopting a new identity in France has always been difficult. Changing one's état civil - the legal name that defines one's existence in the French state bureaucracy - can take months and a great deal of money. One's lawyer must put forward a compelling argument. It wouldn't be enough just to hate being called Melvin, Starchild, or 'the Donald'.
All that is changing. New laws will allow the French to change their names with little formality.
Why? I didn't make this up: in the 1990s, Kevin was the most popular name given to French baby boys. Costner and Bacon, and a British soccer player called Keegan, must have been "yuge" in France. Yet Kevins, bizarrely, are reportedly 30 percent less likely than anyone else to be hired in France. A rash of name changes in the immediate future seems likely. Perhaps they'll all want to be called Caitlyn.
The French, of course, pioneered the concept of 'cupboardization.' French labour laws, which limit the working week to 35 hours, make it difficult to fire employees not called Marion. Unnecessary staff, therefore, are consigned to the "cupboard of idleness" until things pick up. I didn't make that up either. (Much the same applies, among less scrupulous operators, in Bermuda.)
Now imagine you're a manager from a sensible country, who wishes to establish a French presence. First, you'd fire all the employees in the cupboard (but not those in the closet). Then you'd institute a 60-hour working week, like the rest of us. Then you might hire a bunch of Kevins, since they would be desperate for work and therefore cheap.
It would end badly. Your home office would disavow you and you'd end up in jail.
Far better to hire French managers to make a go of things, although with the odds stacked this high against your company, it would be virtually impossible.
I am by no means anti-French. I visit la belle France three or four times a year. They have wonderful food and cheap tobacco. Those are a few of my favorite things. But be fair: France is otherwise clearly beset by some form of mass hysteria.
Best, then, to advise your French manager to staff your bureau d'assurances with people called Kevin and Marion. A bientôt.
Note to readers of last month's column about Apple and its tax minimization techniques: Eagle-eyed reader and publisher of Intelligent Insurer John Walsh has pointed out an error in last month's column about Apple and its low rate of tax in Ireland.
I said that Apple had no employees in Ireland, which I had read somewhere. John directed me to an article in the Irish Examiner. "The European headquarters of the world's biggest company [which the newspaper believes to be Apple] employs 4,000 workers in Cork," the newspaper reported back in November 2015.
I got that wrong, then, but I'm not sure that Apple's physical presence makes the case for its paying so little tax any stronger; rather the reverse.
is an American Society of Business Publication Editors national award winner. An English chartered accountant who lives in
Eastbourne, on England's South Coast, he writes and broadcasts news and opinion in the US, UK, Bermuda and the Caribbean, in print and online. His main beat is insurance and financial services, with 30-year sidelines in music and humour. All views expressed in Roger's columns are exclusively his own. Contact Roger at
Copyright CATEX Reports
October 17, 2016
Uncertainty of claims payments was one of the "risks" traditionalists pointed to when coverage backed by securitized instruments came into play. But according to S&P "there is a greater potential for claims to be disputed when protection is purchased from a traditional reinsurance firm as opposed to a CAT bond". Luca Albertini, CEO of Leadenhall Capital Partners, made the same point more descriptively when asked if non-traditional markets were less willing to pay claims than traditional reinsurers. He said "We're based in London and how many insurance law firms are there around the square mile? Are they there to organize a party between Cinderella and Snow White or because the insurance industry is being equally as litigious?"...Thus far JLT remains the only major London broker to not sign up for the Lloyd's electronic trading system Placing Platform Limited (PPL). JLT says it is a "supporter" but has chosen to defer its adoption. Aon, which has adopted PPL, said that PPL was an "expensive" platform that needed sufficient transaction volumes to make it viable. An Aon executive said "If we don't get business through there will be a funding issue going forward."...Tracey Skinner of British Telecom, director of insurance and risk financing, said that market "modernization" efforts like PPL prompt concerns about risk being treated "like it is plain vanilla". Skinner expressed fears that risks would be "lumped together" from an underwriting perspective...In November the Prudential Regulation Authority will test UK (re)insurers on their response to a "market-turning event." Chris Moulder of the PRA said that given the changes in the industry since the last large scale event over a decade ago "we think it is prudent to assume that at some point, an unexpected or very large event will occur that causes significant losses to firms" and we want to "assess the ability of individual carriers to continue to operate in line with their solvency requirements."...Reports are that London broker RFIB is sizing up Tysers as an acquisition. Tysers has been broking in London for 196 years and some speculate that a number of the 250 registered Lloyd's brokers could be ripe for a "roll-up" strategy...Scor in Paris can be one very determined company as it signaled it will appeal the EC's decision that the French government's guarantee to French reinsurer CCR complies with EU internal market rules. Scor believes that the unlimited retro arrangement CCR has with the French government has created a monopoly that has a 90% share for flood and earthquake CAT reinsurance in France. CCR is wholly owned by the French government...Speaking of France, French regulators have pledged to simplify and speed up licensing procedures for UK-based firms that may want to set up operations in France as a result of the Brexit vote...Peter Scale's new start-up insurer, Blenheim, will be a dedicated Lloyd's (re)insurer. Blenheim will hold all its capital in Lloyd's and write all its business via Syndicate 5886...This won't be a surprise but Willis Towers Watson said that aviation insurers have named failure of critical IT systems as the risk which most concerns them. British Air, Delta, United, Southwest and others have all experienced costly IT failures in just the past few months...This next one was a surprise. A report released by Boston Consulting and Morgan Stanley said that the global motor insurance sector could see premiums fall by 80% in mature markets by 2040. The $200 billion market is expected to be severely impacted by new car technology reducing accident frequency and increasing adoption of shared mobility. We would translate those two factors, respectively, as "driverless cars" and Uber...By the time of the next CATEX Reports the US election will be behind us which is hard to grasp as it seems that it's been in progress for three years (it has) and that coverage is ubiquitous on TV, radio, newspaper and the web (it is). No further comments about it other than relief that it will soon end...
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