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EU regulator warns relocating UK insurers against using ‘empty shell’ subsidiaries

p3 London Market Awards: Celebrating Hamilton the market’s triumphs Re’s Lefebvre: Digital investment crucial to maintaining relevance

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ID-Client Feedback-Ad-260x70.indd 1 12/05/2017 09:39 2 www.insuranceday.com | Thursday 1 June 2017 NEWS Hamilton Re’s Lefebvre:

Market news, data and insight all day, every day Insurance Day is the world’s only daily newspaper for the international insurance and and risk industries. Digital investment crucial Its primary focus is on the London market and what affects it, concentrating on the key areas of catastrophe, property and marine, aviation and transportation. It is available in print, PDF, mobile and online versions and is read by more than 10,000 people in more than 70 countries worldwide. to maintaining relevance

First published in 1995, Insurance Day has become the favourite publication for the London market, which relies on its mix of news, analysis and data to keep in touch with this fast-moving and vitally important sector. Its experienced and highly skilled insurance writers are well known and respected in the market and their insight is both compelling and valuable. Chief underwriting officer on using technology to gain a competitive advantage Insurance Day also produces a number of must-attend annual events to complement its daily output, including the Insurance Day London Market Awards, which recognise and celebrate the very best in the industry. Rebecca Hancock Reporter ‘To be successful For more detail on Insurance Day and how to subscribe or you have to be attend its events, go to subscribe.insuranceday.com a new kind of Insurance Day, Christchurch Court, 10-15 Newgate Street, London EC1A 7HD company in the he decisions re/insurers make digital age... when it comes to technology in- vestments will play a decisive It’s trickier Editor: Michael Faulkner role in which carriers remain for larger +44(0)20 7017 7084 Trelevant in the current soft market. [email protected] companies – Speaking to Insurance Day, Claude smaller firms can Editor, news services: Scott Vincent Lefebvre, chief underwriting officer +44 (0)20 7017 4131 for casualty and specialty at Hamil- be nimbler and [email protected] ton Re, warned that in response to in- more flexible’ creasingly difficult market conditions Reporter: Rebecca Hancock +44 (0)20 7017 5570 insurance companies must adapt their Claude Lefebvre [email protected] business models. Hamilton Re “To be successful you have to be a Global markets editor: Graham Village new kind of company in the digital age,” +44 (0)20 7017 4020 he said. [email protected] Lefebvre said it was crucial for re/ Global markets editor: Rasaad Jamie insurers to change with the times and relation to IT and how the business op- tools, Lefebvre said Hamilton Re was +44 (0)20 7017 4103 embrace technology to “create a com- erates, he added. better able to manage both risk selec- [email protected] petitive edge”. “It’s trickier for larger companies – tion and the pricing of risks as a result. But the executive acknowledged smaller firms can be nimbler and more “Both capturing and the harmonisa- Head of subscriptions: Carl Josey +44(0)20 7017 7952 adapting business model to navigate flexible,” Lefebvre said. tion of data is key – it’s at the heart of Key account manager: Abby Straker +44(0)20 7017 7299 the changing digital landscape is easier Lefebvre said central to Hamilton the company,” he said. Account manager: Matthew Smith +44(0)20 7017 7894 Business development manager: Toby Nunn +44(0)20 7017 4997 for some market players than others. Re’s digital strategy had been the cre- Lefebvre said through investment Advertising/events: Jefferson Emesibe +44(0)20 7017 4061 “We’ve learnt from the big re/insurers ation of a proprietary risk manage- in technology Hamilton Re was able Head of production: Liz Lewis +44 (0)20 7017 7389 what not to do,” Lefebvre said. ment platform, Hamilton Analytics to differentiate itself from its competi- Production editor: Toby Huntington +44 (0)20 7017 5705 Smaller companies were better and Risk Platform (Harp), which is tors in the market and access new rev- Subeditor: Jessica Sewell +44 (0)20 7017 5161 placed than their larger counterparts to a collection of software tools use to enue streams. Events manager: Natalia Kay +44 (0)20 7017 5173 undertake the necessary digital trans- build, optimise and analyse Hamilton “It’s getting more difficult to find re- formation programmes, he argued. Re’s risk portfolio. ally attractive new business, but we do Editorial fax: +44 (0)20 7017 4554 Being agile was crucial, especially in Alongside some third-party modelling find it,” Lefebvre added. Display/classified advertising fax: +44 (0)20 7017 4554 Subscriptions fax: +44 (0)20 7017 4097 All staff email: [email protected] TSR increases forecast for 2017 Insurance Day is an editorially independent newspaper and opinions expressed are not necessarily those of Informa UK Ltd. Informa UK Ltd does not guarantee the accuracy of the Atlantic hurricane season information contained in Insurance Day, nor does it accept responsibility for errors or omissions or their consequences. ISSN 1461-5541. Registered as a newspaper at the Post Office. Tropical Storm Risk (TSR) has become TSR has forecast a 33% probability Published in London by Informa UK Ltd, 5 Howick Place, the latest forecasting unit to increase its the 2017 Atlantic hurricane season will London, SW1P 1WG. forecast for the 2017 Atlantic hurricane 14 see above-average activity. Printed by Stroma, Unit 17, 142 Johnson Street, Southall, season, writes Scott Vincent. Named storms Last week, the official Nation- Middlesex UB2 5FD TSR said it now expects 14 named al Oceanographic and Atmospher- storms, six hurricanes and three major Tropicak Storm Risk ic Administration (NOAA) forecast © Informa UK Ltd 2017. hurricanes to form this year, including now expects for the suggested a 45% probability of an April’s tropical storm Arlene. above-average season, with a 70% like- No part of this publication may be reproduced, stored in a This represents a slight increase on the 2017 Atlantic season lihood of 11 to 17 named storms form- retrieval system, or transmitted in any form or by any previous forecast, primarily driven by ing during the course of the season, of means electronic, mechanical, photographic, recorded or the expectation for weaker trade winds which five to nine could become hur- otherwise without the written permission of the publisher of Insurance Day. following a reduction in the expectation ricanes and two to four could become for El Niño conditions this summer. major hurricanes. www.insuranceday.com | Thursday 1 June 2017 3 NEWS EU insurance regulator warns relocating UK insurers against using ‘empty shell’ subsidiaries

Eiopa will closely monitor national supervisors to Eiopa: the regulator warned ensure ‘proper supervision’ insurers looking to set up ‘empty shells or letter boxes’ to do business in the EU this Michael Faulkner practice will not be tolerated Editor ‘Sound supervision demands appropriate location of management and key

he head of the EU’s in­ functions, including sound surance super-regulator outsourcing and reinsurance has sounded a warning that “empty shell” com­ policies. Empty shells or letter Tpanies cannot be used by UK in­ surers in a bid to maintain access boxes are not acceptable’ to EU business. Gabriel Bernardino Gabriel Bernardino, chairman Eiopa of the European Insurance and Occupational Pensions Authority Bernardino’s comments came likely to encourage others to fol­ (Eiopa), said European subsidiar­ as many insurers are weighing up low or, at the very least, give the ies of UK insurers needed to be where to set up a subsidiary to ac­ state greater consideration. subject to proper supervision. cess European business if the UK Bernardino said Eiopa’s over­ “Sound supervision demands loses access to the single market sight team was visiting national appropriate location of man­ after Brexit. supervisory authorities engaged agement and key functions, in­ Luxembourg has been vying in discussion with UK companies. cluding sound outsourcing and with Ireland as the front-runner Eiopa is to publish guidance for reinsurance policies,” Bernardi­ location for restructuring UK car­ national supervisory authorities no told Insurance Asset Manage- riers, with Malta, Belgium and the on “sound principles for authori­ ment Europe. Netherlands also being considered. sation and supervision”. Ber­ “Empty shells or letter boxes The decision of Lloyd’s to set up nardino said Eiopa will “closely are not acceptable,” he added. its European base in Brussels is monitor their implementation”. European regulatory bodies are keen to avoid regulatory arbitrage FM Global receives arising from competition between national supervisory authorities. They are also concerned about Luxembourg licence European subsidiaries of restruc­ turing insurers outsourcing or for European hub delegating a substantial degree of their functions to other entities, US commercial property insurer FM Global has been granted a licence which might have a detrimental “Firms need to be subject to the But other jurisdictions have to launch an operation in Luxembourg, where it intends to establish impact on supervision. same standards of authorisation been making great efforts to per­ a European hub. Yesterday, the European Se­ and ongoing supervision across suade insurance executives of their FM Global, which has operated in continental Europe for more than curities and Markets Authori­ the EU27 to avoid competition on merits, offering incentives such as 50 years, said the licence had been granted to the newly formed FM ty (Esma) published an opinion regulatory and supervisory prac­ a streamlined application process Insurance Europe. setting out general principles tices between member states.” or lower taxes for foreign workers. The insurer said Luxembourg had been selected as it was “a multi­ aimed at “fostering consistency Luxembourg has been the ven­ Mazars partner Sarah Ouarbya national business-friendly financial centre with regulatory expertise in authorisation, supervision and ue of choice for a number of car­ said it remained to be seen wheth­ that enables us to remain true to our mutual insurance company busi­ enforcement” related to the re­ riers seeking to maintain access er these tactics would be success­ ness model”. location of entities, activities and to Europe. AIG, FM Global and ful in the long run. Chris Johnson, the FM Global executive vice-president who will functions from the UK. more recently Hiscox have said “Sometimes perceptions of the serve as the hub’s managing director, said: “Most notably, Luxem­ “The EU27 have a shared interest they plan to create an entity in the ease of doing business in a par­ bourg is a hub that permits EU passporting, which fits our business in building a common approach to Grand Duchy. ticular country are hard to break model perfectly.” dealing with relocating firms that Dublin was, initially, seen as the and promises may be found to Johnson said the group’s London operation would remain a critical wish to continue to benefit from obvious choice for insurers, given be empty. Political uncertainty in part of the company’s strategy. access to EU financial markets,” its proximity to the UK and estab­ several counties in the EU is also a Esma’s chair, Steven Maijoor, said. lished re/insurance market. factor,” she added. 4 www.insuranceday.com | Thursday 1 June 2017 www.insuranceday.com | Thursday 1 June 2017 5 M&A $4bn Table: Major insurance underwriting company M&A deals and flotations 2017* , and Aegon Acquirer Target Notes Price ($m) Funds the planned IPO of minority Aberdeen Asset Management Agreed deal valued at £11bn, with Standard Life shareholders to own two-thirds of combined company 13,495 stake in US Sompo Endurance Japanese group expands its international presence 6,300 operations could deals underline Institutional investors Axa Axa plans an IPO of its US operations next year est 4,000 raise for Axa Arch AIG Acquisition of United Guaranty now completed 3,400 Liberty Mutual Ironshore Liberty has completed the takeover from Fosun International 2,935 Europeans’ strategic NN Delta Lloyd NN has now closed the takeover of Delta Lloyd 2,695 Institutional investors PICC Chinese non-life group plans offering on Shanghai exchange 1,930 CF Corp Fidelity & Guaranty US investment group to buy life and annuity insurer 1,835 M&A moves SquareTrade US warranty provider, founded in 1999 1,400 KB Financial KB Insurance Korean group is to acquire remaining 60% of insurance arm 1,140 Omers Allied World Omers is to take a 21% stake in Allied World which is being acquired by Fairfax 1,000 Leading European companies are taking another look at Enstar RSA Enstar will take over RSA’s UK employers’ liability legacy book via reinsurance 977 Institutional investors ING Life Korea IPO of a stake of about 40% 974 their position in the US and other mature markets First Origin Hong Kong Life First Origin is an investment group based in Hong Kong 914 Institutional investors Fairfax Fairfax is selling a stake of 25% in Fairfax India 900 priority lines, including health, Run-off Graham Village capital-light savings products, pro- Meanwhile, Dutch group Aegon Santa Lucia Aviva Aviva has sold stakes in various Spanish life businesses 534 Global markets editor tection and non-life commercial is also acting in the US market Zurich Cover-More Zurich has taken over Australian travel insurer Cover-More, also active in India and the US 551 lines operations. Or Axa may de- through a proposed deal that will SocGen Aviva Aviva has sold its 50% interest in French insurer Antarius 550 cide to give some or all of the pro- see Bermuda’s Wilton Re take over Travelers Simply Business Acquisition is a UK tech-based broker for small business accounts 490 ceeds back to shareholders. its two largest run-off units, the Assured Guaranty MBIA MBIA UK, mortgage insurance group’s European business 370 © 2017 Chrisophe Ena/AP trategic considerations are In any case, the US operations will payout annuity business and the driving some significant be better positioned as a listed com- bank-owned or corporate-owned United Insurance American Coastal United/UPC has completed takeover of American Coastal 330 merger and acquisition pany in the US, Axa said, and it plans life account. Graph: Number and value of deals by type, May 2017 Catalina Hartford Catalina has bought Hartford Fin Products and Downlands 320 (M&A) moves by European to increase their capitalisation by Under the agreement, Wilton Re Markel SureTec Markel has bought surety provider SureTec 250 Sgroups and recent weeks have seen converting about $1bn of outstand- US will reinsure $14bn of Aegon’s n Number Bupa Arabia Bup has bought an additional stake in BUPA Arabia bringing total to 34% 246 12 7 n Value a series of deals that continue the ing debt owed by Axa US to Axa Transamerica life subsidiaries’ lia- trend of restructuring by several Group in advance of the flotation. bilities, with completion expected Kotak Mahindra Bank OM is selling its 26% stake in Indian life joint venture 201 leading European players. Speculation now centres on over the summer months. Argenta Gives German group exposure to Lloyd’s market 180 6 10 Even the leading companies are Axa’s long-term plans for the US The rationale for the deal is clear, Allianz Irish Life German group to take remaining 33.5% stake in Irish subsidiary 171 finding they cannot operate at scale market post-IPO. The highly ma- even though the reinsurance will Fairfax Tower Ltd Fairfax has agreed to buy New Zealand insurer but faces rival bid from Vero 144 in all markets. Emerging markets ture, capital-intensive US market result in a book loss of about €270m 5 Validus ADM crop Validus to take Archer Daniels Midland’s crop business 128 8 offer attractive potential but Eu- does not seem to fit Axa’s current for Aegon. The Dutch group wants Total Value of deals ($m) Number of ropean companies are adopting a focus on high-growth regions and to cut the amount of capital it has Assurant Green Tree US insurance agency focused on housing market 125 deals: 19 4 targeted rather than broad-brush products that require less capital. tied up in run-off business and Global Bankers Insurance Enstar Enstar is selling Pavonia Holdings 120 approach in Asia and elsewhere. The group has already pulled the transaction will improve the 6 Deal size (where Vitruvian CFC Investor has backed mbo of $575m mga CFC 115 financial details And the desire to get rid of lega- out of the life and savings sector group’s Solvency II ratio by about given): $12,288m 3 cy or non-core operations is greater in the UK, another mature market, six percentage points. The deal AIG Hamilton AIG has agreed to buy Hamilton’s US platform to develop insurtech applications 110 than ever following the advent of last year, completing the sale of the should cut annual capital genera- CBL Corp Securities & Financial Solutions Europe New Zealand credit insurer has taken 71% stake in French construction specialist 101

Number of deals Number 4 the Solvency II regime. Elevate wrap platform to Standard tion from the US operations by just International Finance Corp Union Life IFC has committed to investing up to $100m in China’s Union Life 100 2 Most importantly of recent de- Life and its investment, pensions €27m following the transaction. velopments, in what appears to be and direct protection account to The move is in line with Aegon’s Source: Company announcements/Insurance Day M&A database 2 *announced and/or completed in 2017 1 the first sign of a major refocus- , as well as its off- wider plans as it seeks to improve ing, French group Axa last month shore investment bonds business its performance in the US market. It announced its intention to float a in the Isle of Man. Early this year, is carrying out a strategic overhaul Refocus In a similar move, in April Avi- Map: Number and total value of M&A deals by region, May 2017 0 0 minority stake in its US operations, Axa sold its UK commercial lines of its product offerings and chan- Aviva’s strategic refocusing of its va sold its 50% shareholding in probably during the first half of broker, Bluefin, to Marsh. nel position, reducing the size of international operations continued French life joint venture Antarius Life next year. The initial public offering Some observers believe Axa is pre- its geographical footprint in the US last month with the announcement to Sogecap, a subsidiary of Société Non-life (IPO) should consist of the group’s paring to follow the route fellow Eu- and disposing of non-core assets. of the sale of its 50% shareholdings Générale, for €500m in cash. An- Europe Reinsurance US life and savings operations, as ropean group ING took with first the Last year, Aegon announced the in Spanish life and pension joint tarius operated as a joint venture North International/ Number of deals: 1 well as its interest in fund manager flotation of its US business, renamed divestment of its £9bn ($11.5bn) ventures Unicorp Vida and Caja Es- between Aviva and another SocGen America Deal size: $435m AllianceBernstein, and could raise Voya, and then the full disposal. annuity portfolio in the UK through paña Vida, as well as its retail life subsidiary, Crédit du Nord, which Number of deals: 9 Deal size: $6,323m Chart: Deals by size range, May 2017 (where financial details given) as much as $4bn. Following Axa’s latest announce- two transactions, one with Rothe- insurance business Aviva Vida y had the option to acquire Aviva’s in- UK/London The US business is centred on ment, rating agency Standard & say Life, the other with Legal & Pensiones. Buyer Santalucia will pay terest after the expiry of a 12-year Number of deals: 3 Total number of deals: 10 Axa Equitable and subsidiaries, Poor’s said it viewed the US life General. The expectation is the €475m to acquire the businesses. distribution agreement between Deal size: $320m including Mony Life, as well as business that is set to be included in transactions will lead to a total cap- Aviva said the disposal would in- the partners. the group’s stake of about 64% in the IPO as strategic rather than core ital release of £500m once the trans- crease its Solvency II capital surplus However, Aviva Investors France 4 Alliance­Bernstein. Axa took a fi- to the overall Axa group. actions are completed through the by about £130m. has entered into a new agreement Bermuda nancial interest in Equitable on Developments in the UK and now lengthy Part VII transfer process. Aviva sold its shareholdings in with Sogecap to continue manag- Number of deals: 2 $1bn+ that company’s demutualisation the US are just the highlights of what Aegon booked an after-tax loss of joint ventures with Spain’s Bankia ing more than €10bn of assets held Asia-Pacific 2 Deal size: $2,935m in 1992, with the French group be- has been a busy period for Axa in £481m in the second quarter of last in 2012 and Novacaixagalicia Gru- by Antarius. Number of deals: 3 $249m to coming majority owner in 2000. terms of M&A. It has sold operations year to cover the divestment. po in 2014 for £720m. But the latest Outside Europe, Aviva has been Deal size: $1,930m $499m 1 Axa said the flotation would in the central and eastern European But Aegon is also developing other sale does not mark the UK group’s in more expansive mood over the Africa create “significant additional fi- region to parts of its UK account, completing complete withdrawal from the past 18 months. This year it has ac- Number of deals: 1 3 $500m to nal flexibility to accelerate Axa’s but strengthened its position in Po- the acquisition of Cofunds, an in- Spanish life market as it will remain quired VietinBank’s 50% holding in Deal size: $246m $100m to $999m transformation, in line with Am- land with the acquisition of Liberty vestment trading platform, last year a shareholder in joint ventures with life joint venture VietinBank Aviva $249m bition 2020 [its strategic plan] Mutual’s non-life operation. Last and also taking over BlackRock’s UK Caja Granada and Cajamurcia, both Life. Last year, it acquired Canadi- objectives”. The proceeds of the year it sold its Portuguese operations defined contribution platform and part of Banco Mare Nostrum, and an insurer RBC General and took an transaction will go towards Axa’s to for €189m ($211.5m). administration business. Pelayo Group. additional 23% of Aviva India. n 6 www.insuranceday.com | Thursday 1 June 2017 www.insuranceday.com | Thursday 1 June 2017 7 LONDON MARKET AWARDS Celebrating the This year’s categories Adviser of the Year triumphs of the Broking Team of the Year Claims Team of the Year London market (sponsored by Vitesse) Company of the Year Entries set to open for this year’s annual The Scor Diversity & Talent Management London Market Awards Award (sponsored by Scor)

needs of the customer; those creating Michael Faulkner Industry Achiever of the Year new business models and seeking out Editor fresh opportunities in emerging risks. (sponsored by Allied World) So it is with great pleasure that In- surance Day will next week open the MGA Initiative of the Year entry process for this year’s annual (sponsored by EC3/Legal) he shape of the London mar- London Market Awards, which recog- ket is continuing to change as nise the very best in insurance. Rising Star of the Year companies grapple with the Last year’s winners included Tal- continued tough market con- bot chairman, Rupert Atkin, and in- Technology Initiative of the Year Tditions, evolving distribution trends and dustry icon Brian Duperreault – who the threat of international competition. has since taken on the job of turning (sponsored by Acord) The UK’s vote to leave the EU and around AIG – broking group Ed, His- Donald Trump’s election as president cox Re and Markel International. Transaction of the Year (sponsored by FWD) of the US only add to the challenges The awards ceremony will be on and uncertainties. November 23 at the Hilton London Underwriting Team of the Year It is in these conditions where the Bankside hotel. most resilient and innovative stand All entries should be submitted The Charles Taylor Newsmaker of the Year out. These challenges demand every electronically at www.insuranceday- (sponsored by Charles Taylor) ounce of tenacity, skill and creative awards.com, where you can also find thinking to prevail. out more about the categories. Insurance Initiative of the Year Insurance Day has been there Entries will be judged by our es- throughout to champion the industry’s teemed panel of independent and ex- (sponsored by NIIT) success stories, keeping a watchful eye pert judges, who will be announced on those driving new products and in the coming weeks. Lifetime Achievement Award solutions to meet the ever-demanding Good luck. n Sponsored by Financial Conduct Authority: risk chief Keith Jackson is joining the financial watchdog as Jackson moves director of general insurance to Financial Conduct Authority

Appointed director of general insurance at UK watchdog

who is heading to Arthur J Gallagh- Michael Faulkner er to be a non-executive director. Editor Green’s departure from the fi- nancial watchdog after nearly three year was announced in Oc- tober last year. on’s chief risk officer, Jackson, who joined Aon from Keith Jackson, has Towergate last year, is understood been appointed direc- to be taking up the role this week. tor of general insur- He will oversee UK general in- Aance at the Financial Conduct surance providers and brokers, Authority (FCA). including Lloyd’s and London Jackson replaces Simon Green, market firms. Markel International Former Platinum chief Price joins Hanover expands board audit committee

with pair of Former Platinum Underwriters chief executive Michael Price is to join The Hanover Insurance Group promotions board of directors on July 3, writes Scott Vincent. Markel International has expanded its board, appointing Price will serve on the board’s Hannah Purves (pictured) and Simon Wilson to the boards audit committee. of Markel Syndicate Management and Markel Inter­ Price served as president, chief national Insurance Co, writes Michael Faulkner. executive and deputy chairman Purves has been Markel’s director of claims since the of Platinum from 2005 until it beginning of 2013 and was previously head of claims was acquired by RenaissanceRe for the political and contingency group at Beazley. She in 2015. is credited with transforming Markel’s claims function. Before that he served as Plati- Wilson has been head of Markel’s national markets num’s chief operating officer and Price: the former Platinum business, which deals with national and regional bro- was president of Platinum US Underwriters president, chief executive and deputy ker’s domestic business, since 2015. He joined Markel from 2002 to 2005. chairman is joining the in 2010 from Lloyd’s, where he was managing direc- He was chief underwriting of- board of Hanover Group tor of its Asia operations. ficer of the former reinsurance William Stovin, president of Markel Inter- business at The St Paul Companies, national, said: “We are delighted to make use of from which Platinum emerged, He began his career with the their experience and insights as we plan and and also held senior roles with oth- actuarial and consulting firm Mil- deliver the success of Markel International.” er industry companies. liman & Robertson.