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Welcome to our Monthly Newsletter – May 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

Reports are still coming in about the continuing soft market. RIMS members will probably not complain about that, but they are looking for more new products. Brokers are looking at insurance solutions for the causes and fall-out from the diminishing availability of agricultural products. As the market softens, otherwise solid and stable firms become acquisition targets and in the emerging countries increasing attention is being paid to making social security style products available to the poor, mainly in rural areas. More and more carriers are opening offices in other countries but brokers are relatively quite – perhaps they think that they are there already. If you would like to discuss your international strategies with us, please contact us.

This month we have the second of two HIGHLIGHT articles of genuine interest for our readers. During the past months we have received a lot of feedback on comments about Climate Change and the response from the insurance world. With kind permission from Benfield Group we are reproducing two articles on this subject from their Global Reinsurance Market Review and if you have any comments on these, we would be very pleased to pass these on.

Who pays the ferryman?

Floods are such frequent and potentially devastating natural events that in most countries the government has a major role alongside the commercial (re)insurance sector in managing the risk and compensating for losses.  As highlighted in the previous chapter, the escalation of flood risk world-wide means that strategies for containing and managing its impact are becoming a higher priority. In the developing world, insurance is often beyond the reach of the majority and reliance on government and aid agencies remains the norm.  In developed countries, as values at risk and the scale and frequency of flood events increase, how governments and (re)insurers respond to this exposure has become a high profile political issue.

One of the most obvious responses is for government to increase the scope of flood protection measures. However, it could be argued that such action can actually increase flood risk by encouraging development in the protected zones. Successful flood defences mean that flooding of an exposed area becomes a rare event and perception of the risk is distorted. Property values accumulate and when an extreme event occurs and the flood protection fails, the resulting losses are many times more serious than would previously have been the case.1 The devastating floods which hit New Orleans after Hurricane Katrina in 2005 seem to bear out this theory. More than two years after the floods and after US tax-payers have already contributed USD127bn to rebuild the Gulf region, the debate as to whether and how much more to rebuild remains heated. USD6bn is being spent to upgrade the 350 miles of levees around New Orleans. But many observers argue that another Katrina-scale storm would still cause extensive damage to rebuilt properties, while investment in rebuilding will further increase values at risk.

European pragmatism

Elsewhere in the world, the question of whether and how much governments should intervene to provide flood protection has been no less urgent. Protecting against flood risk has been a fact of life for some European countries for centuries, but the issue came to the fore across the continent in 2002 when widespread floods caused economic losses of EUR18.5bn and insured losses in excess of EUR3bn.2 The relatively low proportion of the cost borne by commercial insurers and reinsurers reflects the fact that in many European countries flood damage does not form part of standard residential property insurance cover. In fact, most of the insured loss in this instance was borne by reinsurers on contracts written in Germany and the Czech Republic, followed by Austria and Italy.

To read the complete report online please click here.

To read the complete report on the escalation of Flood Risk, Global Floods and the Human Factor, please click here.

In reproducing this Highlight article we would like to acknowledge the whole team and writers at Benfield Research (www.benfieldgroup.com e-mail benfieldresearch@benfieldgroup.com telephone +44 (0)20 7522 4125) whose work we gratefully appreciate.

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

In our next e-newsletter we will feature a Spotlight on Cambodia. For many of us, this is a relatively quiet country somewhat overshadowed by events in surrounding countries – often violent. There is a lot happening. In our next edition of WoRdS we will look at a bit of history and what is going on there today.

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

  • The Chinese health insurance market is forecast to triple to 120 billion yuan (US$17 billion) by 2015.  Wellpoint, the largest U.S. health insurer, has established a representative office in Beijing. Swiss Re’s Beijing Prestige Health Consulting Service Co will provide third-party administrator and related consulting services to hospitals, insurers, policyholders and employers. China is expected to announce a new healthcare master plan this year and so who else is going to join in?
  • Indian banks are widening their approach to the insurance market. Besides bancassurance activities, they are looking to buy brokers, set up retail chains and strengthen agency forces. They have a long way to go before the market gets saturated. The country continues its race with China on the health insurance side with intensive lobbying for a healthcare pooling scheme for the elderly
  • Also in India, the old hack about raising the stake of foreign investment in domestic insurers from 26% to about half has returned again. It will happen one of these days and will attract even more foreign insurers
  • Korea is to encourage domestic insurers to expand abroad. Once they have opened up in India and China, they will be well on their way to being classed as global players. The questions is, will they follow the Allianz and open up in Sri Lanka?
  • The Indian response is for the LIC (Life Insurance Corporation of India) to plan expansion in Australia, New Zealand and the U.S.
  • Taiwan has also put itself onto the list of mainland carriers’ expansion plans as it intends to allow Chinese insurers and banks to set up representative offices in the country. Mainland China has already allowed Taiwanese counterparts to do that sometime ago
  • In the U.S. the National Association of Insurance Commissioners (NAIC) is to draft reforms of the country’s insurance regulation. In the U.K. they are not going to reform the whole country, just the processes in the London market.
  • Chances are that the recent consultation request from the European Commission on the coinsurance market will be thoroughly discussed by the London Market Reform Group and the so-called Insurance Block Exemption (BER) will look a little different when renewed in 2010
  • The European Commission is also seeking feedback on the need for legislation to allow Class Action suits on a limited basis
  • Financial planners in Australia will need Professional Indemnity cover from the 1st July 2008 in order to comply with new legal requirements
  • The Egyptian government is planning to introduce more flexible rules for the investments of pension funds by the end of the year
  • Soon after French companies were given the green light to operate in Algeria, BNP Paribas/Cardif and the Caisse Nationale d'Épargne et de Prévoyance link up to distribute life and savings products throughout the country
  • A new corporate governance law for listed companies has come into force in Japan with clear rules on managing risks in internal controls and financial reporting
  • Not long after Lloyd’s becomes the first to obtain a licence as an admitted reinsurer in Brazil, XL, Scor and a handful of others follow on. Good news for clients
  • Serious thought is being paid to creating a catastrophe insurance pool in the Pacific Islands along the lines of the Caribbean Catastrophe Risk Insurance Facility (CCRIF). Meanwhile the world’s first multi-country catastrophe pool has come under criticism and an alternative, Caribbean Government Insurance Bond, has recently been launched
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    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
  • Poland
  • Portugal
  • Romania
  • United Kingdom
  • U.S.A.
  • Vietnam
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    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

    “Although culture and market customs vary greatly around the world, Worldwide Risk Solutions manages to cope with ease"

    “Worldwide Risk Solutions has opened some important doors for 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

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    Worldwide Risk Solutions LLP
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    West Sussex
    RH16 1NB, England

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    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.