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INFORMING YOU WITH MARKETS AND INDUSTRY SPECIFIC INSIGHTS AND KNOWLEDGE

ENERGY REVIEW

03 November 2017

At the time of writing, the world is waiting for several events to take place which most people consider with some anxiety: President Trump cancelling the nuclear deal with Iran; the repercussions of Catalonia’s declaration of independence from Spain; and a further North Korean rocket launch prompting action from the West all top the list. Waiting further back in the wings are: President Trump’s threat to cease diplomatic relations with Cuba; chaos in Zimbabwe when President Mugabe passes away followed possibly by unrest in South Africa with the ongoing investigation of President Zuma; and the simmering problem in the South China Sea where Vietnam and the Philippines may soon assert their rights. In the European Union, Hungary and Poland are showing an ever-growing difference of opinion with the western members of the union, the far right parties seem to become established political players in Germany, Austria and the Netherlands, and in the UK, the continuing dissatisfaction with the leadership of both potential parties. International politics can never get it right; even when something looks like working, problems arise.

In the commercial and industrial world things are different and then you have the energy sector. Some energy corporations are larger than small countries and their shareholders are generally far more demanding than the entitled voting electorate. Little wonder, then, that more action is taken on the basis of the business section of the news than general news however disturbing that can be. We would like to register one exception and that is our admiration of the generosity of many individuals and corporations in sending support to the hundreds of thousands of people affected by the recent hurricanes in the Caribbean and United States.

In spite of the low oil and gas prices, the energy industry is enjoying rude health. There are some situations which indicate how the workings of global trade can appear strange. US oil producers are shipping barrels directly to refineries in Europe, placing the cargoes in competition with supplies from the North Sea. In recent times, refineries in China and South Korea in particular have become a critical source of demand for North Sea oil. But now more than half of crude exported by the US late last month went to East Asia and nearly a third was shipped to north-west Europe and the Mediterranean region: typical markets for North Sea oil. And then we read that whilst the United States exports a large share of the petroleum it produces, it still relies on imports to help meet local demand. Perhaps the left hand doesn’t know what the right hand is doing.

Once again, there are questions relating to the effectiveness of OPEC. Iraq and Iran boosted crude exports in September to win buyers in key markets like China and the USA. Saudi Aramco is planning to flood the Indian oil market. On the 9th October, the Saudi energy ministry said Aramco would make the deepest cuts in supplies to customers in its history in November (including the USA), but he omitted to say what would happen in subsequent months: there are too many customers to let down. This is where politics and commerce differ. Although Russia is not a member of OPEC it likes to portray itself as a loyal friend. That being said, Mr Putin will not stop Gazprom from producing oil from its latest major discovery in the Sea of Okhotsk and sending it off to market, thereby increasing Russian production and exports.

Possibly in defiance of President Trump, the Iran insurance industry is pushing ahead with contacts in the West. After sealing a deal with Total a couple of months ago, there is now the Catastrophe Excess of Loss deal with SCOR. In dribs and drabs, UK-based companies are choosing their EU locations: Everest has gone for Ireland, Starr has selected Malta, Chubb preferred France and Tokio Marine has decided on Luxembourg. There has been a lot of news relating to cyber and cybersecurity. Kroll and Hiscox have been in the headlines as well as a warning from Fitch that global cyber premiums will increase six- to eightfold within ten years. The European Commission has recently adopted a series of measures to increase the cyber protection of European industries and citizens including a strengthened EU cybersecurity agency.

As always, we have a lot of news for our readers and look forward to discussing these and other issues with you all.


Energy Casualties

 

Noble Energy stops Tamar production after crack found on platform

Noble Energy stopped production from the Tamar gas field, offshore Israel, after a crack was discovered in a pipe aboard the Tamar platform.

Noble’s partner in the field, Delek, announced that the crack had been found during a planned upgrade work on the platform on the 20th September.

The crack was discovered in the emission pipe used to release natural gas and pressure from the platform routinely and in emergencies.

“Following identification of the crack and according to the procedures in place at the Tamar Platform, the supply of natural gas from the Tamar reservoir was stopped in a controlled manner on the 21st September,” Delek said.

The operator has advised Delek that there was no safety and environmental exposure.

“The operator is acting to repair the Malfunction, and has updated the Tamar Partners that the planned date for completion of the repair and commencement of flow of natural gas from the Tamar reservoir is during the coming week. It is noted that the cost of the repair is not expected to be material,” Delek said.

According to Delek, Noble has decided to press ahead with the planned upgrade work on the Tamar platform, in parallel with the repair work on the crack.

Delek said that the decline in the supply of natural gas from the date of cessation of the flow of natural gas until the expected date of repair of the crack – during which time the gas flow from the Tamar field to the Tamar production platform was in any event planned to be performed through only one of two pipes, and at one half the maximum production capacity, due to the upgrade work – is expected to amount to about 0.1 BCM (100%), reflecting a decrease of approx. US$3.5 million (net, after payment of royalties and taxes) in the partnership’s revenues from the sale of natural gas.

“Accordingly, the malfunction is not expected to have a material effect on the Partnership’s revenues from the sale of natural gas in the third and fourth quarters of 2017,” Delek said.

Kuwait faces new oil leak near Ras al-Zour

Kuwait’s struggle with oil spills continued in September as the state news agency reported the clean-up of another leak off the southern coast on the 18th September, as the nation tries to juggle its critical role in the future of natural gas markets as a key negotiator between Saudi Arabia and Qatar in a diplomatic crisis which has lasted for months on end.

With the backing of the US government, Kuwait is charged with mediating a dispute between two Sunni countries over their relations with Iran – a Shiite stronghold.

The Kuwait National Petroleum Company is constructing the Middle East’s largest refinery in the Ras al-Zour area, which is where the leaks have been occurring over the past few weeks. The facility is slated to have 615,000 barrels per day of refining capacity, with a price tag of US$11.5 billion.

The Ras al-Zour area is also home to two power and water desalination plants, both of which have so far remained unaffected by previous spills.

Kuwait has an Environment Public Authority that is charged with monitoring oil spills and related damage. That agency said the scope of the spill is still being assessed.

The head of the Environment Public Authority, Sheikh Abdullah al-Sabah, told the Associated Press after a previous incident, “There will be severe consequences to those responsible for this incident, and we will prosecute them.”

Ghana fuel site blast kills at least seven, injures dozens

At least seven people were killed and dozens injured, mostly suffering burns, after a huge explosion at a fuel distribution site in Ghana’s capital, local authorities said on the 8th October.

The blast on the evening of Saturday 7th October was heard across much of the city, sending a giant fireball into the sky above the eastern part of Accra and causing frightened residents to flee their homes in large numbers. Others were forcibly evacuated.

At least seven people died and 132 were injured, a statement from the Ministry of Information read out on local radio said. About half of them had already been treated and discharged, it said.

The site includes a liquefied petroleum gas storage depot and two service stations run by state-owned GOIL and oil major Total. It was not immediately clear where or how the explosion began.

Witnesses said people had already begun fleeing the area ahead of the blast because of the pungent odour of gas – a factor that likely reduced casualties.

Ghana, a relatively new oil and gas producer, has suffered several recent accidents including an explosion in 2015 which killed around 100 people. Like many teeming African cities, Accra’s infrastructure has failed to keep up with its population, which has shot up to seven million.

Oil spill off the coast of Spain

Chemical oil products tanker Alia suffered an oil spill off the port of Huelva after its arrival on the 3rd October from Rotterdam, en route to Spain. Salvamento Maritimo’s Salvamar Alkaid was called to contain the spill. An oil barrier was placed around the tanker.

Goliat production stopped until electrical faults get fixed

Following an audit of electrical safety, the Norwegian offshore safety watchdog, the Petroleum Safety Authority (PSA), has issued a notice of order to Eni Norge to fix faults and deficiencies on the Goliat floating production, storage and offloading unit (FPSO) before resuming production.

The Eni-operated Goliat field is located in PL 229 in the Barents Sea, 80 kilometres north-west of Hammerfest. Production from the field started on the 12th March 2016. Eni has a 65% interest in the field, with Statoil as its partner with a 35% interest.

The PSA said on the 6th October that it conducted an audit of electrical safety with the person in charge of the electrical facilities on board the Goliat FPSO from the 19th to the 28th September.

This audit was followed up by a meeting between Eni and the PSA on the 4th October.

A high fault rate with the Ex integrity of the equipment was established through random sampling of reports from Ex inspections of electric motors incorporating an emergency stop arrangement. This also included equipment in hazardous areas.

The safety body added that Eni had reviewed all the inspection reports relating to the relevant equipment in the wake of the audit.

Eni submitted that the total fault rate for the relevant equipment after the inspection-related repair was 38%, with 3.5% of these being serious faults in Eni’s own assessment. The safety watchdog regards these fault rates as high.

Also, Eni reported at the meeting that it investigated about 50% of the Ex motors at that point. The condition of the Ex motors which had not been inspected is therefore unclear.

This, in turn, represents a non-conformity regarding the facilities regulations on ignition source control.

Notice of order
Considering this nonconformity as a serious one, the PSA ordered Eni to complete the systematic survey of potential ignition sources related to electric Ex motors. The company must also implement the necessary technical, operational and organisational measures to reduce the threat of ignition from all faults which represent an ignition source.

All of these activities must be implemented before production is resumed from the Goliat FPSO and the PSA must be informed when this order has been complied with.

To clarify, an order is an administrative decision and a strongly preventive instrument which is legally binding on the recipient, in this case, Eni. Before the PSA issues an order, it usually sends a notice of order to the affected companies, which is neither an instrument nor a notice of sanctions.


Insurance News

 

Cybersecurity package: Towards a true European governance of cybersecurity

Note from FERMA (Federation of European Risk Management Associations)

On the 13th September the European Commission adopted a series of measures to increase the cyber protection of European industries and citizens, including a strengthened EU cybersecurity agency. FERMA has previously raised its concerns about the lack of focus on risk governance in cybersecurity and welcomes the current initiative which is a strong package.

The Commission is now reaching the middle of its 2014-2019 mandate. These plans are part of a mid-term review of the Digital Single Market strategy (DSM), which was first delivered in May 2015.

Among the key ideas are:

  • A Cybersecurity Act to create an EU Cybersecurity Agency to assist Member States in dealing with cyber-attacks
  • A European certification scheme to ensure that products and services in the digital world are safe to use
  • A new directive to combat cyber fraud and counterfeiting of non-cash methods of payment

EU Cybersecurity Agency
The Commission has proposed a Regulation to reinforce the mandate and roughly double the resources of the EU Agency for Network and Information Security (ENISA) and turn it into an “EU Cybersecurity Agency”.

The mandate will be extended to assist Member States in preventing and responding to sudden and simultaneous cyber-attacks like Wannacry or Petya. To fight large scale cross-border attacks, the ENISA will also be empowered to organise yearly pan-European cybersecurity exercises.

To this end, the Commission has published a recommendation for a blueprint for an EU-coordinated response to large scale cybersecurity incidents and crises. The processes primarily involve EU and Member State institutions, with a deepening relationship with NATO on cyber defence, but the recommendation also calls for the involvement of private sector entities as appropriate.

EU-wide certification framework
The Cybersecurity Act will mandate the ENISA to establish a new European cybersecurity certification framework similar to food labels but for online goods and services. Cybersecurity certificates would be recognised across Member States, therefore cutting down on costs and administrative burden for companies.

Eventually, all existing certificates issued under national cybersecurity certification schemes should gradually disappear when not covered by the future European cybersecurity certification scheme. The pending question will be if cybersecurity certificates should be binding or not.

Non-cash payment fraud prevention
The Commission is proposing a new Directive to combat the fraud and counterfeiting of non-cash means of payment. It will aim to boost Member States’ capacity to prosecute and sanction cyber criminals, including criminal justice cooperation and harmonised penalties across the EU.

As shown in the latest Europol’s 2017 Internet Organised Crime Threat Assessment (IOCTA), cybercrime and especially payment frauds are becoming increasingly sophisticated and cross-border.

Global cyber premiums to increase six- to eightfold within ten years
The global premiums volume for cyber insurance is set to increase six- to eightfold within a decade, according to a Fitch Ratings report.

The ratings agency expects cyber business to be ratings neutral for most highly-rated insurers with sound underwriting, particularly as it represents a relatively modest percentage of individual insurers’ overall premium volume and risk exposure.

“Cyber insurance is an emerging business line which presents unique, new risks for insurers,” Fitch said in a statement. “Limited historical loss data creates difficulty in pricing coverage. The nature of cyber risk and the wide variety of potential cyber events add to challenges in quantifying risk aggregations and catastrophe loss potential. A lack of standardised policy language and terms can also lead to meaningful differences in individual carriers’ product offerings, which is a source of confusion and uncertainty for policyholders.”

The global market for stand-alone cyber coverage is estimated to have grown to between US$2.5 billion and US$3.5 billion annually.

This is largely driven by increasing risk and awareness of cyber-attacks, as well as more active regulation, such as in the US where it is considered a prime factor behind an estimated 90% of global cyber premium originating there.

The ratings agency believes the GDRP (General Data Protection Regulation) implementation in May 2018 will also boost the demand for coverage.

Fitch warned that insurers that lack cyber underwriting expertise, poorly manage their risk accumulations or fail to recognise loss potential from “silent” cyber exposure in their traditional commercial insurance products could face pressure on earning, capital or even ratings, if large loss scenarios emerge as the market expands.

Unduly large cyber risk aggregations of specific insurers may not become evident until after a large or catastrophic cyber event, Fitch said.

Advent Claims establishes European operation in post-Brexit move

Advent Claims, a division of Advent Insurance Management, has entered into a partnership agreement with pan-European claims specialist Van Ameyde to provide support after Brexit.

The agreement completes Advent’s global network, extending its capabilities to Lloyd’s managing agents and coverholders across Europe and 40 countries worldwide.

“Europe is an important and growing region for Lloyd’s and the London market, with many insurers committed to opening EU subsidiaries post Brexit,” said Jerry McArthur, Managing Director, Advent Claims. “We are delighted to have partnered with Van Ameyde to deliver claims support across Europe, both in the run up to and during a critical transitional period for the market and beyond.”

As part of the agreement, Van Ameyde has taken a strategic investment in Advent Claims, providing capital to help accelerate growth through the development of products and services, and potentially acquisitions.

Iran signs XoL treaty with SCOR, makes overtures to other overseas reinsurers

Global reinsurer SCOR has reached an agreement with the Central Insurance of Iran (CII) to provide catastrophe excess of loss (XoL) reinsurance protection, a move which supports the development of the country’s insurance and reinsurance industry.

Since the lifting of sanctions in January 2016, the CII has talked with over 140 foreign insurers and reinsurers that have expressed interest in entering the Iranian market.

Currently the CII, Iranian Re and Amin Re are the only three reinsurers operating in the country which, until recently, was regarded by many western governments as a pariah-state.

Sara Haghighivand, a member of the Professional Committee of High Council Insurance, speaking to Iranian publication, Financial Tribune, said, “It’s important to transfer more risks to credible foreign reinsurers, since more risk is distributed across a broader geographical area.”

The agreement was finalised following a meeting between CII President, Abdolnasser Hemmati, and Victor Peignet, the Chief Executive Officer (CEO) of SCOR Global P&C, which was announced by the CII on the 29th September.

“Such an accordance is the consequence of extensive investigations and discussions conducted by Bimeh Markazi (CII) top executives as well as technical experts in the field of reinsurance and law, all in all leading to amendments to the treaty mutually agree,” according to the CII statement.

Everest and XL pick Ireland for EU subsidiary

Bermuda-based holding company Everest Re Group has been granted in-principle approval by the Central Bank of Ireland to operate as an authorised non-life insurer in Ireland.

The new Dublin-based subsidiary, to be named Everest Insurance Ireland, dac (EIID), will enable the re/insurer to operate throughout the European Union under a single regulatory framework after Brexit.

EIID will initially focus on underwriting trade credit and political risk insurance. It has obtained approval to underwrite a variety of specialty commercial insurance products, including third party liability, property and financial lines.

XL has also revealed plans to move XL Insurance Company SE, its principal EU insurance company, from the UK to Ireland in 2018 in response to Brexit.

The insurer stated that the move followed a meeting between An Taoiseach, Leo Varadkar and XL Group’s Chief Executive Officer, Mike McGavick, in Dublin on the 19th September.

The provider further noted that it has had a presence in Dublin since 1990, adding that moving this part of the business to Ireland will allow its clients and brokers to “benefit from continuity of service through its branch network in Europe”.

Mr McGavick commented, “Since the referendum announcement we have been clear that our top priority is to provide certainty and consistency of service to our clients and brokers.

“Moving XL Insurance Company SE to Ireland means we deliver on that commitment. My meeting today with An Taoiseach Leo Varadkar has only served to further enhance our relationship and our commitment to Ireland.

“Dublin is a natural home for us in Europe. We have a long and established presence in Ireland and we understand and respect the high quality business environment, the regulatory environment and the talent of the people here.”

Starr to relocate EU base in Malta

The Maltese insurance sector has received a significant boost as the government revealed that Starr Companies, the US-based global insurance and reinsurance group led by former AIG CEO Hank Greenberg, will relocate its European base to Malta.

Reports in the international media say that the company hopes to be operational by the 1st January 2018, describing Malta as “a popular jurisdiction for captive insurers” like Volkswagen, BMW and Renault.

Chubb selects France as EU hub

Chubb is the first insurer to pick Paris as its preferred post-Brexit trading location.

The insurer said that the move to its “preferred post-Brexit” hub was dependent on it receiving all the necessary regulatory and other governmental approvals.

Evan Greenberg, Chairman and Chief Executive Officer at Chubb, said, “Paris is the principal office for our Continental European operations and we have a significant investment there in both financial and human resources, as well as a large portfolio of commercial and consumer insurance business throughout France.”

Liberty Specialty Markets creates renewable energy unit

Liberty Specialty Markets (LSM) is establishing a new specialist renewable energy team, integrating underwriting, risk engineering and claims, to expand its onshore energy offering.

Tom Clifton, Senior Underwriter – Power and Renewables, will head the team from LSM’s London office. He will be supported by Jose Luis Ruiz-Poveda, Energy Manager, based in Madrid.

The business will be underwritten from Liberty’s London office and regional hubs in Paris, Madrid and Dubai.

KBRA expands into Europe with Dublin office

Kroll Bond Rating Agency (KBRA) is opening its first international office, in Dublin, as part of an expansion into Europe.

It aims to provide investors and market participants in the region an additional view on ratings with detailed and timely analysis.

The ratings agency has grown substantially in the US over the past few years, having published over 8,000 ratings.

KBRA expects all major geographies in Europe to benefit from its approach, including Ireland where it hopes to become the preeminent agency, improving access to the capital markets for all entities in the country.

Computer viruses now commonplace in vessels’ software

Two-fifths of officers have sailed on a vessel which had been infected by a computer virus or malware, according to a survey carried out by UK-based firm Futurenautics.

In a survey of 2,500 seafarers, it was also revealed that 87% of respondents had received no cyber security training whatsoever.

Lars Jensen, head of Danish organisation CyberKeel, said that the “40%” statistic appeared to indicate that a large percentage of seafarers were unaware that they have had malware or a virus on their ship. He said that, although the severity of viruses and malware varied enormously, it was “highly likely that most vessels have seen some element of virus or malware”.

Roger Adamson, who led the survey for Futurenautics and who expects the total number of respondents eventually to reach 5,000, said that “the figure from serving officers is confirmed by additional research we have conducted with ship operators. However, given that typical breach detection time is 146 days and that up to 70% of breaches go undetected, the figure could be far higher”.

IUA: Top challenges for London’s re/insurers are soft market, Brexit, regulations

The top three challenges facing London market companies are the soft market, Brexit and regulatory compliance, according to a survey of International Underwriting Association (IUA) members.

In an online questionnaire, members also cited the IT/cyber revolution, the challenge of innovating new products and the recent change in the UK Ogden discount rate as key business issues.

Around 150 professionals working across the IUA’s 48 member companies answered the survey, conducted to assess the relevance of strategic priorities and obtain feedback on services provided. Representing member views to government and regulators was ranked as the association’s most important service, followed by the provision of market intelligence and supporting modernisation of business process technology.

Survey respondents were also asked their views on Brexit priorities for the London Market. The most important objective cited was mutual market access, enabling businesses in the UK and the remaining 27 EU states to trade freely (via so-called passporting).

This was followed closely by the early agreement of a Brexit implementation period and the signing of new trade agreements between the UK and other countries.

“The results have given us new areas of potential focus as members outlined the most important emerging risks for insurance coverage,” said Dave Matcham, Chief Executive of the IUA. “Cyber and artificial intelligence, as expected, were prominent, but many other issues were also listed, for example climate change, e-cigarettes and 3D printing. Perhaps the most pertinent answer to this question was from the respondent who simply stated ‘so many’.”

In another section of the IUA survey, members were asked to rank the importance of different legal and regulatory topics. The top two priorities were unchanged from 2014: international sanctions and regulation by the Prudential Regulation Authority/Financial Conduct Authority. However, the third most important issue is now data protection, which was not mentioned three years ago.

Respondents were also asked to rank the importance of seven projects aimed at improving business processing in the London company market. Structured data capture was identified as the top priority, finishing ahead of electronic placing and enhancements to electronic claims files.

EU regulator warns UK insurers to avoid ‘fronting’ in post-Brexit EU HQs

London-based insurers applying for licences to operate in the European Union after Brexit will be scrutinised for any attempts to game the system, the bloc’s insurance watchdog said.

Insurance specialists say some insurers have been shopping around for jurisdictions which are less strict when it comes to “reinsuring” or outsourcing the insurance risk back to London or another non-EU jurisdiction.

More than 20 insurance firms with operations in Britain, including Lloyd’s, RSA and Chubb, have so far announced plans to open EU hubs to maintain links with customers there after the UK leaves in March 2019.

Gabriel Bernardino, who chairs the European Insurance and Occupational Pensions Authority (EIOPA), told the Reuters Financial Regulation Summit that while many firms have announced plans, licences have not yet been issued for many of them.

The EIOPA, which writes rules for insurers across the EU, published Brexit licensing guidelines or “opinion” in July aimed at stopping national regulators from undercutting each other to attract insurers from Britain.

“EIOPA is going to monitor how national authorities adhere to the guidance we have given by our opinion,” Mr Bernardino said, adding that it had already identified differing practices during the preparatory talks between regulators and firms.

The EIOPA said that in 2016 some 80 UK-based insurance firms were operating under EU rules allowing them to provide life and non-life services across the bloc, with more expected to announce plans for EU hubs supervised by local regulators.

“We expect to see a number of firms indicating their preferences,” Mr Bernardino said.

Lloyd’s, the world’s largest specialist insurance market, has said it will hire up to 20 people for its EU subsidiary in Brussels, while other insurers told Reuters in a recent survey they would hire ten or less for their EU hubs.

The EIOPA guidance says that at least ten percent of insurance business should be kept within the new EU jurisdiction to avoid “fronting” or setting up a letter-box firm where governance and risk management functions remain elsewhere.

“We see the ten percent reference of business being retained as a good referential,” Bernardino said.

“What matters is the formal authorisation process. We are looking at each case, each situation and are in dialog with the national authorities,” he added.

The EIOPA has no formal powers to stop a national regulator issuing a licence unless it can show that EU insurance law is being broken, but Mr Bernardino does not expect it to come to that. “We believe we will not arrive at such a situation.”

Pool Re looks to broaden coverage

The UK’s terrorism pool, Pool Re, is looking to extend its coverage beyond physical damage in response to the recent Islamist extremist attacks in the UK.

Pool Re’s CEO Julian Enoizi has said that the changing nature of the threat in which, while there has been high levels of death and injury but minimal property damage, needs a response from insurers.

Mr Enoizi explained that “intensive talks” are currently taking place between the Government and UK insurers.

“Extending Pool Re’s cover requires a change in legislation, albeit minor. Combined with more affordable pricing as well as incentives designed to improve risk management, a change in underlying insurance cover is essential to enable businesses across the UK to better combat today’s threat and to safeguard future investment in our economy”, he explained.

The news comes as Pool Re published its latest “Terrorism Threat and Mitigation Report” which analyses recent terrorist attacks as well as outlining and assessing the broad spectrum of terrorist threats faced by the UK and Europe.

It painted a bleak picture with Islamic extremism remaining the principal threat to the UK with the role of women perhaps greater than expected and low technology/unsophisticated attacks likely to continue.

Pool Re is a mutual reinsurer established in 1993 and backed by the UK Government. Its members comprise the vast majority of insurers and Lloyd’s Syndicates which offer commercial property insurance. It has accumulated reserves of £6.2 billion and, in the event these would be exhausted, the Government provides a guarantee to pay claims.

CCRIF reaches US$100 million milestone with Irma loss triggers

The Caribbean Catastrophe Risk Insurance Facility (CCRIF), the World Bank-sponsored risk which provides cat cover to its Caribbean members based on parametric triggers, has now paid over US$100 million following Hurricane Irma.

The facility – which is celebrating its tenth anniversary this year – has made seven separate payments to the governments of different islands totalling US$31.2 million following the hurricane.

The largest Irma-related individual payment was US$14.9 million to the Turks & Caicos Islands, followed by US$6.8 million to Antigua & Barbuda and US$6.7 million to Anguilla.

In contrast to traditional insurance products based on an indemnity of loss, parametric triggers occur regardless of loss when an agreed trigger occurs. According to the CCRIF, the payments were made as a result of excess rainfall and also the severity and passage of Hurricane Irma.

With two months of the hurricane season to go, 2017 is already destined to be the largest loss year for the facility exceeding the US$31.1 million paid last year.

Haiti – one of the world’s poorest countries – was the largest recipient in 2016, receiving payments of US$23.3 million following Tropical Cyclone Matthew.

The CCRIF, which is a not-for-profit organisation, was formed in the aftermath of the devastation caused by Hurricane Ivan in 2004 and began incepting risks in 2007. Each member pays an annual premium directly related to the amount of risk it transfers to the CCRIF and can purchase coverage up to a limit of approximately US$100 million for three different hazards: cyclones, earthquakes and excess rainfall.

Developed with the support of the World Bank, the CCRIF received a grant from the Japanese government, together with contributions from various countries including Canada, the UK, France and the EU.

Crucial to the CCRIF scheme is that members receive payment within 14 days of the trigger event occurring, thereby providing immediate funds to assist with disaster recovery.

The CCRIF CEO Isaac Anthony said on the 20th September, “The injection of short-term liquidity that CCRIF provides when a policy is triggered is not intended to cover all the losses on the ground following a disaster, but is designed to allow governments to reduce their budget volatility and to provide much needed capital for emergency relief such as clearing of debris and other clean-up activities, restoring critical infrastructure, and most importantly providing humanitarian assistance to the affected population.”

Cat modelling needs to move beyond property losses post Harvey

Hurricane Harvey demonstrates the need for catastrophe modelling to move beyond property losses, said Russell Group Managing Director, Suki Basi.

Mr Basi was speaking at the Houston marine insurance seminar on port accumulation.

“What Harvey reinforced is that the insurance industry needs to understand their exposures from such events in each of the sub-classes.

“Furthermore, whilst the insurance industry’s initial focus is on all risk exposure, they also need to understand their exposure from other connected risks such as the supply chain, cyber and political violence” he said.

Russell Group’s approach to port accumulation covers all trade to and from G20 countries, political risk watch zones and countries prone to flood, according to a company statement.

By adopting a holistic approach, underwriters and insurers will get a better understanding of their underlying port accumulation risk prior to capital commitment, Mr Basi noted.

Beale warns on marine market share loss

Lloyd’s CEO Inga Beale warned the International Shipping Week on the 14th September of the risk that traditional players may lose market share to new competitors in marine business.

The size of the average cargo insurance claim is growing. In the last twenty years, large cargo claims as a proportion of total claims have doubled. This is partly because large ports and bigger ships routinely handle larger volumes of cargo. Partly it’s because of risk aggregation – when cargo concentrates in big ports for example, which are then hit by a disaster such as Superstorm Sandy or Tianjin explosions, and insurers are hit by bigger claims than they expect.

There are likely to be further cargo insurance losses stemming from Harvey and Irma, but actual losses from these events are still unknown.

All this means that, in recent years, cargo insurance as a class of business has seen decreasing profitability, with a combined ratio of more than 100%.

“If the insurance market doesn’t rise to the challenge then traditional players will lose market share to new competitors – like technology firms and asset managers – who are already investing and trying to capture market share from traditional underwriters,” Ms Beale said.

“It is important we get this right, not just for our own benefit, but more importantly for the benefit of our policyholders who rely on our insurers to pay out when disaster strikes.

“We are exploring the possibilities new technology offers our sector, including artificial intelligence, data collection and analytics. By bringing together statistical forecasting methods, big data techniques, telemetry solutions and high resolution satellite imaging, a more realistic view of cargo exposures could be achieved, leading to better risk selection, which could help underwriters improve their overall profitability.”

A new market insight report into cargo insurance aims to help cargo underwriters develop a greater understanding of cargo risks/and in particular how they aggregate. It suggests that underwriters should consider bringing together statistical forecasting methods, big data techniques, telemetry solutions and high resolution satellite imaging.

Altogether these solutions will not immediately solve the profitability issue – but they could help enhance risk selection and how insurers structure their reinsurance programmes, helping them manage their balance sheet exposures better, according to the report.

“Lloyd’s is working in partnership with a number of marine insurers to test the business impact of implementing a new smart data analytics platform for managing an insured vessel fleet,” Ms Beale said.

“Underwriters and their insureds will be able to use this live information source to ensure that vessels circumvent risky waters when they can, such as conflict zones, or areas prone to piracy or extreme weather. The system’s data can also be used to inform underwriting decisions, improve risk profiling and assist with claims.”


People on the Move

 

XL Catlin hires ocean marine insurance experts from CNA and Allianz

XL Catlin has expanded its marine team with the addition of Stephen Clark as Vice President, National Hull and Liabilities Practice Leader in Chicago, and Alison Rizzi as Senior Ocean Marine Underwriter in New York.

In his new role with XL Catlin, Mr Clark will address marine businesses’ hull and liability insurance needs. Most recently, he served as vice president of ocean marine business at CNA.

Neon hires Talbot and Brit underwriters for marine expansion

Specialist Lloyd’s insurer Neon has appointed Brian James as Class Underwriter for cargo, and Richard Mander as Class Underwriter for marine liability.

Mr James most recently served as class underwriter at Talbot Underwriting, where he was responsible for leading the cargo/war on land and agency business lines.

Mr Mander joins Neon from Brit Insurance, where he was class underwriter for marine and energy liability.

Lloyd’s names SCOR cat modeller as risk aggregation chief

Lloyd’s has named Dr Kirsten Mitchell-Wallace as its new Head of Risk Aggregation, reporting to Jon Hancock, Director of Performance Management.

Dr Mitchell-Wallace will join Lloyd’s from global insurer and reinsurer SCOR, where she is currently EMEA Regional Head for Catastrophe Management, based in Zurich.

Dr Mitchell-Wallace also co-authored “Natural Catastrophe Risk Management and Modelling – A Practitioner’s Guide.”

She is expected to take up the new position at Lloyd’s before the end of 2017.

Hiscox appoints special advisor on cyber security

Specialist insurer Hiscox UK and Ireland has appointed Robert Hannigan, a former director of intelligence at security agency GCHQ, as Special Advisor on cyber security.

Mr Hannigan, credited with developing the UK’s first cyber security strategy and setting up the National Cyber Security Centre, will work closely with Hiscox and its specialist cyber division to provide market intelligence, staff training and inform the development of new and existing cyber products.

His new role will include advising the UK business on emerging threats and cutting-edge criminal techniques which could impact customers both now and in the future, as well as helping to educate staff and customers about the importance of managing cyber risk.

AXIS bolsters renewable energy business with Aspen hire

AXIS Insurance, a business segment of Bermuda-based AXIS Capital Holdings, has appointed Christina Tom as Vice President, Renewable Energy Underwriter.

Ms Tom joins AXIS Insurance’s global renewable energy team, where she will be responsible for leading its US West Coast business, underwriting wind, solar and energy storage risks.

Based in the company’s San Francisco office, Ms Tom will report to Tom Cain, Vice President and Head of US Renewable Energy.

Ms Tom most recently served as vice president, inland marine, at Aspen Insurance, where she helped launch and grow the company’s San Francisco office.

UK Broker Capsicum Re appoints Williams as cyber security specialist

Capsicum Re, the London-based specialist reinsurance broker, announced the appointment of Conrad Williams as the latest addition to its cyber team. He will report to Ian Newman and Samantha Thompson, partners in Capsicum Re’s London property and specialty division, and begins his new role with immediate effect.

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