MONTE CARLO SPECIAL

MARKET NEWS, DATA AND INSIGHT ALL DAY, EVERY DAY TUESDAY 12 SEPTEMBER 2017

ISSUE 4,932

Re/insurers look to amend business plans as they hunt for post-Irma opportunities p3

ILS market undaunted by hurricanes but In depth: Cat losses pose fundamental trapped collateral may dampen liquidity questions for reinsurers

p3 p9-12

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Re/insurers look to amend Storm surge flooding to business plans as they hunt drive large proportion of Irma losses for post-Irma opportunities Flooding looks set to drive a sig- Irma had earlier made its first nificant proportion of insured US landfall in the Florida Keys as losses from Hurricane Irma, a category 4 hurricane. Executives are already considering how strategies may which is expected to become one Robert Muir Wood, chief re- of the three costliest storms to im- search officer at RMS, said the change following 2017’s devastating hurricane season pact the US, writes Scott Vincent. storm’s earlier landfall in Cuba AIR Worldwide’s latest estimate as a category 5 hurricane had was considering potential oppor- likely to be earnings events than of losses from the storm suggests sapped some of its strength be- Michael Faulkner, tunities in marine, energy and capital events. William Haw- the US insured impact will total fore the Florida landfall. Monte Carlo Editor specialty, as well as the potential kins, analyst at Keefe, Bruyette & between $20bn and $40bn, as well The subsequent landfall in to write more flood business. Woods, said he expected Harvey as any losses incurred by the Na- south-west Florida also meant The underinsurance of flood to be enough to exhaust the ca- tional Flood Insurance Program. the storm lost the fuel supply it risk in the US is an issue that has tastrophe budgets of many of the According to Property Claim would have received had it re- e/insurers are looking been particularly highlighted by biggest reinsurers in the second Services, only 1992’s Hurricane mained over water on its jour- to amend their busi- Hurricane Harvey. Insured losses half of the year. Andrew and 2005’s Hurricane ney up to Tampa. ness plans for next year from Harvey have been estimated And while Hurricane Irma had Katrina have exceeded the low “However, Irma’s windfields as they begin to identify at around $20bn, but economic the potential to become a more end of this range. The two storms were very extensive. For that Ropportunities following the dev- losses – mainly from flooding – meaningful earnings event for the would cost $24.4bn and $49.7bn reason, both coasts have seen astating hurricanes. could be many times that. sector and would affect the pric- respectively at today’s values. storm surge of around four to While Hurricane Irma is no Sompo Canopius executive ing of renewals, it would take a While the bill from Irma will five feet,” Muir Wood said. longer the $100bn-plus event that chairman, Michael Watson, said serious capital event to trigger a be substantial, it is significant- “Storm surge will be a major had been feared last week, senior the insurer wanted to write more “hard” market. ly below the expected total had part of the loss emanating from executives told Insurance Day US inland flood risk. He told Insur- Risk perceptions and premiums Irma made a direct hit on Miami this event. Low level flooding they were looking at growth op- ance Day the company has been will likely be affected in Florida in and moved up the East Coast. will be a major impact for the portunities across a broad range working on the pricing and risk the near term. Had it followed this path, in- National Flood Insurance Pro- of classes. mapping and will be looking for Analysts at Barclays said with sured losses were expected to far gram and homeowners, while “Everyone is going to be looking “creative ways” to access the mar- hurricane season still under way, exceed $100bn. some commercial districts have at it. There are definitely opportuni- ket. “There are absolutely new op- there was “potential for reinsur- Irma’s path up Florida’s west also been impacted. ties,” the chief executive of a Lloyd’s portunities,” he said. ance prices to finally stabilise or coast saw it follow a path up “A significant portion of loss- insurer said, adding the company JLT Re’s global head of analyt- modestly increase in early 2018”. from south of the city of Naples, es from the event will come was holding a board meeting next ics, David Flandro, said: “The stars Edward Hochberg, chief execu- where it made landfall as a cate- from flood, most of which will week to discuss the issue. are aligned for private capital to tive at JLT Re North America, said gory three hurricane. be storm surge driven. Irma has Another senior executive at a enter the [flood] market and for he expected the direct and facul- It is along this path the major- the potential to become an event Bermudian re/insurer said: “Post- reinsurers to come in with some tative market to “sustain some ity of losses will be incurred. AIR similar to Katrina and Sandy, Irma we are looking at how we will kind of solution.” major pain” from Irma’s impact said the path has estimated expo- where the majority of the losses amend our 2018 business plan.” Meanwhile, Hurricanes Irma but said the market overall re- sures of around $1trn. result from flood.” The executive said the company and Harvey now appear more mained robust. ILS market undaunted by hurricanes but trapped collateral may dampen liquidity

High demand for insurance-linked oversees Munich Re’s divisions will be a multiple of the expected pay up than fight such claims in according to Thomas Seidl, an ana- securities (ILS) is likely to persist in Germany, Asia-Pacific and Af- loss, which could affect investors’ court, Valentini said. lyst with Sanford Bernstein. through Hurricanes Irma and rica, said this particularly active willingness to commit further But Albertini rejected the idea Valenti confirmed that cedants’ Harvey, with yield-hungry in- hurricane season “will have price funds until the claim is resolved. that capital market investors concerns about being tied in liti- vestors waiting on the sidelines effects” in the ILS markets. Rafal Walkiewicz, chief execu- will “just go to the lawyers” to gation is a big hurdle for ILS in- for opportunities in perils old While Harvey is “probably not tive of Willis Towers Watson Se- avoid paying up in the event of vestors looking to expand into and new, writes Lorenzo Spoerry, relevant” to the alternative risk curities, said it was unclear how a large loss. new perils. Monte Carlo. transfer market, the potentially investors would respond in such Speaking to Insurance Day, In some lines of business, like Fund managers said investors much more costly Irma should be a situation. Investors might offset Benfield chief executive, liability , “every sin- had already indicated they were seen as the first real test of alter- any new limits against the trapped Eric Andersen, said he did not gle is claim is debatable,” he said, looking to increase their exposure native capital, Pohlchristoph said. collateral, he told Insurance Day. believe ILS investors are more making reinsuring this line of to natural catastrophe risk. Luca And he warned of “some con- Cat bond sponsors will be keep- likely than traditional reinsur- business a “nightmare”. Albertini, chief executive of Lead- fusion” among investors about ing a close eye on settlement times. ers to seek to avoid paying up He said, however, there exists enhall Capital Partners, an ILS terms and conditions. Alberto Valenti, who heads Gener- by going to the courts.“There the possibility for “many more fund manager, said his firm was On Barclays’ analysis, some ali’s property/casualty treaty ret- are disputes [among] tradition- deals” outside the natural ca- contacted in the immediate after- 60% of ILS issued include US rocession business, said he would al players, there are disputes tastrophe space. math of Harvey by investors will- wind cover, with a potentially be looking very carefully at “how among non-traditional players,” Mirko Sartorti, head of insur- ing to increase their participation even greater share for collater- quick the payment will be and how he said. “I don’t think anybody ance liability management at Gen- as soon as prices ticked up. alised reinsurance. is it comparable to the behaviour likes to write big cheques.” erali, said that he expects the ILS Those investors “are working Collateral issues may hamper of the traditional market”. If ILS investors are unwilling to sector could take on a greater share on the assumption, though, that the ability of ILS investors to re- Traditional reinsurers, who accept speedy settlements, a key of the life reinsurance market, and by being quick there is some ben- load following a partial loss on might be more keen to maintain consideration for sponsors, tradi- that he was “very interested” in us- efit to pick up”, he said. catastrophe bond. In the case of longstanding relationships with tional reinsurers could use this to ing ILS to manage Generali’s capi- Hermann Pohlchristoph, who a partial loss, the collateralisation cedants, could be more willing to prove their “value-add” to cedants, tal under Solvency II. 4 www.insuranceday.com | Tuesday 12 September 2017 NEWS Barbican open to Market news, data and insight all day, every day Insurance Day is the world’s only daily newspaper for the international insurance and reinsurance and risk industries. 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, new syndicate mobile and online versions and is read by more than 10,000 people in more than 70 countries worldwide.

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 Managing agency also exploring new SPAs as it looks to expand insurance writers are well known and respected in the market and their insight is both compelling and valuable. Rebecca Hancock, Lloyd’s: BMA is looking to grow Insurance Day also produces a number of must-attend annual Monte Carlo by adding another syndicate events to complement its daily output, including the Insurance Reporter Cedric Weber/Shutterstock.com Day London Market Awards, which recognise and celebrate the very best in the industry.

For more detail on Insurance Day and how to subscribe or attend its events, go to subscribe.insuranceday.com arbican has not ruled out launching another syndicate, Insurance Day, Christchurch Court, 10-15 Newgate Street, according to Iain Bremner, London EC1A 7HD managing director of Barbican BManaging Agency (BMA). Speaking to Insurance Day in Monte Editor: Michael Faulkner Carlo, Bremner said Barbican’s manag­ +44(0)20 7017 7084 ing agency has the aptitude to grow ex­ [email protected] isting syndicates while simultaneously Deputy editor: Lorenzo Spoerry exploring new ventures. +44 (0)20 7017 6340 The growth plans follow the launch [email protected] of syndicate 1856 on January 1 last year with funds managed by Credit Editor, news services: Scott Vincent +44 (0)20 7017 4131 Suisse, complementing Barbican’s long­ [email protected] standing syndicate 1955. Alongside BMA’s special-purpose arrangement Reporter: Rebecca Hancock (SPA) 6118, it is understood Barbican is cessful at what they do, but may have +44 (0)20 7017 5570 seeking to launch another vehicle for ’We have the resource a gap in their portfolio and want to es­ [email protected] January 1, 2018. to go above and beyond tablish at business at Lloyd’s or their at Global markets editor: Graham Village The Lloyd’s managing agency, [syndicate 6118] and least interested,” he said. +44 (0)20 7017 4020 which manages or underwrites £492m manage another one on a Bremner did not confirm lines of [email protected] ($648.3m) of premium at present, will similar basis. It could be business, but said BMA intends to grow potentially create a new syndicate as syndicate 1856. “Irrespective of class, Global markets editor: Rasaad Jamie an SPA that we manage +44 (0)20 7017 4103 a means of achieving its premium that turns into a syndicate we’re expanding our footprint,” he said. [email protected] growth target. or it could be a standalone The managing agency is also bolster­ “We have the resource to go above new syndicate’ ing its senior management team, with Key account manager: Abby Straker +44(0)20 7017 7299 and beyond that and manage another Henry Johnson appointed non-executive Account manager: Matthew Smith +44(0)20 7017 7894 one on a similar basis,” Bremner said. Iain Bremner director, joining the company as of Business development manager: Toby Nunn +44(0)20 7017 4997 Advertising/events: Jefferson Emesibe +44(0)20 7017 4061 “It could be an SPA that we manage that Barbican Managing Agency October 1. Johnson joins from Lloyd’s, Head of production: Liz Lewis +44 (0)20 7017 7389 turns into a syndicate or it could be a where he was chief actuary. Production editor: Toby Huntington +44 (0)20 7017 5705 standalone new syndicate.” ploy capacity on behalf of third parties, Bremner said growing the board of Subeditor: Jessica Sewell +44 (0)20 7017 5161 He added: “The SPA route has been seeking established businesses with directors was also part of a strategy to Events manager: Natalia Kay +44 (0)20 7017 5173 quite popular of late.” long-term ambitions. expand the business itself. “The board Bremner said the managing agency “We’re looking for long-term partner­ needs to grow for the business to flour­ Editorial fax: +44 (0)20 7017 4554 Display/classified advertising fax: +44 (0)20 7017 4554 was actively seeking to attract and de­ ships with businesses that are very suc­ ish,” he said. Subscriptions fax: +44 (0)20 7017 4097 All staff email: [email protected] Chubb picks Paris for EU headquarters 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 Chubb will set up its EU headquarters in business throughout France,” he said. sidiaries; Luxembourg has proved a information contained in Insurance Day, nor does it accept France if Brexit goes ahead as expected “We have been encouraged by the as­ popular choice, with companies such responsibility for errors or omissions or their consequences. in March 2019, writes Lorenzo Spoerry, sistance and co-operation provided as AIG, Hiscox and FM Global selecting ISSN 1461-5541. Registered as a newspaper at the Post Office. Monte Carlo. by the French government as we have the Grand Duchy. Published in London by Informa UK Ltd, 5 Howick Place, London, SW1P 1WG. The global re/insurer’s principal of­ considered our post-Brexit options and Markel has selected Munich as its fice for continental Europe is in Paris. we look forward to working closely European base and Lloyd’s has chosen Printed by Stroma, Unit 17, 142 Johnson Street, Southall, The firm said it still plans to keep a with the French authorities as we move Brussels for its EU platform. Middlesex UB2 5FD “substantial presence” in London. forward on this project.” “When considering location, insurers Evan Greenberg, Chubb’s chairman Since the UK voted to leave the EU have typically started by considering © Informa UK Ltd 2017. and chief executive, said Paris was the last year, many insurers have been where they have existing operations or No part of this publication may be reproduced, stored in a “clear choice” for the firm’s EU base. drawing up contingency plans to main­ branches: the larger European coun­ retrieval system, or transmitted in any form or by any “We have a significant investment tain access to Europe should pass­ tries – including Germany, France, the means electronic, mechanical, photographic, recorded or there in both financial and human re­ porting rights be lost. Netherlands and Spain – typically fall otherwise without the written permission of the publisher sources, as well as a large portfolio of Recent weeks have seen a number into this group,” Paul Merrey, insurance of Insurance Day. commercial and consumer insurance of companies announce plans for sub­ partner at KPMG, said. www.insuranceday.com | Tuesday 12 September 2017 5

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ry lead layers for medium-sized ly to enter the primary market in has some lingering concerns corporations in a bid to change ‘[The movement towards the a large-scale way, experts say. about PartnerRe’s focus on re- its portfolio mix amid the chal- primary market is] partly down Some reinsurance companies insurance, due to the very chal- Primary colours lenging market conditions. are avowedly “pure play” mod- lenging market conditions… AM Munich Re has also been eying to the fact that about half of els, and have no plans to enter Best believes PartnerRe’s current primary market deals. Earlier the primary space. focus on building out life and this year, the world’s largest re­ the reinsurers we cover are New York-based Transatlantic health operations could provide insurer’s chief financial officer, currently earning less return on Re has as one of its principles additional diversification to off- Many reinsurers are building businesses in Jorg Schneider, said it would be “exclusively focusing on rein- set those challenges”. the primary insurance market as they look open to making “large” acquisi- equity than their cost of equity... surance, to avoid competing There is still a place for pure tions in the primary market – if with our customers”. Germany’s reinsurers, Moran says. The suc- for ways to deploy their capital. This trend is the price were right. There are pockets in the primary Group also retains cess of such a model “effective- expected to increase as reinsurance market Paris-based reinsurer Scor, market that are profitable’ a focus on reinsurance, while se- ly depends on what their value meanwhile, has the develop- lectively writing large commer- proposition is to the ceding in- conditions continue to challenge firms, but ment of its Scor Business Solu- David Flandro cial risks to complement that surers,” he adds. there are risks to this strategy tions unit, which handles large JLT Re book of business, it says. And Pure reinsurers may avoid the corporate risks, as a central ten- Bermuda-based PartnerRe also potential channel conflict risked et of its three-year “Vision in Ac- ling reason for reinsurers to seek primary carriers about reinsur- is committed to being solely a re- by reinsurers that also write tion” strategic plan. to diversify into primary business. ers’ plans to write more prima- insurance player. primary business, they must of- Other reinsurers also have tar- A further rationale for reinsur- ry business. Even some of those Experts say while re­insurance fer compelling products at an geted the primary segment; some ers seeking to underwrite more specialist or regional carriers business is under pressure from attractive price. While they do via Lloyd’s syndicates and others primary business is that it can whose business is not likely to intense competition, if such not run the risk of competing via US platforms, for example. give them a better understand- be targeted by large reinsurers companies can maintain strong against their customers, these This is not a new phenomenon ing of the “front-line customer are unhappy at the idea of re­ risk management practices and reinsurers are somewhat more and has been going on for some needs”, Moran says. For exam- insurers – to which they cede discipline, they do not necess­ removed from the original risks time, with reinsurers writing pri- ple, from a product perspective, business – entering their turf, arily need to diversify into pri- covered by their cedants and mary business both on the life and dealing with the ultimate client the source adds. mary business. must place an extra emphasis on health and property/casualty side. can give the re/insurer a greater Reinsurers that are contem- In a recent affirmation of Part- having a true partnership with David Flandro, global head of understanding of the risks and plating increasing their pres- nerRe’s A financial strength rat- their ceding insurers to really analytics at JLT Re, says there are risk transfer needs. ence in the primary market ing, AM Best said while it “still understand their needs. n potential advantages for rein- Perhaps the weakest rationale must be wary of being overly surers that manage to enter the for reinsurers seeking to diversify aggressive, Flandro says. There primary marketplace. “As a ‘new’ into the primary segment is as a is a risk that reinsurers that are entity, you go into the primary reaction to the influx of alterna- not cautious could end up com- side with a clean balance sheet tive capital into the reinsurance peting with their own customers. for that line of business,” he says. arena, Moran says. In this scenar- “You have to do this carefully, It is helpful, in the primary mar- io, it is “unclear what the reinsur- so as not to upset the apple cart,” ket, to have a degree of longevity er would bring to the table” in the he says. in the lines that you are under- primary space, he adds. If you are asking insurers to writing, he adds. The lines of business or geo­ trust you as their reinsurer with Reinsurers that are contemplat- graphies most suited to reinsur- their data and your promise to ing this move are weighing up ers writing primary business pay, you need to manage care- the risks and opportunities, Flan- very much depends on the skills fully the risk that you might dro continues. This movement is and expertise of the reinsurer, end up competing against them “partly down to the fact that about its ultimate strategic reasons for in another part of the business, half of the reinsurers we cover the move and what it wishes to Moran says. However, he points are currently earning less return achieve, Moran says. out, many companies are already on equity than their cost of equi- For example, if a reinsurer is navigating this situation well. A move by reinsurers to in- ty”, so they need to look at ways looking to leverage its skills in Another major challenge for Sarah Veysey crease their premium volume to boost their earnings, Flandro portfolio underwriting, lines reinsurers entering the primary Journalist in the primary market has been says. “There are pockets in the that lend themselves to being market is the work and invest- under way for some time. But primary market that are profit- pooled or homogenised in some ment required to set up a retail market conditions today, among able,” he adds. way might be good. However, re- distribution network. This re- other factors, mean this shift is insurers that have knowledge of quires a whole set of skills, rela- he trend of reinsurers likely to increase in the coming Portfolio underwriting skills underwriting large catastrophe tionships and economics that are seeking to underwrite months and years, experts say. There are several drivers behind risks may explore transferring different from those of the re­ more primary business Two years ago, , the reinsurers exploring the prima- that expertise to primary risks, insurance channel, Moran says. looks set to accelerate. world’s second-largest reinsur- ry market, Michael Moran, chief he says. Reinsurers must also be able TAgainst a backdrop of contin- er, said it was on the lookout for executive of Aon Inpoint in Chi- From this perspective, the to create a very compelling val- ued challenging market condi- possible acquisitions to boost its cago, says. First, reinsurers are route that reinsurers take to ue propositions for the retail cli- tions, many reinsurers both large corporate solutions business, looking to use the skills and ca- enter the primary market also ent, he says. and small, centuries old and rela- particularly in emerging mar- pabilities they have in portfolio depends upon their ultimate Flandro says he expects to see tively young, are exploring ways kets. In October 2016, Swiss Re underwriting and bring those to goals, and the challenges associ- reinsurers continue – at the very to underwrite increasing volumes Corporate Solutions announced it retail business. They are explor- ated with the move are similar least – to explore a push into the of primary insurance business. was entering into a joint venture ing innovative ways to leverage whether the reinsurer is a large primary marketplace. While some could be said to be with to create a their reinsurance skills in the composite reinsurer or a small- While it is unlikely any re­ dipping their toes into the prima- commercial large risk insurer in primary market. Reinsurers also er, more niche player. insurers will go in as “ful- ry market as a means to find di- Brazil. Later that year it acquired are seeking new ways to deploy There are, of course, challeng- ly fledged” primary market versification, others are targeting IHC Risk Solutions in the US, their capital. es facing reinsurers that wish to insurers, they will look at lines of Hong Kong: Swiss Re obtained an a larger-scale push into the space. obtained an insurance licence for There are pools of risk that do enter the primary marketplace, business or geographies where Hannover Re: one of the insurance licence for the region There are many drivers be- Hong Kong and opened an office not make their way to the rein- experts say. they have experience and ex- companies that is retaining a late last year, one of a number of focus on reinsurance, although hind this move, experts say, but in Kuala Lumpur. surance markets at present, but pertise and where they will not moves it made to diversify into it does selectively write large the primary market a shift into primary insurance In announcing its 2016 results which could be capital-efficient Disquiet be competing against their own commercial risks to complement must be undertaken with great earlier this year, Swiss Re said for reinsurers to underwrite, he One industry source says there customers, he adds. its existing business care, they warn. it would begin to write prima- continues. This may be a compel- is disquiet among some large But not all reinsurers are like- 8 www.insuranceday.com | Tuesday 12 September 2017 NEWS AmTrust Hannover Re insists at Lloyd’s plans to profit target will hold combine despite hurricane blow syndicates AmTrust at Lloyd’s has applied to Lloyd’s for approval to combine its three fully aligned non-life syndi- Share price recovers as chief executive says catastrophe budget will cates under management, writes Michael Faulkner, Monte Carlo. withstand hurricane losses The managing agent said it had submitted a syndicate business Wallin declined to give a loss esti- forecast to Lloyd’s for business Herbert Fromme, mate for the two hurricanes. written by syndicates 1206, 5820 Monte Carlo Flooded homes after Harvey: many Texas homeowners Germany correspondent Hurricane Harvey devastat- and 1861 to be consolidated into ed Texas two weeks ago, while were not insured against a single syndicate – 1861 – for the the flood losses of the storm Hurricane Irma made landfall in 2018 year of account. Florida over the weekend. RoschetzkyProductions/ Subject to Lloyd’s approval, Shutterstock.com annover Re has suc- Wallin stressed Hannover Re syndicate 1861 will have under- cessfully convinced will stick to its goals of achiev- writing capacity of more than shareholders that Hur- ing a gross written premium in- £500m ($659.18m). ricanes Harvey and crease of more than 5% in 2017 Christopher Jarvis would con- HIrma will not jeopardise the €1bn and group net income after tax in tinue as active underwriter of the ($1.19bn) profit target for 2017, its excess of €1bn. “I see no evidence enlarged syndicate. chief executive said. why we should change that guid- Bruce Whitmee, who is active Speaking in Monte Carlo on ance,” he said. underwriter of syndicate 5820 yesterday morning, Ulrich Wallin Board member Jürgen Gräber at present, will become head of said the storms will not be a major said Hannover Re reduced its consumer products. challenge for the reinsurer. “Hur- exposure in Florida after hurri- Combining the syndicates ricane Harvey fits comfortably in cane Katrina. “We have less than would “enable operational and our budget for big claims,” he said. half the market share there we service improvements, while al- This helped to revive the Han- have worldwide”, he said. lowing AmTrust’s expert team of nover Re share price. It had Hannover Re, the third-largest underwriters to deliver compet- dropped from €101.20 on Sep- reinsurer worldwide, has a mar- itive and innovative solutions to tember 5 to €95.06 at the end of ket share of 4.5% globally; in Flor- broking partners and clients”, trading on September 8. But af- ida it is less than 2%. were not insured against the rate environment at the January AmTrust at Lloyd’s said. ter Wallin’s comments yesterday Board member Michael Pick- flood losses arising from hurri- 1, 2018 renewals,” he said. Syndicate 1861 will sit along- morning the reinsurer’s share el stressed the hurricanes may cane Harvey. “There are more Wallin is certain Hannover Re side AmTrust’s syndicate 44, price bounced back to €101.45. even be beneficial to Hannover reinsurance opportunities to will grow its book of business in which writes life business. Owing to benign loss activity in Re. Insurers are asking for more come,” Pickel said. the 2018 renewals. “We have seen Peter Dewey, chief executive the first half of 2017, Hannover back-up cover since their origi- He said he expects rate increas- growth in 2017 and expect oppor- of AmTrust at Lloyd’s, said: “By Re still has a budget of €700m nal coverage may be exhausted. es in the North American market tunities for 2018,” he said. Apart consolidating our underwriting for large losses for the rest of the In addition, there will be a re- because of the hurricanes. Wallin from the US business, Hannover activities within one non-life and year, the chief executive said. thinking of the protection gap, is hoping the overall price de- Re is seeking opportunities in one life syndicate, we are making “There is also still budget remain- Pickel added. creases in the market will come schemes helping primary insur- the most efficient use of capital ing for Hurricane Irma,” he said. Many homeowners in Texas to an end. “We expect a stable ers save equity under Solvency II. and resources.” B3i shows off blockchain prototype and eyes launch next year

The B3i blockchain initiative tration costs and the ability to offer the prototype at the Rendez-Vous measurement system for prop- for the insurance industry has more attractive rates to clients. ‘The deployment de September in Monte Carlo this erty cat excess-of-loss business. launched a prototype for reinsur- B3i was launched last year by architecture is week before pushing it out to the “The deployment architecture ance transactions and will start 15 leading international insurers already close to a market for testing on an equal ba- is already close to a produc- beta testing trials with the mar- and reinsurers including , production-ready sis using a common agreement. tion-ready environment and the ket next month in advance of an Zurich, XL Catlin and the four environment and the Users will be able to access a team is preparing for feature expected full launch next year, largest continental reinsurers. team is preparing for “sandbox” that lets them simulate enhancements of the prototype writes Graham Village. The initiative aims to use block- feature enhancements the creation and settlement of con- and a first deployment into pro- The initiative has started with a chain technology through a world- of the prototype and a tracts, feeding back findings to the duction in 2018,” he added. joint distributed ledger for proper- wide platform that will make it first deployment into wider group. Participants will also B3i operates on a contractual ty catastrophe excess-of-loss trans- easier for the market to cede, han- production in 2018’ gain access to B3i user group work- agreement that runs until the end actions. It supporters say the entire dle and trade risk. The prototype is shops until the end of the year. of the year but members are in- insurance industry can benefit the product of four months’ work Paul Meeusen Paul Meeusen of B3i said the vestigating setting up a more per- from blockchain technology, mak- on the part of a dedicated team B3i prototype has the core func- manent operation within a legal ing productivity gains of up to 30% drawn from B3i members. tionalities required to enable entity next year to further devel- possible through lower adminis- B3i has been demonstrating a distributed smart contract op infrastructure and processes. www.insuranceday.com | Tuesday 12 September 2017 9 COMPANIES HOUSE

Cat losses pose fundamental questions for reinsurers

Even before this year’s impending substantial catastrophe bill, results were on the slide

Six months down and the re­ At the time of writing, consider- insurance market, they have the cat market this has been Graham Village insurance sector’s results were able uncertainty exists regarding raised questions companies hope the big, unanswered question Global markets editor generally seen as disappointing reinsurers’ ultimate hurricane prove to be of academic rather for about a decade now. The and indicative of mounting prob- bill for 2017, although most ana- than all too immediate relevance: higher the loss, the higher the lems beneath the headline figures, lysts expect Harvey and Irma to • How much of a major US cat proportion of the total is likely but most companies still managed dent company profitability but loss running in the tens of bil- to fall to the alternative market. uddenly the reinsurance to post underwriting surpluses not cause too much damage to the lions of dollars will work its Many observers think alterna- sector’s performance over and reasonable net profits. industry’s overall capital solidity. way through to structures tive players will not be deterred the first six months of 2017 Full-year figures are now set to According to AM Best, the rein- backed by alternative capital? from accepting further cat risk does not look so bad. Giv- show a big deterioration after the surance industry started the year The private nature of many of and will even want to increase Sen the hit the market could well totals from Harvey, Irma and pos- with dedicated capital of about these vehicles and their mini- their exposure if the tradition- take from Hurricanes Harvey and sibly Jose are tallied, and several $420bn, of which alternative mal disclosure makes it much al market withdraws or scales Irma, global reinsurers would no weeks remain of the 2017 North sources contributed about $75bn, harder than before to track back. This will be the first time doubt settle for a full-year result Atlantic season, not to mention concentrated in the catastrophe where the real risk lies in the they have been tested by a truly that showed no further deteriora- the possibility of bad weather in risk area. event of a mega-loss; catastrophic event and, assum- tion than they suffered over the the northern hemisphere in the Whether or not the storms • How will alternative capital re- opening half. late 2017 and early 2018 period. prove to be huge losses for the re/ act following major losses? For Continued on p11 >>

Boats litter a dock on Tortola in the British Virgin Islands after Hurricane Irma passed through the Caribbean © 2017 Joel Rouse/MoD via AP 10 www.insuranceday.com | Tuesday 12 September 2017 www.insuranceday.com | Tuesday 12 September 2017 11 COMPANIES HOUSE

Table 1: Global reinsurance underwriting, first six months ($m) Continued from p9

Net written premium Combined ratio (%) Underwriting result Net result ing significant cover disputes do not occur, they will at last 2016 2017 2016 2017 2016 2017 2016 2017 Something in reserve? be able to demonstrate their ef- Advent 80 95 102.6 99.8 (2) – §3 §3 fectiveness and ability to settle Alleghany – reinsurance 2,067 1,928 94.4 93.9 108 116 – Alleghany Corp 2,657 2,526 92.4 92 187 197 232 251 claims quickly; Arch – reinsurance 613 648 75.9 86.6 132 74 – – • Have the many, fairly small, Arch Capital 2,145 2,525 89.7 83.1 232 408 355 416 heavily reinsured property Benefit of reserve releases fell in H1 2017 versus the first half of last year Arig 177 164 87.2 79.1 1 8 2 4 specialists in Florida got their Argo Group 691 791 94.8 97.8 70 55 59 83 sums right and bought enough ’s whopping $872m fall in positive development Validus saw favourable development slip to $104.5m from $116.5m Aspen – reinsurance 756 734 87.8 89.6 71 57 – – protection to cover an extreme factors in a wide difference in experience at insurance and reinsur- because of a lower release from attritional loss events. That release Aspen Insurance Holdings 1,525 1265 96.2 98.5 51 22 179 172 loss? They are already under ance operations, writes Graham Village. was down to $89.1m from $127.8m but Validus managed to cover some Axis – reinsurance 1,693 1,432.00 89.3 93.5 103 61 – – pressure as a result of non- Primary business (mainly grouped under Geico and Berkshire Hatha- of that with a release of $15.4m from cats and major losses, mainly Axis Capital 2,693 2,465 97.2 99.8 109 73 158 90 catastrophic losses related to way Primary Group) released $532m for the 2017 period but reinsur- related to the Pemex loss of 2015. The company had to add $11.3m to Berkshire Hathaway Re Gp †3,895 †13,627 – – 105 (1,000) – – assignment of benefit abuse; ance reserves needed strengthening. Part of that was due to a $215m hit major loss reserves for the 2016 period following receipt of a large loss Beazley 930 936 90 90 *206 *206 129 132 • How will the new Florida com- from Ogden, of which $140m fell to General Re, but the company also advice for a marine policy. Blue Capital †22 †21 67.8 56.3 *10 *12 7 9 panies writing flood insurance had to bolster reinsurance reserves because of higher-than-expected Positive development at Axis Capital fell below the $100m level Brit 758 769 98 96.9 14 23 §210 §84 cope in the event of heavy losses from hurricane and earthquake events last year. Berkshire Ha- following a big reduction in the reinsurance account, which took a hit Chaucer – total 449 453 96.2 92.2 16 32 ¶39 ¶55 Chubb – reinsurance 431 389 78.5 71.8 83 101 §218 §227 flooding in the state? thaway Reinsurance Group had to strengthen reserves by $250m. of $20m from Ogden, affecting the motor book. The primary liability Chubb 13,634 14,291 90.7 87.8 1,221 1,591 1,165 2,398 • With the National Flood Insur- XL’s benefit from reserving was well down at $62.7m from $142m as account recorded net adverse prior-year development of $7m, mostly Gp 7,243 9,662 99 98.7 *589 *638 414 443 ance Program (NFIP) set to suf- elements of both primary and reinsurance divisions needed strength- related to the Bermudian excess casualty book in run-off. EMC – reinsurance 61 59 90.7 96.4 6 2 §6 §2 fer another big loss, adding to ening. In the reinsurance division, Ogden had an impact, leading to a Axis said recent increasingly favourable development for liability EMC Insurance Companies †289 †294 100.3 104 *6 *(7) 21 12 its existing debt of about $25bn, deficiency of $69.2m for the long-tail account. For property and short- reinsurance reflects the increased weight management is giving to Everest – reinsurance 1,629 1,945 ¶¶75.0 ¶¶80.5 271 304 – – will Congress be more willing tail business, reserve releases climbed to $110m. experience-based indicators on older accident years. Everest Re Group 2,336 2,753 90.7 88.3 235 313 327 537 to introduce changes to the pro- XL’s insurance division booked increased releases for professional Arch Capital delivered more favourable development, driven by Fairfax 4,169 4,489 94.5 94.7 204 216 277 388 gramme and shift further risk and casualty business but the property account needed bolstering to good experience for reinsurance and mortgage operations. Long- and Farmers Re ‡759 ‡772 107.1 103 (54) (23) ¶(19) ¶6 to the private market? the tune of $93.5m, reflecting deterioration of $49.3m in the London medium-tailed reinsurance booked good releases from casualty lines General Re †2,779 †2,969 – – 44 (118) – • The private market has been wholesale property book and strengthening of $38.2m for significant for the 2002 to 2013 underwriting years as well as releases for marine Global Indemnity 242 235 101.7 95.5 (2) 13 2 22 keen to see reform of NFIP so adverse large loss experience in the energy property account. business for most years, the company said. Greenlight Cap Re 253 366 107.8 98.5 (21) 5 (34) (27) it can write homeowners’ ex- The specialty lines account needed $16.7m in strengthening due to Favourable development for primary insurance came to just $4.1m, Hannover Re 8,254 9,270 95.4 96.5 (3) (90) 541 611 posure but will the scale of deterioration in large loss experience in more recent years affecting with short- and long-tailed lines producing releases while the medium- Hanover 2,366 2,463 96.2 97.5 81 51 80 124 Hiscox London market 286 260 85.3 94.8 – – §49 §22 Harvey’s damage give insurers the crisis management and political risk and trade credit portfolios. tailed book needed $9.7m of strengthening. In particular, Arch’s pro- Hiscox Re 192 172 56 84 – – §73 §49 pause for thought? Swiss Re released reserves in property, casualty and specialty non- gramme business required bolstering of $26.4m, mostly for the 2013 Hiscox group 1,178 1,317 80.7 91 *327 *360 262 127 • The $1.042bn reinsurance pro- life lines but had to add $136m to reserves for life and health business. to 2015 years. Lancashire 279 240 76.2 78.4 111 96 60 69 tection bought by NFIP appears Overall, development was favourable, at $120m. For the core property Aspen booked a $13.1m reserve release in its reinsurance account Maiden – diversified reinsurance 448 465 103.2 106.4 (12) (26) – – to be under threat. The rein- and casualty reinsurance division, releases improved the combined following a recovery for an offshore energy loss that occurred in Afri- Maiden Holdings 1,443 1,585 98.7 103.4 29 (34) 77 10 surance covers 26% of losses ratio by 2.0 points, up from 1.1 points, but the corporate solutions divi- ca, offsetting a $12.8m hit from Ogden. – reinsurance 2,519 2,654 96.8 92.3 – – 100 116 in a loss corridor running from sion suffered from a reserve shortfall, driven by large casualty losses Hannover Re took a €291m ($349.6m) reserving hit from Ogden but Markel reinsurance 629 710 84 108 67 (36) 67 (36) $4bn to $8bn. If the reinsurance on the 2015 and 2016 accident years. said it did not need to bolster reserving overall as a result. n Markel Corp 2,233 2,398 90 95 183 108 239 220 is exhausted, will this deter re- Munich Re – reinsurance 16,304 17,397 94.3 95.5 **1,315 **1,295 1,595 1,250 insurers from covering US per- Table 2: Selected re/insurers’ prior-year reserve releases (strengthening), first six months ($m unless stated) Munich Re Group 26,186 33,760 – – **1,633 **1,662 1,555 1,464 sonal lines flood risk in future? Novae 470 456 95.7 104.7 18 (21) 77 15 Such questions were not so press- OdysseyRe 1,115 1,216 92.5 90.4 74 104 §195 §226 2016 2017 2017 underwriting result ing at the half-year mark, as table Oxbridge †5 †4 66.6 47.3 *2 *3 2 2 (excluding reserve PartnerRe 2,755 2,650 101.7 91.7 (136) 11 338 229 1 shows. Most reinsurers posted development) reduced (although still positive) Peak Re – ***472 – – – **19 – 36 Alleghany Group 175.3 111.4 86.0 Polish Re 44 33 95.1 95.6 – – §2 §2 net results, while slightly more Arch 141.8 152.6 255.0 Qatar Re †164 95.8 – 24 companies delivered underwrit- QBE – reinsurance †364 †398 96.7 97.2 – – §30 §28 ing losses than for the comparable Argo 15.9 (5.7) 61.0 QBE Insurance Group †5,615 †6,043 99 97.5 54 154 265 345 period of 2016. Aspen 42.8 74.9 (53.0) RenaissanceRe Holdings 1,032 1,100 76.1 79.7 169 152 264 264 The table shows the headline Axis 148.1 95.7 (23.0) RGA 4,504 4,846 – – – – 313 378 figures from the global rein- RSA 4,081 4,482 94.3 93.2 231 289 121 268 surance sector for the first six Berkshire Hathaway 1,071.0 199.0 (602.0) Sava Re 289 313 96 92.2 9 17 16 20 months but rather than list group Everest 29.0 (0.4) 313.0 Scor 6,799 7,686 93.8 93.5 **556 **562 305 333 figures only, we have extracted Sirius 532 597 – – *(6) *61 (2) 8 Fairfax 273.2 32.1 184.0 reinsurance-specific details wher- Sompo International Re – 1,727 – 97.8 – – – 100 Lancashire 57.0 37.8 58.0 ever possible to give a clearer StarStone 182 116 99 98.2 *65 *72 20 19 Markel 246.3 184.4 (76.0) Swiss Re – reinsurance ††14,712 ††14,765 97.2 97.4 – – – – indication of the larger reinsur- Swiss Re Group 18,681 16,817 98 98.6 195 132 1,866 1,211 ance players. PartnerRe 331.8 196.2 (185.0) Toa Re America 190 203 – – (10) 2 9 20 Some caveats are needed. Sev- RenaissanceRe 30.9 16.1 136.0 Third Point Re 393 300 111.9 106.6 (32) (21) 2 179 eral major reinsurers have not yet Scor (€m) 40.0 (71.0) *633.0 Validus – Validus Re 882 797 69.4 69.8 150 139 – – issued six-month figures. Lloyd’s Validus Holdings 1,733 1,727 82.5 82.9 202 209 262 196 is due to report on September Swiss Re – 120.0 12.0 WR Berkley – reinsurance 363 279 99.3 108.7 – – §52 §19 28. Others such as Korean Re, Ja- Third Point Re (24.7) (23.9) (3.0) WR Berkley Corp 3,306 3,211 94.2 95.4 – – 229 233 pan’s Toa Re and France’s Caisse TransRe (Alleghany reinsurance) 149.0 90.9 25.0 XL – reinsurance 2,500 2,376 89.9 88.2 160 205 – – Centrale de Réassurance do not XL Group 5,784 5,626 94.3 93.3 277 339 66 455 Validus 116.5 104.5 104.0 report interim results. And sever-

*net earned premium less claims and underwriting expenses **technical result ***gross al major insurance groups known XL 142.0 62.7 276.0 †net earned ††gross earned to write significant reinsurance ‡gross written *technical result §pre-tax result Source: company filings and announcements/Insurance Day database ¶operating result ¶¶US reinsurance division Continued on p12 >> 12 www.insuranceday.com | Tuesday 12 September 2017 COMPANIES HOUSE

Continued from p11 return period level, reinsurers ‘More recent accident years appear to are retro­ceding about 40% of business either do not provide full their business, according to the disclosure or do not report at the be reserved less conservatively and rating agency. six-month mark. But S&P further calculated that Delving deeper into perfor- loss cost trends outpace pricing trends. exposure to recurrent events is mances it becomes clear why rising at a faster pace than earn- results were a disappointment. Some reinsurers have reported reserve ings, with seven of the 20 rein- Problems bubbling below the sur- surers the firm rates now at risk face for a while have started to cut deficiencies in certain product lines, of erosion to their capital base as into profitability and will come un- a result of an annual aggregate der much greater scrutiny now the particularly longer-tailed classes, such loss in the one-in-10-year return market faces significant cat losses. period. Last year, no companies Combined ratios increased for as casualty and specialty reinsurance’ were at threat. most players during the first six Rates in non-cat lines are fac- months even though major loss Fitch Ratings ing mounting pressure and that activity was for most lower than means greater catastrophic losses for the 2016 period. On Fitch Rat- posted an accident-year ratio of and loss cost trends outpace pric- and quota-share business, entail- have a higher likelihood of push- ings’s figures, the combined ratio 101.0% in 2016, the industry’s ing trends. Some reinsurers have ing a higher but less volatile com- ing underwriting results into the for a sample of 19 reinsurers in- first loss in more than 10 years, reported reserve deficiencies in bined ratio than non-proportional red, S&P said. On combined ratios creased 2.1 percentage points to excluding the heavily cat-hit 2011. certain product lines, particularly reinsurance typically brings. that reinsurers posted in 2016, an 94.6% for 2017. Ratios were up Reserve releases have account- longer-tailed classes, such as casu- For many property-focused annual aggregate cat loss of 13% even though the damage caused ed for a significant chunk of re- alty and specialty reinsurance.” reinsurers, diversification has would result in an underwriting by cat losses was down to 4.1 insurers’ underwriting profits A look at individual company been an imperative over the past loss. That compares with 21% for points from 6.3 points. US storms for several years and analysts disclosure on reserve movement few years. Several of the Bermu- 2012. Reinsurers are now twice as and Cyclone Debbie in Austra- have long predicted this cush- provides an interesting insight dians have branched out into likely to suffer combined ratios lia were the only major natural ion is coming to an end. Overall into where problems are brewing new lines, either by setting up above 100% owing to natural cats events to cause much of a prob- reserve development figures for (see boxout, p11). a capability from scratch or by as they were four years ago. lem for reinsurers in the opening the six months seem to confirm acquisition. Perhaps the biggest The industry’s large, even ex- six months of 2017. the trend (see table 2, p11), al- Combined ratio deteriorating strategic shift has come at Arch, cess, capital position provides That means the market’s core though for many companies the Stripping out the impact of cat which launched operations in the plenty of comfort for clients, and underwriting performance dete- totals were adversely affected by losses and reserve releases, the mortgage sector before moving most reinsurers should be able to riorated. Not only that, but both the change to the discount rate reinsurance market’s core, under- to acquire AIG’s United Guaranty ride out a one-in-250-year event, the 2016 and 2017 periods also for bodily injury claims in the UK lying accident-year combined ra- for $3.4bn. Reinsurers have piled S&P said. Some London players experienced lower-than-average under the Ogden formula. tio worsened by 0.8 of a point to into the mortgage market looking and heavily cat-focused Bermudi- major loss activity. But even without Ogden, re- 93.8% for the first six months of for a new, profitable line and they ans run most exposure. Underwriting results have been serving releases have been di- 2017, Fitch calculated. Factors con- have picked up plenty of business If reinsurance losses from this getting worse for several years minishing. Fitch said: “More tributing to the increase include as the two federally backed mort- year’s storms come in at the high- and, as AM Best highlighted in a recent accident years appear to higher ceding commissions and gage entities, Fannie Mae and er end of estimates, the spotlight recent sector report, reinsurers be reserved less conservatively the shifts towards more casualty Freddie Mac, are now required will fall on those companies writ- to cede more risk back to the pri- ing large amounts of high-level US vate market. cat business, Lloyd’s syndicates Cyber cover has also been a and the two largest European popular new line for many play- writers: Swiss Re and Munich Re. ers. Both cyber and mortgage Swiss Re has been pruning its lines have delivered good results natural cat exposure and in the for reinsurers so far, although it company’s annual report the rein- is worth pointing out reinsurance surer said although its group non- underwriters have little track re- life risk remained stable during cord in these two areas. For cyber 2016 at $9.4bn, this included a risks in particular, true exposure reduction in natural cat risk, no- is hard to estimate and could be tably Atlantic hurricane and Cali- far in excess of what the market fornian earthquake risk, offset by expects at present. increases for casualty risk. At the same time as branching At the one-in 200-year return out, reinsurers have been scaling period, Swiss Re estimated its pre- back their catastrophe and other tax loss from an Atlantic hurri- property books in favour of casu- cane at $5.1bn, down from $5.6bn alty reinsurance or specialty pri- a year earlier. Atlantic hurricanes mary lines. represent the group’s largest in- With retrocession plentiful and surance risk exposure, ahead of comparatively cheap, reinsurers Californian quakes, at $3.4bn. have been able to line up more And during the first six months protection for their catastrophe of 2017, Swiss Re cut its cat capac- Flooding in Brisbane from exposures, including in peak US ity again “where price levels fell Cyclone Debbie: reinsurers’ zones. S&P Global Ratings esti- below our return hurdles”. underwriting results for the mated half of the reinsurers it Swiss Re took probably the first half of 2017 worsened despite only Debbie and US rates reduced their cat exposure largest hit from natural catastro- storms causing problems in absolute terms at the January phes of any reinsurer during Igor Corovic/Shutterstock.com 2017 renewals, much of the fall the first six months of 2017, suf- due to additional retrocession fering a loss of $350m from Cy- purchases. At the one-in-250-year clone Debbie. n 14 www.insuranceday.com | Tuesday 12 September 2017 www.insuranceday.com | Thursday 12 September 2017 15 M&A Table 1: Major insurance underwriting company M&A deals and flotations 2017* Reinsurance market retains its M&A appeal Acquirer Target Notes Price ($m) Aberdeen Asset Management Agreed deal valued at £11bn, with Standard Life shareholders to own two-thirds of 13,495 combined company Deals are likely as long as hyper-competitive conditions block organic growth Sompo Endurance Japanese group expands its international presence 6,300 a deal’s potential at a time when Fairfax/Omers Allied World Deal completed with Omers contributing $1bn 4,900 Map: Number and total value of M&A deals by region, August 2017 Graham Village industry valuations are in any Institutional investors Axa plans an IPO of its US operations next year est 4,000 Global markets editor case at historic highs. Arch AIG Acquisition of United Guaranty now completed 3,400 It is hard to foresee what impact North Europe America Number of deals: 4 Ironshore Liberty has completed the takeover from Fosun International 2,935 a large industry loss from Hur- Number of deals: 5 ricanes Harvey and Irma could Deal size: $779m NN Delta Lloyd NN has now closed the takeover of Delta Lloyd 2,695 Deal size: $2,533m nternational re/insurance have on acquisition activity; firms UK/London Institutional investors PICC Chinese non-life group plans offering on Shanghai exchange 1,930 remains a highly active sec- with big losses could find them- Number of deals: 4 CF Corp Fidelity & Guaranty US investment group to buy life and annuity insurer 1,835 tor for acquisitions as com- selves under financial pressure Deal size: $2,031m MS&AD Fairfax Mitsui Sumitomo is to acquire Fairfax’s First Capital, based in Singapore 1,600 panies look to counter the and receptive to a takeover, al- Ieffects of the soft market and the though the sector as a whole may Institutional investors HDFC Standard Life Owners plan to float up to 20% stake 1,500 threat of alternative capital. feel it has less money to spend on Asia-Pacific SquareTrade US warranty provider, founded in 1999 1,400 Number of deals: 4 While a flood of new money acquisitions if it has had to absorb Africa Deal size: $4,016m KB Financial KB Insurance Korean group is to acquire remaining 60% of insurance arm 1,140 has poured into the industry a significant storm hit. Number of deals: 1 China Development Financial China Life Bid to take 25.3% of Taiwanese life insurer 1,020 through new company forma- But barring a market shift Latin America Deal size: – Yunfeng Group MassMutual Hong Kong group to buy MassMutual’s operations in HK 1,010 tions, typically in the alternative caused by Harvey or some other Number of deals: 1 area, traditional-style takeovers as yet unknown event, acquisi- Deal size: – Institutional investors GIC Re State-owned GIC Re has filed an IPO 1,010 still hold plenty of appeal. tion activity should remain at a Institutional investors SBI Life Owners State Bank of India and BNP Paribas plan 12% float 1,000 It is true most of the larger high level. As S&P said, “As long UnipolSAI Restructuring involves sale of stakes in health insurer Unisalute and 1,000 deals this year have been comple- as competitive pressures persist, the biggest driver of activity. At Chart: Deals by size range, Aug 2017 (where financial details given) direct insurer Linear tions of acquisitions announced re/insurers will continue to con- the start of the year the govern- Enstar RSA Enstar will take over RSA’s UK employers’ liability legacy book via reinsurance 977 in 2016, like Sompo’s capture of sider purchasing their own tick- ment announced a programme Total number of deals: 12 Institutional investors ING Life Korea IPO of a stake of about 40% 974 Endurance for $6.3bn, Fairfax’s et to ride the M&A rollercoaster, of flotation for four state-owned Centerbridge Sompo Canopius Buyout group includes Gallatin Point 952 acquisition of Allied World for which has yet to derail.” non-life insurers – New India, $4.8bn and Liberty Mutual’s pur- Away from the international Oriental, National and United In- 4 Allianz LV= Allianz to take at least 69.9% of LV= in stages 921 chase of Ironshore for $2.9bn. insurance and reinsurance sec- dia – and one reinsurer – GIC Re, $1bn+ Markel State National Target is a US collateral protection provider 919 But Axis Capital’s revised and tor, the most obvious highlight of the country’s only reinsurance 5 First Origin Hong Kong Life First Origin is an investment group based in Hong Kong 914 now accepted £478m ($631.7m) the year has been the bewildering player until 2016. 1 $249m to Institutional investors Fairfax Fairfax is selling a stake of 25% in Fairfax India 900 offer for Novae, Hannover Re’s es- pace of takeovers involving Asian That reinsurer last month be- Less than $499m timated £143m takeover of Argen- financial interests, domestically, came the first of the batch to un- $100m Exin Ethniki General Matt Fairfield’s Exin vehicle is to take a 75% stake in Greek insurer 820 2 ta and most recently the $952m regionally and even into the ma- veil an IPO, looking to sell a stake Institutional investors IRB Re Flotation of a 23% stake 640 management buyout of Sompo ture markets of Europe and the US. of 14.2% to the public now, rais- 0 $500m to Institutional investors ICICI Lombard India’s ICICI Bank and Fairfax plan float of 19% 625 Canopius underline the interna- India is the current hotspot as ing an estimated $1bn, and about $100m to $999m Axis Novae Axis has upped its bid for Novae 620 tional market’s attraction for both the country moves into a new 25% over a three-year period. $249m Santa Lucia Aviva has sold stakes in various Spanish life businesses 534 existing and new investors. phase of development for its in- Details of New India’s flotation In a report published last surance industry. Liberalisation are expected before the end of Zurich Cover-More Zurich has taken over Australian travel insurer Cover-More, also active in 551 India and the US month, rating agency S&P Global in the market started in 2000 the year. Ratings identified a mix of rea- when the Indian government The privatisation of these state- Graph: Number and value of deals by type, August 2017 SocGen Aviva Aviva has sold its 50% interest in French insurer Antarius 550 sons why acquisitions have been at last allowed foreign interests owned companies has received a Travelers Simply Business Acquisition is a UK tech-based broker for small business accounts 490 popular in the international mar- to hold a stake in local insur- warm welcome because it facili- Total Invest Financial Pru is to sell its US broker-dealer network 448 ket and are likely to remain so. ers, pegged at 26% initially. That tates the raising of much needed 10 4 Number of International Financial Group Friends Provident International Aviva to sell this Asian operation 440 Most importantly, the soft market threshold increased to 49% in capital for India’s insurance in- deals: 19

has made it hard for reinsurers 2015, prompting many foreign dustry and also as it should im- 8 Value of deals ($bn) MS&AD Challenger Japanese group to buy Australian annuity provider 396 Deal size (where 3.2 to generate organic growth and players to up their holding to the prove corporate governance and IFFCO-Tokio Marine General Japanese group has increased stake by 23% to 49% 395 financial details profitability, encouraging them maximum permitted. transparency standards. given): $9.36bn 6 2.4 HC-One Bupa is pulling out of the UK care home sector 388 to consider takeovers. For some, The next stage in the market’s At the global level, the sum- Danske Bank Sampo Danske Bank is to take over the life portfolio of Mandatum Life sold through the bank’s 381 the aim is to “offset weak pricing transformation came in August mer months of 2017 have seen no n Number branches in Finland conditions with cost and reve- last year when the regulator is- let-up in the level of M&A activ- 4 n Value 1.6 Assured Guaranty MBIA MBIA UK, mortgage insurance group’s European business 370 nue synergies that offer cedants sued rules for insurance com- ity. August alone saw a value of a larger, more diversified, rated pany flotations, paving the way $9.3bn in deals either announced 2 0.8 Bremer Kreditbank Allianz Disposal of Oldenburgische Landesbank 357 of deals Number balance sheet and a lower over- for several initial public offer- or completed. Busy as ever, Fair- Aon Aegon Aon is to buy Aegon’s Unirobe Meeus, a Dutch IFA 350 all cost structure”, thus becoming ings (IPOs). The first was ICICI fax cut a deal to sell its non-life 0 0 United Insurance American Coastal United/UPC has completed takeover of American Coastal 330 a more attractive counterparty, Prudential, the joint venture be- operation in Singapore, First Cap- Catalina Hartford Catalina has bought Hartford Fin Products and Downlands 320 S&P said. tween Indian bank ICICI and UK ital, to Japan’s Mitsui

Markel SureTec Markel has bought surety provider SureTec 250 Diversification has been a key life company Prudential. for $1.6bn in cash. Fairfax and Non-life driver, and S&P cited PartnerRe’s This year, life players such as Mitsui Sumitomo have also en- Composite International Heritage Narragansett Bay Florida group to buy this US coastal homeowners’ insurer 250 /Reinsurance takeover of life specialist Aurigen SBI Life and HDFC Life have an- tered into a wider co-operation Bupa Bupa has bought an additional stake in BUPA Arabia bringing total to 34% 246 and Axis Capital’s bid for Novae as nounced flotations, while non-life agreement that includes reinsur- Argo Ariel Re Ariel writes through syndicate 1910 235 good examples of this trend. companies Reliance General and ance. The deal should close early to take control of the non-life busi- In the second phase, Allianz Athene Aegon Athene is to acquire Aegon Ireland, a unit-linked guarantor and offshore bond provider 209 Interestingly, the agency has ICICI Lombard General are also in next year. ness of the UK’s LV= in a staged will take a further 20.9% of the Kotak Mahindra Bank OM is selling its 26% stake in Indian life joint venture 201 only a “neutral view with a neg- the process of going public. Serial For Mitsui Sumitomo, the ac- process. Initially Allianz will take non-life account of LV= for £213m. ative bias” on re/insurance com- acquirer Fairfax Financial plans to quisition extends its position a 49% stake in the non-life busi- LV= will have the option to sell Institutional investors Zhong An IPO announced for up to HK$1.5bn 192 panies making acquisitions, sell a stake of about 12.3% in ICICI in the Asean region, where it is nesses of LV= at a cost of £500m its remaining stake to the Ger- Hannover Re Argenta Gives German group exposure to Lloyd’s market 180 reflecting concerns about capital Lombard General having already present in all countries, and in ($658.7m). The Allianz-LV= joint man group. Alllianz said the deal Assa Generali Italian company is disposing of its Panamanian business 172 adequacy following a takeover disposed of a 12.2% holding earli- Singapore in particular, where it venture will take on Allianz’s per- would make it the UK’s third- Allianz Allianz Irish Life German group to take remaining 33.5% stake in Irish subsidiary 171 and the risks of integration. And er this year to Warburg Pincus and will become the country’s largest sonal home and motor insurer’s largest personal lines insurer. companies can be pressured into other institutional investors. non-life insurer. renewal rights while Allianz will Allianz subsequently announced *announced and/or completed in 2017 paying too much if they have un- Looking ahead, a massive In Europe, Allianz moved up its obtain the renewal rights of LV=’s it had agreed to acquire Nigeria’s Source: Company announcements/Insurance Day M&A database duly optimistic assumptions about government sell-off is set to be acquisition plans a gear, agreeing commercial insurer. Ensure from Greenoaks Global. n 16 www.insuranceday.com | Tuesday 12 September 2017

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