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Welcome to our Monthly Newsletter – March 2008

An Established and Successful Force in International Insurance

Worldwide Risk Solutions is a U.K. based commercial organisation which has the sole objective of facilitating global business strategies and business development in the international insurance industry. For more information about us, please go to www.worldwiderisksolutions.com.

Since Our Last Newsletter

As we pass through the first two months of the year, people are still talking about what will happen this year: continuing soft market, higher incidence of natural catastrophes, more consolidation, etc. London is ratcheting up the attention to its role as a specialist market and Lloyd’s is seeking greater penetration in the continent of Europe. The larger carriers are on the move into emerging markets and especially in the Far East bancassurance and takaful continue to gather momentum.

It is in these latter two areas that insurance brokers are relatively quiet. As both bancassurance and takaful become an irreplaceable part of the markets in key segments of the globe, one can expect the entrepreneurs to seek and find opportunities to play a role. As usual, those people with the right contacts will have an advantage. If you would like to discuss your international strategies with us, please contact us.

In our SPOTLIGHT series we will help you understand the way different markets around the world operate so that those of you who do business there can feel more "at home abroad". Different does not need to mean difficult but knowledge of the needs and characteristics of specific geographic markets is an advantage to those who are active in the global economy. This helps avoid misunderstandings and unfulfilled expectations. We have now done articles on Vietnam, Takaful, Taxation and more; if you would like copies, please let us know.

New Zealand

Current State of the Insurance Market

Like everywhere else, it seems, in the world, the market here continues to be “soft, soft, soft”! Despite the four major players (NZI, QBE, Vero & Lumley) stating that they will increase/review rates on renewal by 5% or so, (not that that’s really acceptable without reason to brokers – e.g. adverse claims) it is a different story when it comes to new business. The same risk which an underwriter will not reduce pricing on for renewal would be readily accepted at lower rates if presented as new business.

The interest rates are currently very high in New Zealand, (floating house mortgage rates are around 10.7%) so this is helping to keep underwriter investments at a good level, even if underwriting results are deteriorating.

We guess the market will remain soft for some time yet, unless there is a major natural disaster (local or global), the investment returns deteriorate or the underwriters’ directors demand better underwriting returns. Certainly, the pressure is currently on some underwriters with the blow torch being firmly applied to the Y fronts by some senior management!

Legislation

The New Zealand insurance market is generally pretty un-regulated at the moment. However, this is all about to change. Following a spate of finance companies collapsing recently, coupled with some substantial undisclosed commissions received by certain financial advisers, the Government has introduced proposed legislation as follows:

  • Financial Service Providers (Registration and Dispute Resolution) Bill – this affects underwriters and, possible, some brokers with binders
  • Insurance (Prudential Supervision) Bill – again, this affects insurers
  • Financial Advisers Bill – this affects mainly brokers. If you are providing “financial advice” in our market, then you will need to be licensed in New Zealand. There are various aspects to the legislation, including disclosure of remuneration. More information is available from our office if required, especially if you have clients in New Zealand (info@ibi.co.nz).
  • Unable to Sue for Bodily Injury in New Zealand

    Yes, this is true!! Under the Accident Compensation Act 1972 (with various subsequent amendments/legislation) one is not able to litigate for bodily injury (including medical malpractice) claims from virtually any cause, 24/7. This was extremely radical in its day and remains so in 2008. Law students throughout the world review the unique nature of this act. However, it has worked extremely well. Injured parties are taken care of by the government established Accident Compensation Commission. Naturally, there are limitations, however, for more information, see www.acc.co.nz

    Summary

    Certain aspects of the New Zealand economy are extremely buoyant (dairy industry) and other aspects are pretty depressed (transport, exporters). Nevertheless, there is a shortage of skilled (and un-skilled) labour and the unemployment rate is only 3.4%. Wages are generally strong as a result and it is difficult to find staff. In the broking/insurance sector, there is a severe shortage of young (under age 35) people, which will cause major problems in ten years or so, when the majority of current brokers will retire.

    In preparing this Spotlight article we have received invaluable assistance from Insurance Brokers International) Ltd in Auckland (www.ibi.co.nz e-mail nick.cressey@ibi.co.nz) for which we are grateful.

    If you would like Worldwide Risk Solutions to conduct an economic, business and insurance survey of any international markets please contact us – Details below.

    Worldwide Risk Solutions has access to a wide client base of internationally oriented organisations. Why not utilise this knowledge and experience? We can conduct a swift appraisal of your global activities or answer any questions you may have about international developments. Call +44 (0)1444 450 919 or send us an e-mail and we will respond immediately. And should you be passing through London, please let us know.

    We are very pleased to announce that our next two e-newsletters we will feature Highlight articles in collaboration with Benfield Research at Benfield Group. The first will discuss the escalation of Flood Risk, global floods and the human factor.

    For more information about any of the items discussed in the current or previous issues of WoRdS, please see our Contact Details

    George Worsley, Director
    Worldwide Risk Solutions
    Telephone +44 (0)1444 450 919
    E-mail info@worldwiderisksolutions.com

    Talk Around the Bazaar

  • Brazil has joined the prestigious International Union of Marine Insurers (IUMI), Lloyd’s has applied for a licence, Munich Re is opening a regional office in São Paulo and a local bank (Parana Banco) has applied for a reinsurance licence. These are just some of the results of recent legislation allowing foreign insurers to underwrite directly in the market without having to post collateral and breaking the monopoly of the IRB. We can expect other Latin American countries to take similar steps with Argentina, Mexico and Venezuela amongst the leaders
  • At a recent Summit of regional CEOs in Asia there has been a call for more cooperation between major players in the industry – something for an ASEAN sub-committee? Singapore has already responded by altering the tax rules to encourage the development of international business.  In the meantime more players are setting up shop in various countries: Scor has received approval to write non-Life business in China, Aviva has formed a consortium with Woori Finance Holdings and will write Life business in the Korean market and Travelers has teamed up with Larsen and Toubro to handle non-Life business in India where Ergo has also just joined up with HDFC. Perhaps the most noteworthy is the approval by the CIRC to permit a Taiwanese carrier to establish a joint venture in mainland China
  • In the U.K. the FSA is to increase its focus on insurers’ risk and capital management. Sub-prime and SocGen have helped this decision through the corridors of power. The ABI and the government are to review the Statement of Principles on the Provision of Flood Insurance to ensure that it works properly. AIRMIC is the first risk management group to applaud the European Commission’s softening stance on subscription policies. The E.C. now has other priorities: it has instituted a study into organised crime and corruption
  • Other European insurers expanding are Zurich opening up in the Nordic region, AXA buying out their Turkish partner, Oyak, Wiener Städtische has bought a majority share in Ukrainska Strakhova Group, thereby strengthening its already strong position in the Ukrainian market
  • Expect to see more insurance investment in Ukraine now that it has joined the WTO
  • Car theft in Japan has been halved over the past five years. This is a major success for the cooperation between the government and the insurance sector           
  • After more than 30 years Algeria and France are nearing agreement to allow French insurers back into their market. In 2006 other foreign insurers were granted the right to operate there. Not only will the large French carriers bring expertise and capacity but the state owned CAAR will most likely be privatised
  • Risk Management Solutions (RMS) has launched the first parametric index for assessing insured industry losses from windstorms in Europe. Paradex Europe Windstorm, which can be used by the insurance industry and capital markets to structure and monitor catastrophic bonds, combines wind speed measurements in specific locations with industry exposure data across twelve countries for residential, commercial, industrial and agricultural lines of business
  • RMS has also launched the Wholesale Broker RiskBrowser Platform, providing catastrophe risk models in a special format tailored to the needs and resources of wholesale brokers. The Platform allows users to analyse specific catastrophic exposures on behalf retail brokers and their insureds, and for the first time gives them access to the same modelling tools which are relied upon by other parties throughout the insurance transaction
  • * * * * * * * * * *

    We are currently discussing projects in the following markets and are regularly being asked to attend the annual conferences and meetings of the major networks:

  • Cambodia
  • Canada
  • France
  • Germany
  • India
  • Ireland
  • Italy
  • Netherlands
  • New Zealand
  • Poland
  • Portugal
  • Romania
  • Slovenia
  • United Kingdom
  • U.S.A.
  • Vietnam
  • * * * * * * * * * *

    We continue to work with a growing number of networks to improve and expand their international capabilities.  If you have not already spoken to us about expanding your international markets, now might be the right time for us to conduct a feasibility study. For more information, please see the contact details below.

    What Clients Say

    “Once again Worldwide Risk Solutions has the contacts we needed"

    ““That they have personal relationships in so many countries has been of immense value to us”

    * * * * * * * * * *

    Worldwide Risk Solutions has access to a wide client base of internationally oriented organisations. Why not utilise this knowledge and experience? We can conduct a swift appraisal of your global activities or answer any questions you may have about international developments. Call +44 (0)1444 450 919 or send us an e-mail and we will respond immediately.

    CONTACT US

    BY POST
    Worldwide Risk Solutions LLP
    20 Blunts Wood Road
    Haywards Heath
    West Sussex
    RH16 1NB, England

    BY TELEPHONE
    Telephone: +44 (0)1444 450 919
    Mobile: +44 (0)7968 191 511

    BY E-MAIL
    info@worldwiderisksolutions.com

    BY SKYPE
    Skype Name: georgeworsley

    Disclaimer
    Information appearing in WoRdS is checked for technical accuracy but is not intended to provide a basis of knowledge upon which advice can be given. Worldwide Risk Solutions accepts no responsibility for any loss occasioned to any person acting or refraining from action as a result of the material included in this newsletter.