Marine Insurers Wary of Arctic Shipping Routes: Marsh

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ISSUE 4,172

Marine insurers wary of Arctic shipping routes: Marsh

mtoPylypenko/shutterstock.com Dmytro p3 QBE to HDI-Gerling opens raise $750m underwriting unit in São Paolo equity and sell off non-core assets Frazao/shutterstock.com Filipe

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Technology Focus Risk Foresight Big Interview

The internet of trees is not Complications of foreign Esdaile and Aspinall on BPL’s such a ridiculous concept p4 intervention in Iraq p5 changing of the guard p6-7 2 www.insuranceday.com| Wednesday 20 August 2014 NEWS

Marketnews,dataandinsightallday,everyday InsuranceDay istheworld’sonlydailynewspaperforthe internationalinsuranceandreinsuranceandriskindustries. ItsprimaryfocusisontheLondonmarketandwhataffectsit, concentratingonthekeyareasofcatastrophe,propertyand marine,aviationandtransportation.Itisavailableinprint,PDF, mobileandonlineversionsandisreadbymorethan10,000people inmorethan70countriesworldwide. Political events Firstpublishedin1995,InsuranceDay hasbecomethefavourite in Ukraine publicationfortheLondonmarket,whichreliesonitsmixof and ensuing news,analysisanddatatokeepintouchwiththisfast-moving sanctions on andvitallyimportantsector.Itsexperiencedandhighlyskilled Russia have put insurancewritersarewellknownandrespectedinthemarketand theirinsightisbothcompellingandvaluable. the political risk and trade credit InsuranceDay alsoproducesanumberofmust-attendannual insurance eventstocomplementitsdailyoutput.TheLondonandBermuda market under summitsareexclusivenetworkingconferencesforsenior enormous executives;meanwhile,theLondonMarketAwardsrecognise andcelebratetheverybestintheindustry.ThenewInsurance pressure TechnologyCongressprovidesauniquefocusonhowITishelping © 2014 Evgeniy totransformtheLondonmarket. Maloletka/AP

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Insurance Day, Christchurch Court, 10-15 Newgate Street, London EC1A 7HD Russia exposure likely to

Editor: Michael Faulkner +44 (0)20 7017 7084 [email protected] lead to more diversified Editor, news services: Scott Vincent +44 (0)20 7017 4131 [email protected] political risk market Deputy editor: Sophie Roberts +44 (0)20 7551 9906 [email protected] “Of perhaps more immediate concern vate political risk and export credit mar- Global markets editor: Graham Village Rasaad Jamie is the fact many players in the market – ket(whichhasbeenprofitableforallbut +44 (0)20 7017 4020 Global markets editor both underwriters and brokers – have one of those years) has increased its [email protected] made significant amounts of income overallunderwritingcapacitybyslightly

Global markets editor: Rasaad Jamie from Russia-related business over the morethan50%. +44 (0)20 7017 4103 past five years. Esdaile expects the market to double or [email protected] olitical risk underwriters and “As such, a potential combination of treble over the next few years. There are brokers, for whom Russia has clientsreducingactivitythereandunder- two reasons for this he explained: Reporter: Alexis Burris been a significant source of writers remaining cautious in taking on “Firstly, within the context of the cur- +44 (0)20 7017 4252 income over the past five new exposure would force the market to rent soft general insurance market, our [email protected] Pyears, will have to look at new territories look elsewhere to replace lost income,” class of business is growing by virtue of and sectors to replace that income, an he continued. an inflow of capital into it as a specialist Publisher: Karen Beynon +44 (0)20 8447 6953 Sales director: Mark Windsor +44 (0)20 8447 5266 industry expert has said. Although the private political risk area of the market with higher returns,” Advertising director: Andrew Stone +44 (0)20 7017 4027 While speaking to Insurance Day, market has been cautious in extending he said. Sponsorship manager: Benali Hamdache +44 (0)20 7017 7999 James Esdaile, a director at political risk cover to Russia in recent months, the “The second thing to say is that the Marketing manager: Randeep Panesar +44 (0)20 3377 3809 Subscriptionskeyaccountmanager:CarlJosey+44(0)2070177952 and specialist credit insurance broker exposure remains considerable as the range of activities and sectors currently Head of production: Liz Lewis +44 (0)20 7017 7389 BPL Global (BPL), said political events in vastbulkofthemarket’sexistingcommit- covered by our market – such as the Production editor: Toby Huntington +44 (0)20 7017 5705 Ukraine and the subsequent imposition ment to the country is through medium- banks, the capital goods exporters and Subeditor: Jessica Sewell +44 (0)20 7017 5161 Production executive: Claire Banks +44 (0)20 7017 5821 of economic sanctions on Russia have put to long-term contracts. the commodity traders – is actually a very Events manager: Natalia Kay +44 (0)20 7017 5173 the political risk and trade credit insur- However, the length of those contracts tiny proportion of overall global trade ance market under enormous pressure. – uncomfortable as they may be for the and investment activity.” Editorial fax: +44 (0)20 7017 4554 Display/classified advertising fax: +44 (0)20 7017 4554 “Of course, it is far too early to take a market at the moment – is also a sign of He continued: “As a result, there is a Subscriptions fax: +44 (0)20 7017 4097 firm view on this eventuality, but it’s its growing sense of confidence and the huge opportunity for other industrial or fair to say underwriters with existing expansion of its underwriting capacity service sectors to become comfortable All staff email: [email protected] exposure are not taking on new expo- after its highly successful negotiation of with our products.” Insurance Day is an editorially independent newspaper and sure, while new players are unlikely to the global financial crisis. opinions expressed are not necessarily those of Informa UK want to put Russia exposure on their Over the past five years, according to A changing of the guard at BPL: Ltd. Informa UK Ltd does not guarantee the accuracy of the information contained in Insurance Day, nor does it accept books at the present time,” Esdaile said. the most conservative estimates, the pri- Big Interview, p6-7 responsibility for errors or omissions or their consequences.

ISSN 1461-5541. Registered as a newspaper at the Post Office. Published in London by Informa UK Ltd, Mortimer House, 37/41 Mortimer Street, London, W1T 3JH IAG reports 59% increase in net profit after tax

Printed by St Clement’s Press, Unit 16, Bow Industrial Park, Carpenters Road, London E15 2DZ Insurance Australia Group (IAG) has periodinthe2012/13financialyear.IAG performance from the Equity Red Star announced a net profit after tax of said it had been boosted by an business it sold in April 2013. In the © Informa UK Ltd 2014. A$1.2bn ($1.1bn) for the financial year improved investment performance, previous financial year, this had contrib-

No part of this publication may be reproduced, stored in a ended on June 30, writes Scott Vincent. which saw investment income grow uted a loss of A$287m. retrieval system, or transmitted in any form or by any means This represents a 59% year-on- 14%toA$396m. Gross written premium was up 3% to electronic,mechanical, photographic, recorded or otherwise year increase compared with a profit The Australian insurer was also A$9.8bn, while net earned premium rose without the written permission of the publisher ofInsurance Day. of $776m for the corresponding assisted by a lack of a drag on its by 3.9% to A$8.6bn. www.insuranceday.com| Wednesday 20 August 2014 3 NEWS

HDI-Gerling Marine insurers opens underwriting wary of Arctic unit in São Paolo shipping routes: Talanx subsidiary HDI-Gerling has expanded its sales office in São Paolo to include an underwriting unit serving Brazil, Marsh writes Scott Vincent. HDI-Gerling Seguros Indus- triais SA has been launched as a subsidiary company to offer business lines including prop- erty, liability, marine and engi- neering in the country. Guillermo León has been appointed managing director of the unit, which will work closely with Talanx’s existing offices in Brazil: Hannover Re (reinsur- ance) and Seguros SA (retail). kldy/shutterstock.com Christian Hinsch, deputy chairman of the Talanx board of thisregion,thereport, entitledArc- could lead to unprecedented minds of marine underwriters, P&I management and chairman of Alexis Burris tic Shipping: Navigating the Risks marine losses, particularly for insurers are approaching these the board of management of Reporter and Opportunities, has found. protection and indemnity (P&I) classes with increased caution. HDI-Gerling, said: “Brazil’s “While marine insurers are insurers in terms of wreck According to Baker, insurers are economy has undergone signifi- largely supportive of the develop- removalandpollution. likely to require detailed planning cant growth over the past ment of Arctic shipping routes, The remoteness and inhospita- documentation and an extensive decade. Many up-and-coming s Arctic shipping routes they are extremely wary about ble environment presents signifi- survey of the vessel. It is also likely companiesinthiscountryhavea become more commer- incurring large, high-profile losses cant challenges for salvage, due to deductibles for ice-related damage bigrequirementforhigh-quality cially viable, marine while the market is still in its the difficulty and danger of survey- are considerably increased. industrial insurance. insurers are concerned infancy,” Marcus Baker, the chair- ingdamageandthefunctionalityof “As the ice continues to recede “There is therefore a very Aabout the lack of viable informa- manofMarsh’sglobalmarineprac- salvage equipment, along with the commercial viability of these sound rationale for us to be rep- tion regarding the associated risks tice, said. environmental issues. routes will increase. Underwriters resented by our own subsidiary these routes present, according to a “Currently, the majority of ships In particular, pollution from oil will remain cautious and require company in this very important new report from Marsh. and their crews lack adequate spills is of considerable concern to detailed evidence the vessel and its market in Latin America.” The Arctic routes present a experience, are unprepared and P&I insurers, owing to the diffi- crew are prepared,” Baker said HDI-Gerling Seguros Indus- number of opportunities for the the support facilities are not yet in culty of locating and handling during the media briefing. triais has received a licence to marine and energy sectors as Arc- place for full-scale commercial spillsinthisregion.Duringamedia As the soft market continues for operate in the country from tic ice continues to recede. voyages through the Northern Sea briefing on the report, one Marsh marine classes, there is some appe- Brazil’s regulator, the Super- However, an absence of histori- Route and the North-west Passage. representative observed it is not tite in the market to write these intendênciadeSegurosPrivados. cal loss information, inaccurate “In the absence of hard facts, it is clear how oil will react in very risks, and “entertain product surveys and reduced coverage extremely difficult for marine cold water “and that potentially development”, particularly as a “Many up-and-coming available by navigation aids such insurers to price an insurable risk, presents an enormous risk on the means of diversification. companies in [Brazil] as global positioning system (GPS) or even to agree to cover a voyage liabilitysideofthings”. Baker added: “The London mar- have a big requirement and the Galileo global navigation in the first place,” he continued. After the skyrocketing costs of ket will be critical in moving this for high-quality satellite system, among other The Arctic shipping routes, the removals of both Costa Concor- forward. I don’t doubt it will take industrial insurance” things, has meant insurers are which are considerably shorter dia and MV Rena in more accessible the lead on how these risks are Christian Hinsch having a difficult time in under- than some of the more traditional but also environmentally sensitive underwritten and establish pre- HDI-Gerling writing the potential high risks in routes, present high risks that areas, which are still fresh on the mium rates.” QBE to raise $750m equity and sell off non-core assets

QBE has announced a number of American operations, described by When combined with the capital premium and net incurred claims sale of its central and eastern Euro- initiatives aimed at boosting its chief executive, John Neal, as “frus- measures announced today, we by around $390m. pean operations and the creation capital strength, including raising trating”. “However, we acted deci- are confident we have turned the “Medical malpractice is one of of a joint venture structure for two more than $750m of equity and sively to put this issue behind us. corner on performance consist- the most complex and long-tail ofitsAustralianagencybusinesses. selling off certain assets, writes Our results show tangible signs of ency with enhanced financial classesofbusinesstoappropriately Gross written premium was Scott Vincent. returning to levels more consistent transparency and flexibility.” reserve for and we are delighted to down 10% to $8.4bn during the first The Australian insurer reported with shareholders’ expectations, Neal said QBE had also reinsured have been able to reinsure these half, mainly attributed to Europe net profit of $392m during the absent the Latin American reserve the risk of any further adverse liabilities with clear benefits for and North America. QBE said the first half of the year, compared development and the impact of development with its Italian and our balance sheet,” Neal said. reductioninEuropewasareflection with $477m during the opening six lowerrisk-freerates,”hesaid. Spanish medical malpractice The equity raise will primarily of its exit of a number of non-core months of 2013. “We are pleased our underlying claims reserves. The transaction is be used to repurchase and cancel and poorly performing businesses, The results included pre- business is demonstrating the solid expected to have a broadly neutral existingdebt,whilecapitalwillalso while in North America the reduc- announced reserve strengthening progress QBE is making towards impact on QBE’s underwriting beboostedbyplanneddivestments tion was due to a further significant of $169m in the company’s Latin deliveringimprovedperformance. result, reducing both net earned of QBE’s US agency businesses, the cutinitslender-placedportfolio. 4 www.insuranceday.com| Wednesday 20 August 2014 TECHNOLOGYFOCUS

The world gets smart

I like to bring you something a little different on this page – ideas that will strike a chord or give a new viewpoint. This time Steve Adler offers a fascinating new way into a really big idea. It is the idea that, pretty soon, all the things around us are going to be collecting and communicat- ing data, via the net. There is a lot of hype about the so-called “internet of things”. But it is a topic insurance profession- Trees in Palo Alto, California: als ignore at their peril. Relevant mapping trees and giving them data is the lifeblood of the URIs can help save the planet – but how? industry and as smart devices proliferate in the world around Andrey Bayta/Shutterstock.com us, there is more and more data wecanusetocreatenewproducts and services. We are on the threshold of a period that will make complaints about “infor- The internet of trees mation overload” look quaint. The great news is the industry is better prepared than ever for this vast influx of valuable and potentially game-changing data. An internet of trees is no less ridiculous than an ‘internet of things’ The ACORD standards process is mature and global – ready to A leading cause of gas leaks is who climb its boughs, birds that they planted and the things they adapt to any new information Steve Adler trees, whose green leaves soak up live in its branches and people who did. URI mapping and open data, sets that become relevant to the IBM CO2 and release oxygen but whose experience events beside it. Open however, offer the possibility for insurance community. Informa- tangling roots wrap around under- data and URIs enable people to add every human being to leave digital tion professionals across the ground pipes and cause fissures detailstotreesandstreetsandlamp records of the lives they led in the industry are focused on data as a and ruptures. In every city in the posts and guardrails and buildings towns where they lived. As a result, business resource, while busi- recently hosted a webinar world, trees beautify the environ- and parks. These details are in a bi- we will be able to look back and ness leaders know information with the chief information ment while corrupting pavements, directional relationship of data understand the histories of our truly is power.n officer of Palo Alto, Califor- streets and underground pipes. publishing and use that describes communities in rich narratives nia, about an open data Some trees have deep roots; oth- the attributes of people’s lives in a about real people. Gregory Maciag is president Iproject in which the city was map- ers have shallow and wide roots. complex web, which defines Andwhentreesaremappedwith and chief executive of ACORD. ping and tagging all of its trees. By Some build complex subterranean exactly what a city is: life and URIs, documenting the extent of He can be reached at gmaciag@ recording location latitude and networks under our lawns, spread- events,past,presentandfuture. their roots and the impact of those acord.org. longitude, genus, age, width, ing to adjacent buildings and Not far from my home is a street roots on gas lines can empower cit- height, fruit and seed, the city is emptylots.Withsomanytreesinso named Middle Neck Road. Halfway ies to hold utilities accountable for creating an asset inventory of its many municipalities, significant up that street is a signpost dedi- cleaning up nasty methane leaks foliage. One of the call-in partici- sums of money are spent on plant- cated to Alicia Patterson, who died before they destroy the planet. This pants asked if the city was also ing and preserving them. People in a car crash on that spot in 1981. new kind of root cause analysis can assigning universal resource indi- take their role for granted without She was just 19 years old at the benefit all living creatures. cators (URIs) to the trees, which ever considering their real net time. All across the world, people This kind of analysis also repre- solicited a long silence and the present value. mark spots where loved ones died sents my vision for open data and question: “What is a URI?” in automobile accidents with rib- theinternetofthings.Itillustratesa URIs are web links for data and Populatingthe‘internetofthings’ bons and flowers and crosses and rich world described in data, acces- they allow any data element to Whether or not you have heard of stars, which last for a while before sible to all, that gives us new have a universal identifier that any the “internet of things”, many in being buried under snow, washed insights into our world that we can web browser can resolve to a thing. the media use this term to tell away by rain or forgotten in time. use to achieve enhanced under- Now, why would anyone want to stories about how toasters can talk But with a global map of trees and standing, communication and his- put trees on the internet? to refrigerators, which is the kind streets, guardrails and intersec- tory, as well as a better future.n Humans are in the middle of a of media nonsense that irritates IT tions all given URIs, anyone can natural gas bonanza, as new drill- professionals endlessly. But is an record these tragic events in open Steve Adler is IBM’s information ing methods and fractured wells internet of trees any less ridicu- data that persists long past the strategist. He founded the IBM data are reaching vast new reserves of lous? Not in the least. organic life of flowers. governance council in 2004, created gas to warm our homes, power In fact, an arboreal internet of We all have seen old photo- the data governance maturity our televisions and even run our things can be a fundamental ena- graphs of how our towns and cities model in 2006, was listed among the vehicles. But every day, all over the bler for global sustainability. looked 100 years ago. But those top 100 most influential people in world, natural gas leaks from Because a tree with a URI is not just photosdonotcaptureallthepeople financial services by Treasury & underground pipes and valves and a thing: it is a living entity that who lived in those cities and the Risk Magazine in 2008 and created collectsundermanholesorescapes changes every year with the envi- houses they built, the lives they led, the information governance into the atmosphere. ronment. It welcomes children the people they knew, the trees community in 2010. www.insuranceday.com | Wednesday 20 August 2014 5 RISKFORESIGHT

Foreign military Mali intervention presents 4.4 complications in Iraq Severe Mali – Increased likelihood of campaign to target international personnel On August 16, a suspected Islamist militant drove into the UN multi- IHS Country Risk Iraq dimensional integrated stabilisa- tion mission in Mali (Minusma) base in Ber, in the Timbuktu circle, 50 km east of Timbuktu, and detonated explosives inside his he office of Iraq’s 4.5 vehicle. The attack is one of several commander-in-chief re- successful suicide attacks in the leased a statement on past year. August 17 saying the Severe The frequency of successful TIraqi government had not granted vehicle-borne improvised explo- foreignmilitaryaircrafttherightto sive device (VBIED) attacks in the operate within Iraqi airspace. The tary action when he takes over. Kurdish northern provinces of Kidal, Tim- Peshmerga delivery of weapons to Kurdish Until then, US and UK action in Iraq buktu, and Gao is likely to increase forces are Peshmerga forces also violated is unlikely to subside. being in the wake of stalling peace negoti- Iraq’s sovereignty, he added. The US authorised the use of air- supported by ationswithnorthernarmedgroups. Although Iraq’s prime minister, strikes in Iraq on August 7 and has US airstrikes Membersofthesegroups,includ-

Nouri al-Maliki, agreed to step been delivering arms to the Pesh- © 2014 Khalid ing the National Movement for the aside on August 15, he is only set merga in Erbil. Mohammed/AP Liberation of Azawad and the High to hand over the premiership to In addition to targeting Islamic Council for the Unity of Azawad, Haidar al-Abadi after a new gov- State convoys, US airstrikes are lised Shia militias and untrained limit the scope of military aid for are likely to be targeted for collabo- ernment is formed. supporting the Peshmerga’s offen- volunteer forces, military action the Peshmerga and delay delivery ration by Islamist affiliates who The statement is probably aimed sive, launched on August 18, to that does not involve local Sunni of pledged aid. support efforts to drive out inter- at highlighting the implications of retake Iraq’s largest but still con- supportandhasthepotentialsignif- It would also raise the risk of a nationalforces. transforming the Peshmerga into tested dam at Mosul. icantly to weaken the Islamic State unilateral Kurdish declaration of Islamist leader Iyad Ag Ghaly a conventional force and their On August 18 UK secretary of in Iraq now depends on Kurdish independence. If Abadi supports announced plans to step up attacks gaining the option to defend their state for defence, Michael Fallon, ground troops, supported by for- theKurds,thiswillincreasethelike- when he returned to northern Mali claim to disputed Arab-Kurd terri- said the UK’s mission in Iraq could eign special forces, military advi- lihoodofhisadministrationmaking on August 8 after an 18-month hia- tory, contested by Sunni and Shia last months and confirmed Royal sors,intelligenceandairsupport. political concessions to turn Sunni tus. Bases, including airstrips, and politicians, militarily. Air Force (RAF) surveillance air- There is a high risk of Abadi’s communities against the insur- patrols in and around Abeïbara, Abadi will probably also be craft were already operating there. government opposing greater gency, consequently enabling the Boghassa, In Khalil, Taghlit, Tes- required to clarify the Iraqi gov- Given the federal government’s armament of Kurdish forces and government to recapture popula- salit, and Tinzaouaten face severe ernment’s position on foreign mili- growing dependence on remobi- autonomy, which would probably tioncentresfromtheIslamicState. risk of VBIED attacks.

Chad/Nigeria – Rising risk of Buni Yadi, Buni Gari, Goniri, and escalation of Boko Haram’s opera- Boko Haram expansion Chad Nigeria Katarko towns in Yobe State. tions in the northeast and Lake The Chadian army intercepted a In Maiduguri, following the Chad Basin area pose a high risk of convoy of Nigerians abducted by burial of 60 troops killed in Gwoza attacks on public places, banks, Boko Haram on the Lake Chad and Bama, wives of soldiers pro- and cash in transit. border,accordingtoareportbythe tested on August 11 against the It also heightens the risk of Jeune Afrique news website on 3.6 5.1 deployment of their spouses to abduction of foreign nationals and August 17. Bama, citing a lack of adequate political and tribal leaders in Over the past two months, the weaponry. Two days after the inci- exchange for ransom or detained Islamist insurgent group Boko Severe Severe dent, ministry of defence spokes- Boko Haram militants. Haram has escalated and man Chris Olukolad cautioned StatessuchasAdamawa,Bauchi, expanded its attacks in north- troops against mutiny. Borno, Gombe, Kaduna, Kano, and eastern states in Nigeria under department in Cameroon. Given uing to hold large swathes of land Nigerian security forces Yobe, as well as northern Cam- emergencyrule(Adamawa,Borno, Boko Haram’s escalating attacks in north-eastern Nigeria is provid- deployedtofightBokoHaraminthe eroon are at risk of such attacks. n and Yobe) and the Lake Chad Basin Chadian president, Paul Biya, has ing the group the time, location three north-eastern states under border areas shared by Cameroon, recently signed a decree and resources needed to plan and emergency rule are poorly moti- IHS Country Risk leverages the Chad, and Niger. to create a fourth military zone to expand its operations. vated. The rising death rate among company’s detailed qualitative and On August 13 Boko Haram better co-ordinate the fight against In early August, it also attacked security forces raises the risk of quantitativeanalysisof204countries, launched an attack on the border the group. communities along the Bama- desertionorderelictionofduty. covering political, economic, legal, town of Bonderi, in Mayo-Sava Boko Haram’s success in contin- Gwoza road in Borno state and Meanwhile, the expansion and tax and security risks. 6 www.insuranceday.com| Wednesday 20 August 2014 BIGINTERVIEW

insurers are now actively targeting between what the large corporate work,agroupofindependentfirms retailing to new clients, our ability regulatory hurdles to meet, it takes areas of the market formerly insurers are able to offer in terms that specialise in risk-transfer solu- to reference the crisis helps enor- a lot longer for them to make the A changing regarded as the exclusive preserve of underwriting capacity and what tions for exporters, traders, inves- mously. Certainly, the clients that finance available to obligors and oftheECAs.“Webelievetheprivate Lloyd’s is now able to offer. tors,banksandfinancehouses. had helped us to build the market therefore the traders can muscle in market is now effectively on a par “Inthepoliticalriskarena,there According to Esdaile, this gives stuck with it because they could see as both financier and off-taker. with certain ECAs,” Esdaile says. is now less of a distinction BPL the ability to service clients in that it worked,” he says. “Those traders are now looking “Andwhileitmighttaketimecul- between Lloyd’s and the London other key export trade credit mar- Aspinall refers to the big shrink- to the insurance market to provide of the guard turally for clients to differentiate companies market in terms of kets, such as Brazil, Italy and the age in liquidity in the banking the guarantee through credit insur- between the two, it is an increasing capacity,” he says. “Fifteen years US. Esdaile describes the founda- sector during the crisis that the ance on the structured deals, rather possibility and a massive opportu- ago, there were maybe a dozen tion of the network in 2000 (with insurance sector, to a certain than to provide funding directly nity for the private market.” players in the market. There are BPL as one of its two founder mem- extent, was able to supplement and because the traders have access to ECAs, he says, typically deal now 42 players, of which more bers) as an important transition enhancewithitsproductofferings. huge quantities of funds them- As the political risk and trade credit directly with clients, rather than than half are Lloyd’s syndicates. in BPL’s transformation from an “There was a huge demand from selves, leveraged off the back of through brokers like BPL. “We’re So Lloyd’s is a very important essentially wholesale broker into a banks because they had their own their balance sheets, in the form of market is being radically reshaped, a not suggesting that we work with playerinthemarket.Theabilityto retail broker. client relationships they were try- revolvingcreditfacilities,”shesays. number of changes are taking place at the ECAs. What we are saying is syndicate among our market is ing to maintain,” she says. “And it Indeed, even large corporate cli- that users of ECAs should work getting easier all the time. So, in Financial crisis was not just banks. Recently there ents are now increasingly looking BPL Global, the oldest independent with us to look at what they are aggregate, the private market Due to the large number of claims hasbeenincreaseddemandforour to the insurance market as an alter- aiming to achieve and let us help really can compete with ECAs in paid by insurers, the global finan- products from commodity traders native to what banks offered them political risk broker in the London them to co-ordinate how they go termsofcapacityandtenure.” cial crisis really helped to validate that have been heading into tradi- in the past, albeit without the fund- market,includingashiftinownership about protecting themselves – BPL, which employs around 70 the value of credit insurance as a tional banking territory and taking ing element. “But many of these whether that be through the pri- people,hasofficesinLondon,Paris, product, according to Esdaile. the lead in large structured trade largercorporatesarecash-richand to a new generation of partners vate market, through the ECAs, or Singapore and Hong Kong, but the “And since the crisis, through finance deals. don’t have a problem with fund- through a combination of the two.” firm is also part of the Global Net- word of mouth, through brokers “The banks now have so many ing,” Aspinall adds.n Another development regards the changes 18 months ago in the Rasaad Jamie Esdaile on... market protocols for credit and Global markets editor political risks at Lloyd’s, a move New generation of partners Russia-related business that greatly increased the under- “A potential combination of writing capacity in that market for clients reducing activity there Esdaile and Aspinall CVs political and credit risk by easing At the same time as the market is Hong Kong and Lucia Petry from founding partners, Charles Berry For BPL, it is about accepting hese are promising but and underwriters remaining previous restrictions on how being transformed, a number of Aon in France. and Anthony Palmer. The reputa- BerryandPalmerwillnotwantto tumultuous times for the cautious in taking on new James Esdaile joined BPL Global in 1997 as a left broking to join AIG as an underwriter. She capacity is allocated among the important changes are taking Esdaile says this is not necessar- tions of Berry and Palmer in the work for another 30 years. “So, political risk and export exposure would force the graduate trainee. Since then, he has built up a subsequently spent 13 years in underwriting, various categories that make up place at BPL, including the ily the start of external hiring at market are based partly on BPL’s the situation as it stands now, is credit insurance market, market to look elsewhere to wealth of experience across the firm dealing with including from 2000 to 2007 as a senior this line of business. appointment of Aspinall in March BPL. Aspinall, Ho and Petry were crucial role in the reintroduction that while they still have sizeable Tcurrently under pressure as a replace lost income.” a wide range of clients. He was appointed to the vice-president at Zurich Financial Services, Commenting on the transforma- this year. highly exceptional cases. of credit insurance into Lloyd’s in stakesinthefirm,collectively,the result of the market’s exposure to limited board in 2004, and to the group goard establishing and heading the company’s trade tion of the PRI market over the past This represents something of a “In the case of [Aspinall], we the early 1990s, but probably more new generation of partners have political events in Ukraine and the Role of Lloyd’s in 2006. credit and political risk division in London. She five years, Sian Aspinall, develop- departure for the firm, which, were halfway there because she importantly, on the part the firm a bigger stake in aggregate,” subsequent imposition of eco- “In the political risk arena, there Sian Aspinall started out as a political risk left Zurich to set up her own political risk ment and technical director at BPL, until very recently, rarely hired has already worked for the firm playedinthedevelopmentofprod- Esdailesays. nomic sanctions on Russia. is now less of a distinction broker in the early 1990s. After a few years, she consultancy, SA Risk Services Ltd. says the new rules introduced by externally. It mainly relied on its and later consulted for us. Her ucts for use by banks, which these “So the control of the company is The country, as a recent report between Lloyd’s and the London Lloyd’s enable a wider number of graduate scheme for recruitment appointment was about timing days constitute more than half of gradually moving from one gener- on the region points out, is one of companies market in terms of players in the market to participate (Esdaile, for example, joined as a and opportunity. It was clear the entire market’s client base. ation to another. And, just to be the largest capacity markets for capacity... T here are now 42 players in the market – both under- underwriting capacity after its investment activity. So there is a on some of the longer-term trans- graduatetraineein1997)andonits [Aspinall] would be happy to EsdaileacknowledgesBerryand clear, this is not something that’s political risk and export credit players, of which more than writers and brokers – have made highly successful negotiation of the huge opportunity for other indus- actions and enables the market to in-house training programmes for rejoin the company and a deal Palmer still very much represent easytodo.Butwe,including[Berry underwriters, which are poten- half are Lloyd’s syndicates. So significant amounts of income global financial crisis. trial or service sectors to become be much more responsive to the staff development to nurture a could be struck,” he says. the public face of BPL but, he says, and Palmer], have worked very tially exposed to significant losses Lloyd’s is a very important from Russia-related business over Indeed, over the past five years, comfortable with our products. demand from both longstanding culture that the firm regards as “We don’t have a lot of people behind the scenes, a number of hard at it and we are now defi- if the US and EU sanctions are player in the market. ” the past five years. according to the most conservative “So we see nothing but an oppor- and new clients that is currently appropriate for an independent, within the firm that used to be things have changed over the past nitely on track to establish a well- further extended and severely “As such, a potential combina- estimates, the private political risk tunity for enormous growth in this out there. specialist broker focused on estab- underwriters. So the experience few years. And, dating back to the balanced equity base for the firm. weaken the Russian economy. Aspinall on... tion of clients reducing activity and export credit market (which class of business. And that view is “Previously, our market used to lishing long-term relationships shebringswith herishugely valua- speech Berry made to a big gather- It is not a new strategy. It has been Such a weakening could result in there and underwriters remaining has been profitable for all but one shared by almost all of the insurers be a very short-term market, with a with clients and underwriters. ble. Ho was hired to enhance our ing of clients and underwriters at going on for some time.” the corporate and state-owned PRI market changes cautiousintakingonnewexposure of those years) has increased its with which we deal. maximum policy period of three However, Aspinall was no capabilities in Asia and Petry to the firm’s 30th anniversary cele- Esdaile points out the changes entities, which are the subjects of “The [private] market is now wouldforcethemarkettolookelse- overall underwriting capacity by “We anticipate the private politi- years,” she says. “But we have seen strangertoBPL.Shestartedherlife strengthenourimportantplatform brations last year, there have been are not about Berry and Palmer political risk and trade credit providing credit insurance cover where to replace lost income. How- slightly more than 50%. cal risk and export credit market enormous changes. The market is as a political risk broker in the in Paris. The demand in Asia is several public signals, including retiring or taking a back seat. insurance, coming under financial on a seven- to 10-year basis and ever, if this turns out to be the case, The size of the market will most will, over the next few years, now providing credit insurance early 1990s and worked for the growingandweneededtoincrease this interview, about the way BPL Indeed, Berry is still very active in strain to the extent that they political risk cover for up to there may arguably be a positive likelydoubleortrebleoverthenext achieve a significance and a profile cover on a seven- to 10-year basis firm for two years before she left to our staff count there quickly, and intends to move forward. all areas of the firm’s business and default on their obligations 15 years. There is now a outcome, in the sense underwrit- few years. There are two reasons that will allow it not only to work and political risk cover for up to 15 join AIG as an underwriter. Francehasalwaysbeenacoremar- The speech, Esdaile explains, Palmer currently serves as chief towards the market’s clients, meaningful volume of ers will have to look at new territo- for this, Esdaile says. “First, within alongside the state-owned export years. There is now a meaningful She subsequently spent 13 ketforthecompany.” “made a clear statement about the executive of the Singapore office according to James Esdaile, a direc- capacity in the market.” ries and sectors in order to sustain the context of the current soft credit agencies [ECAs], but also to volume of capacity in the market.” years in underwriting, latterly as a company being 30 years old. The which he set up in 2012. tor at political risk and specialist and grow their premium income.” general insurance market, our offer an alternative to the ECAs for These changes build on the origi- senior vice-president at Zurich Personality driven plan is that in another 30 years’ But for Esdaile, it is also about Heading into banking territory credit insurance broker BPL Glo- Although the private political class of business is growing by medium- to long-term political and nal Lloyd’s regulations, allowing Financial Services, establishing But in many ways, the emergence time, we will still be employee- reassuring the market. “So it is not “Recently there has been bal, which celebrated its 30th anni- risk market has been cautious in virtue of an inflow of capital into it credit risk insurance.” syndicates to issue contract frus- and heading the company’s trade of a new generation of partners owned and independent. It was a about [Berry and Palmer] stepping increased demand for our versary in June last year. extending cover to Russia in recent as a specialist area of the market tration and trade credit insurance credit and political risk division in such as Esdaile and Aspinall repre- deliberate message to the market back. It is about the fact that we products from commodity “Ofcourse,itisfartooearlytotake months, the exposure remains with higher returns. In this regard, Meaningful capacity cover to financial institutions, London. This was followed by a sents an even more radical depar- we have always been and will now employ 70 people and we are traders that have been heading a firm view on this eventuality but considerable, as the vast bulk of the we very much expect our market to A number of developments in the which allowed these institutions to seven-year career as a political ture for the firm, which is not only always be an employee-owned notjustrestrictedtothosetwoindi- into traditional banking territory it’s fair to say underwriters with market’s existing commitment to continue growing,” he says. aftermath of the financial crisis improvetheircreditriskratingand risk consultant. the oldest and by far the best company. The reality is that for viduals,” he says. and taking the lead in large existing exposure are not taking on the country is through medium- to “The second thing to say is that servedtobringaboutthissituation, claim capital relief under inter- It is BPL’s proudest boast that it known independent political risk some time now, we have had a “And we also like think both our structured trade finance deals.” new exposure, while new players long-term contracts. the range of activities and sectors including the decline in the credit national banking rules for the very rarely loses people to the broker,butalsowidelyregardedas process in place to redistribute the clients and the underwriting mar- are unlikely to want to put Russia But the length of those contracts, currently covered by our market – risk ratings of a number of Euro- trade and export finance trans- competition; the few who left, like one of the most personality-driven equity holding from the older part- ket value our expertise and see our exposure on their books at the uncomfortable as they may be such as the banks, the capital goods pean ECAs, some of which, Esdaile actions for which they have pur- Aspinall, went into underwriting. brokingfirmsinthemarket. ners down to the younger partners independence as key to the health presenttime,”Esdailesays. for the market at the moment, is exporters and the commodity trad- says, are lower than the ratings of chased insurance cover. BPL’s two other external hires this This is largely due to the high and out among the firm’s employ- ofthemarketand,therefore,would “Of perhaps more immediate also a sign of its growing sense of ers – is actually a very tiny propor- players in the private market. Esdaile says the changes also year were Margaret Ho from JLT profiles of the two principal and ees more generally.” liketoseeuscontinueasweare.” concern,therefore,isthefactmany confidence and the expansion of its tion of overall global trade and Indeed, some private market allowed Lloyd’s to bridge the gap www.insuranceday.com| Wednesday 20 August 2014 7