Japanese Sompo Insurance Group has launched a model for evaluating risks to onshore and offshore wind farms.
As the price for energy has steadily increased, many countries around the world are turning to wind as a viable option for producing electricity on a large scale.
The potential of wind turbines, which convert the kinetic (mechanical) energy into electrical energy, is enormous but comes with significant risks.
The model, created by Sompo in collaboration with the University of Tokyo, will provide pricing and catastrophe modelling data for insuring the construction and operation of wind turbines.
Taking into account perils such as wind, lightning, wave, and electrical and mechanical breakdown, the model will provide valuable risk insights to insurers as well as renewable energy companies.
Sompo stated that it is the first such model to be launched. It will initially cater for risks in Japan and then followed by the North Sea and Asia markets later in the year.
Marek Shafer, Head of Catastrophe management at Sompo’s Lloyd’s unit, Sompo Canopius, said: “The quantitative evaluation of risks associated with wind farms is still in its infancy and the development of this model is an important step forward.”
The launch comes few weeks after the Paris Climate Agreement (COP21) where more than 170 countries signed a historic agreement to combat climate change and to accelerate the actions and investments needed for a sustainable low carbon future.
German insurer Allianz has agreed to acquire Moroccan insurance unit, Zurich Assurances Maroc, from Zurich Insurance Group, the insurer said on Friday.
Zurich Assurances Maroc is currently the seventh largest insurance company in Morocco. The company generated around 114 million Euros (£88 million) in gross premiums written last year, serving more than 600,000 customers in the Kingdom. The company also has a license for life and health insurance products, which Allianz plans to exploit.
Allianz will pay 244 million euros (£189 million) to Zurich once regulatory approvals have been finalised. The transaction is expected to close end of 2016
This transaction enables Allianz to make a remarkable entry into the insurance sector in Morocco and capture future growth in the Africa region. Morocco is Africa’s second largest insurance market after South Africa.
“This deal is a major milestone for our strategy to expand in Africa. Morocco presents good growth prospects for both personal and commercial lines.” said Sergio Balbinot, board member of Allianz SE in charge of southern and western Europe, Africa, MENA and India.
The German group will, however, face stiff competition in a market dominated by the likes of Saham Insurance, Wafa Assurance, RMA Watanya and the French behemoth AXA.
In a statement, Zurich explained that the “hard” decision to sell its Moroccan subsidiary was taken after a thorough examination which revealed that there is limited potential to achieve operating scale to justify continued investment of capital and management resources.
Despite the growth potential of the Moroccan market, Zurich ruled that other companies were best placed to manage these businesses.
In 2015, Allianz achieved a turnover of 125.2 billion euros (£95 billion), for a net profit of about 6.99 billion euros. The group has 142,000 employees serving more than 85 million customers across 70 countries.
Zurich Insurance, Switzerland’s largest insurer has been shocked and shaken by the suicide of their former CEO, Martin Senn. It comes less than three years after their Chief Financial Officer, Pierre Wauthier, also committed suicide.
Martin, who was 59, was the company’s Chief Executive Officer between 2010 and 2015; he resigned in December last year after a takeover bid for British insurer RSA that failed, and a series of profit warnings.
Martin Senn former Zurich Insurance CEO
Mr. Senn’s family informed the insurer of his death, and they have remembered him as commendable, well liked and valued.
Mr. Wauthier’s and Mr. Senn’s deaths had prompted an enquiry into how much pressure is being placed on employees at companies such as Zurich Insurance, but family members have been critical of whether anything has been done to improve company morale.
Going back to Mr. Wauthier’s death, he actually named then-chairman Josef Ackermann in his suicide note and blamed his death on his demoralisation with the aggressive route the insurer was taking and his inability to “switch off” at the end of the workday.
The business community in Switzerland has been rocked by both men’s deaths, especially given the fact that there has been a string of similar suicides in the past few years. In total, five executives from some of Switzerland’s biggest companies have taken their own lives in the past eight years. With the passing of Mr. Senn, a disturbing pattern is beginning to emerge.
With finance and insurance professions throughout the world being notoriously high-stress, one must ask if what’s happening in Europe could occur in other key markets as well.
What’s more, experts from the University of Oxford and London School of Hygiene and Tropical Medicine noted suicides across Europe increased by 6.5% between 2007 and 2009, at the height of the crash. This number remained higher than average all the way until 2011.
Cargo theft throughout Europe is on the rise. Nearly $23 billion USD (£16 billion) in losses were reported last year, with a large portion of them taking place in the United Kingdom and the Netherlands, according to a BSI’s 2015 Global Supply Chain Intelligence report.
Various supply chain threats and security concerns have contributed to the increase in trade disruption and thefts. Incidents such as the Paris terrorist attacks in November 2015 resulted in losses of $3.5 million USD (£2.4 million) for the Belgian shipping industry, according to that same BSI report, and also served to highlight the links between terrorism and the supply chain.
Terrorist smuggling rings have also been working together between Spain and the Middle East. Together, they facilitate the illegal transport of stolen electronics, weapons, drugs and other contraband items.
Besides Spain, notable numbers of cargo theft related incidents also occurred in Italy and France; however, the UK and the Netherlands reported the highest number of cargo thefts in the first quarter of 2015. Both countries are under threat from well-organised cargo crime gangs who are becoming increasingly violent to gain access to goods.
Shockingly, the Transported Asset Protection Association for Europe, the Middle East and Africa (TAPA EMEA) has data which indicates more than 67% of all cargo thefts or attempts in Europe during the first quarter of 2015 took place in the two nations, and just 18 of the incidents made for a loss of €100,000. During that time, the UK reported 70 cargo-related crimes, an increase of 133% over the first quarter (Q1) of 2014. In the Netherlands, the rise was 17% over Q1 in 2014.
police officer stopping a cargo truck
Mitigating the risks
A number of measures exists which shipping companies, lorry drivers and cargo facilities can undertake to help reduce the amount of cargo-related crimes happening throughout Europe.
First, trucks can utilise GPS tracking to determine their location at all times. This is especially useful if they are stolen. Additional geo-fencing solutions can also help by setting off alarms if vehicles go off-route or enter known high-risk areas.
There are a number of companies around the world working along the industry to provide telematics solutions. One company in particular named Orbcomm Inc. has just won an award from the Connected World magazine for developing solutions to minimise cargo thefts. The company’s solutions are designed to remotely track, monitor and control both mobile and fixed assets for those who work in transportation and distribution.
Other GPS tracking solutions come are provided by companies such as Fleetmatics that provide real-time tracking, alerts and Geo-fences. Trailermatics, a telematics trailer expert offering GPS tracking on containers and swap bodies.
Within cargo vehicles, a number of different locking mechanisms can also be deployed to help secure the vehicles and its cargo. Furthermore, air brake valve locks that prevent the release of vehicles park brakes can also be installed in addition to the locks and seals on doors. These tools are highly recommended by the Cargo Security Alliance.
All shipping professionals can also play their part by staying alert, whether on the road or working in a cargo storage facility. Look out for signs that a building is under surveillance, such as people loitering around the perimeter taking notes or photos, or vehicles following trucks.
Being aware of the details of the supply chain can also help reduce opportunities for theft. From pick up to collection, knowing who is scheduled to handle each aspect of a shipment and verifying identification before releasing a load is essential. Furthermore, maintaining good communication with everyone involved, monitoring delivery schedules, reviewing security procedures and expecting how many stops cargo will make along its route will all help reduce the likelihood of theft.
Even the most basic safety procedures go a long way towards helping cut down on cargo-related crime. Maintaining well-lit facilities, keeping trucks locked, parking in an organised way and ensuring alarms are working are imperative steps towards increasing cargo security.
Finally, when hiring new employees involved with any aspect of shipping, from working within a warehouse to driving a lorry, rigorous screening must be implemented. Screening and training employees can help weed out potential “inside jobs”.
Working towards theft reduction
While it’s extremely difficult to eliminate cargo theft in Europe, being vigilant and taking every step possible to protect shipments will go a long way towards reducing the number of incidents. There are many businesses and organisations who are dedicated to providing a variety of security solutions for the shipping industry.
With better understanding of the problem, in-depth pre-screening and increased security measures, issues regarding cargo crime may start to decrease instead of rising throughout the remainder of 2016 and beyond.
Building on the requirements of the new European Network Information Security Directive, the Association of British Insurers (ABI) is now calling for the creation of a central UK database of cyber incidents. They are advocating that by doing so, insurers throughout the United Kingdom can tackle the current lack of data and help to properly price cyber risk.
Information sharing of this magnitude is crucial for putting the UK at the head of a £14 billion ($20 billion) global market, and better enables the cyber insurance market to grow. Accordingly, it would provide more choice for businesses of all sizes.
The ABI believes that this information is needed urgently to better tackle cyber security, as three out of four SME firms are now reporting security breaches.
Creation of the cyber incident database would be anonymous, and allow businesses and insurers to record details of incidents involving businesses around the UK. While other countries like the US track cyber crimes on a state-by-state basis, this would be the first national database of its kind. It would position the UK as a world leader in cyber insurance.
The database would be a not for profit venture, and the types of cyber crimes detailed within would include business interruption losses, ransom demands, loss of confidential data and even damage to IT systems.
By building the database on the recommendations set out in the European Network Information Security Directive, which states that certain firms must provide notification of cyber incidents from 2018 onwards, anonymous data will be more accessible to insurers.
This data will be used to improve pricing and could potentially drive market growth. Because it would be a world first, it would put the UK in prime position as the global cyber insurance leader.
Cyber losses are still being underestimated, despite the fact they’re the biggest threat to the UK’s world leading digital economy. Therefore, more absolutely must be done to tackle the problem. Cyber crime is, at present, the biggest insurable risk the industry is facing, and it’s critical to the economy.
Without enough data, insurers won’t have the information needed to provide the appropriate coverage. This is a huge inhibitor to being at the core of the global market.
This proposal must be mandated by parliament. It must also be proportionate and manageable in order to remain truly effective. Suggesting it follows on from the ABI’s recent guide, Making Sense of Cyber Insurance.
Cyber crimes are hitting even small businesses in the UK, and include phishing and spear phishing emails and malware attacks that can cause significant losses and upset. It is time that businesses gain advice and guidance from the government and the insurance industry on how to become more resilient in the face of this threat.
The Prudential Regulation Authority (PRA) is proposing a supervisory statement that sets out a new approach to monitoring model drift, in line with Solvency II. Within the proposal are new expectations for firms with approved internal models, relating specifically to their reporting formula and Solvency Capital Requirement (SCR).
Part of the new, proposed approach is that firms with internal models will privately report their SCR annually, using a template provided. By doing so, it is hoped that it will be simpler for firms to provide this information.
The Consultation Paper details that the proposal will be relevant to all solo insurance and reinsurance undertakings within the scope of Solvency II, the directive making a provision that when relevant SCR is calculated using an internal model, it must be approved by a supervisory authority.
Risk is created when models evolve over time. Capital levels subsequently drift downwards and fail to reflect the risk on the system.
The new expectations on the internal model will require firms to report their results of the SCR calculations to the PRA. From there, the PRA will use the information to monitor model drift and measures of risk.
The consultation closes on Wednesday 17 August 2016. Comments and enquiries should be to CP22_16@bankofengland.co.uk
Pandemics. Just the word is enough to strike fear in the hearts of many. They are a significant threat to our global health security, economic security and ability to end extreme poverty around the world. They also hinder the ability to achieve sustainable development goals.
Outbreaks of disease are unfortunately inevitable in many parts of the world, but if they are addressed promptly pandemics are often preventable. What makes this easy is having money at the right time to save both lives and economies in many countries around the globe.
The recent Ebola crisis in parts of West Africa is a perfect example of why having funds supplied promptly is so essential. With no quick disbursement of significant funds, especially in nations with constrained resources, epidemic outbreaks simply cannot be tackled effectively and stopped before they escalate even further.
Under the present system, global financial aid is not supplied until major outbreaks are already at the point where they are ready to explode. With no strong system in place to tackle outbreaks before they get this severe, the planet just keeps moving from one crisis to the next.
The World Bank’s response
In the wake of the horrendous Ebola crisis, the World Bank worked with expert panels to investigate what more could be done, and how financial support could be provided in a more expedient manner in the wake of potential pandemics.
It has been recognised that the financing gap is especially critical at the early stages of an outbreak, and that assistance must be provided when the crisis level is set to rise. To this end, the World Bank is partnering with the World Health Organisation and other private and public sector partners to develop a Pandemic Emergency Financing Facility.
This new campaign will enable them to provide a significant surge of funding in a much quicker manner for response efforts that help prevent the spread of rare, severe diseases. It will also provide aid to qualified international agencies involved in the response to a major outbreak in the affected countries. This will aim to stop them before they are even more deadly and costly.
The pandemic problem
Sadly, pandemics are one of the biggest uninsured risks in the world today. Experts have even estimated there is a significant chance that a severe outbreak will occur in the next 10 to 15 years, which will destabilise societies and their economies.
The shocking global cost of a moderate to severe outbreak at the moment is $570 billion (£400 billion), or approximately 0.7% of global income. Think back to the Spanish Influenza Epidemic of 1918; a pandemic that size would today cost approximately 5% of the global economy.
Who will benefit
Lower income nations will benefit from this new pandemic funding initiative; those with weaker health systems that are more vulnerable to outbreaks and less able to cope with the consequences.
Financing for the initiative will come from the IDA, a World Bank Group fund designated for the poorest countries on earth. It will come in part from insurance and in part from cash, obtaining funding from resources such as the reinsurance market and proceed from catastrophe bonds.
It will cover the outbreak of infectious diseases like Influenza A, B and C, SARS, MERS, Ebola and Marburg. It will also cover outbreaks of zoonotic diseases such as Crimean Congo, Rift Valley and Lassa fever.
The maximum coverage available will be $500 million (£350 millions) for 3 years. There will also be a replenishable cash window at $50 to $100 million US dollars.
The Goal
The essential goal of this new World Bank initiative is that quicker provisions of resources will translate to stemming outbreaks before they reach pandemic proportions. Financing will be triggered when outbreaks in the poorest nations reaches specific criteria related to their severity.
The Pandemic Emergency Financing Facility is expected to be up and running by late 2016.
A new report from the leading global insurance broker Marsh and risk advisor TheCityUK has urged decisions makers in the insurance and financial sectors to take far greater actions regarding cyber-crimes – starting now.
Just last year, an astounding 2.5-million cyber-crimes were reported in the UK, the majority resulting in fraud and loss for the financial sector. The City of London in particular tends to be a popular target for attacks, because of the significant amounts of money and data City firms possess.
In their report, TheCityUK and Marsh make an important reminder that reputation and reliability are shared assets throughout the industry. As such, firms should be encouraged to work together to create a more resilient financial system. It is critical to the UK economy that London in particular remains seen as a reliable global financial centre, especially in times of potential instability.
While the ‘Cyber and The City’ report makes a point of recognising the efforts made by the UK authorities, it stresses the importance of taking further action against cyber-crime. It also points out that it is not just multinational corporations that need to put in the effort. While larger institutions are more likely to be engaged, individual firms must also play a role in enhancing security.
Shockingly, the evidence laid out in the report suggests that too few firms are tackling cyber-crime in a cohesive manner. Only 30% of firms recognise that potential cyber-attacks are a “top 10” risk, and only 30% even have a response plan in place should a cyber-breach occur. Such low numbers are sure to be worrying to consumers!
The report also urges that management within firms should be held responsible when cyber-attacks occur, without the blame being placed squarely on the shoulders of IT departments. Too often, IT professionals are made the scapegoats when breaches happen when in fact, 95% of cyber-attacks are due to human error. People and processes must be seen as important as technology in preventing cyber-crime.
Cyber and The City suggest that a cyber-forum be established so firms can work together to develop and share best practices, information and support in the battle against cyber-crime. The forum should also work together to aggregate risk and develop a recovery system for stronger overall cyber security.
Finally, the report urges that insurance and financial professionals stop treating cyber-crime like it is a problem for the future. With more than 2.5-million attacks in the UK last year, there is no doubt that it is an immediate threat.
The industry must absolutely pull together and develop practical steps to protect their businesses and their customers, making cyber hygiene as commonplace as locking the doors when you leave the office at the end of the night.
Is it a cautionary tale about the inevitable economic failure of socialism or an example of what can happen, in an ever-shrinking world, when you have placed all of your eggs in one basket?
Yes.
The crisis unfolding in Venezuela before the world’s horrified eyes is a devastating mix of the two, causing food, power and water shortages, and it shows no sign of ending anytime soon. Venezuelans are standing in queue for hours to buy basic supplies, such as food, fuel and toilet paper, at state-run stores selling government-subsidised commodities.
Goods are being sold by the state-run stores at prices so far below market value that they have triggered a black market, effectively making the government an unwitting wholesaler. People buy the items there and then resell them at higher prices, creating empty grocery store shelves and new careers for young men known as bachaqueros – derived from the term bachaco, an aggressive ant-like insect.
The government has hiked wages and is printing more Bolivars, driving inflation into triple-digits in a situation that no one thinks is sustainable.
Still, a glimmer of hope emerged Saturday, May 28 when mediators met separately with members of President Nicolas Maduro’s administration and opposition leaders, Reuters reported. Representatives from both sides sat down with mediators in the Dominican Republic.
The opposition, having won control of the Legislature in December, wants to force a voter referendum on Maduro’s recall, while Maduro, despite popularity ratings that have dipped below 30 per cent, has refused to step down.
The oil-rich South American nation, which amassed huge wealth during the oil boom years leading up to the Great Recession of 2008, has seen its life blood nearly choked off over the past year. It relies on oil exports for 96 per cent of its income, and oil prices have dropped to below $28 per barrel, down from a high of $145 (£100) per barrel in 2008.
Ironically, Maduro can thank the United States, long-time adversary of his predecessor, Hugo Chavez, for launching the chain of events creating his current crisis. Responding to the US’ exploitation of new sources of shale oil in the US and Canada, OPEC decided to ramp up production, flooding the market with a global oil surplus designed to lower prices and quickly force new producers out of business.
If low oil prices have hurt OPEC’s richest members, such as Saudi Arabia, they have annihilated the economies of smaller members like Venezuela that have failed to diversify their exports. Venezuela owes its foreign creditors $120 billion (£83 billion), and could default on a $7 billion payment due by the end of the year.
Defaulting could allow negotiation of more favourable repayment terms, but Venezuela fears a rash of shareholder lawsuits also could result.
Making a recovery more unlikely is the socialist economy’s inability to adapt to, improvise and overcome the severe problems caused by the oil glut. State-run economic systems are notorious for their rigidity. Think the massive Titanic trying to quickly steer clear of the iceberg moments before impact.
Venezuela’s only hope in the near term is persuading its more well-heeled OPEC counterparts to stand down in their game of chicken with North American producers, and reduce output to raise oil prices.
Only then might Venezuela feel some relief, however short-lived it might be if Maduro retains control.
The British Insurance Broker’s Association, or BIBA, is calling for the industry as a whole to embrace the objective of fairness in the Insurance Act 2015 as it comes into force this August.
Doing so will require brokers, customers and insurers to adopt different processes for managing commercial insurance, with a goal of increasing professionalism in the industry.
To help with this process, BIBA has created an implementation guide that members can use to help with the transition. Working in conjunction with compliance experts Mactavish, they launched the helpful resource at the recent BIBA Conference in Manchester.
The guide initially reviews several concepts, including fair presentation and reasonable search. It also takes a look at the effects of changes made on the application of warranties and suggests possible implementation measures in order to achieve compliance with the Act.
As this will be a massive change in legislation governing practices, BIBA is eager to establish a framework that all parties can work with; something clear to make the transition as smooth as possible.
The aim of BIBA is to see all brokers and insurers unite over how the Act is adopted in August. They feel a transparent, united and fair approach for all is the most effective way forward.
By implementing the Act, a more level playing field will be set for all companies, offering clarity for everyone from multinational insurers to SMEs.
Of course, BIBA’s implementation guide isn’t the first document they’ve published to assist with this transition. It’s a follow up guide to a resource they published last year, entitled Introduction to the Insurance Act.
By checking out both documents, brokers and insurers should have a clear expectation of what will be expected from them come 12th August, 2016.
