Brought to you by:

Local

Financial Rights says cyclone pool doesn't solve problems

The Financial Rights Legal Centre has warned the reinsurance pool announced last week for northern Australia may not deliver significant premium reductions and offers no assistance for those exposed to natural catastrophes in other parts of the country.

“Any taxpayer funded scheme should apply nationally, not just in northern Australia. There are pockets of high natural disaster risk all over Australia,” Policy Officer Julia Davis told insuranceNEWS.com.au.

“People living in the Hawkesbury region of NSW can no longer afford flood insurance while consumers on the South Coast of NSW are experiencing huge increases to home insurance costs in the aftermath of the catastrophic Black Summer bushfires.”

The centre notes that the Australian Competition and Consumer Commission report into northern Australian insurance recommends against a pool and proposes direct subsidies to low-income households in high-risk areas.

The reinsurance pool may only reduce premiums by 3% depending on how the scheme is designed, while taxpayers bear the risk of the proposed $10 billion guarantee, it warns.

“It is a tenuous presupposition that insurers will in fact pass on these cost savings to homeowners,” Ms Davis said. “It would require stringent monitoring including an ongoing assessment of the reinsurance premium savings generated and the amount passed on to consumers in high-risk regions and nationally.”

The Federal Government says the pool, to come into effect next July, will be operated by the Australian Reinsurance Pool Corporation. Details will be determined by a Treasury-led taskforce.

The Government estimates more than 500,000 residential, strata and small business property policies will be eligible to be covered and that premiums across the north will reduce by $1.5 billion over 10 years.

Prime Minister Scott Morrison says it’s hoped consumers and businesses could see savings of more than 10%, but the extent of the impact will depend on factors including the involvement by more participants in the marketplace.

The Insurance Council of Australia, which in the past has opposed a pool and stressed the importance of mitigation spending, has said it will work with the taskforce.

“The industry has done considerable work on the key fundamentals of a public reinsurance scheme, and if properly designed and implemented a reinsurance pool can put downward pressure on premium costs,” CEO Andrew Hall said last week.

See ANALYSIS.

'Major' D&O, PI claims pushing up financial lines rates: Marsh

Financial and professional (Finpro) rates in the Australia-led Pacific region surged 48% in the first quarter, the highest out of three commercial product classes tracked by Marsh’s price tracker.

Property went up 20% and casualty 17%, according to the broker’s Global Insurance Market Index.

Marsh says the Finpro market remains challenging as all major lines - directors’ & officers’ (D&O), professional indemnity (PI), and financial institutions - experienced reduced insurer appetite.

“Financial and professional lines pricing rose 48% in the Pacific, where the market has been impacted by major claims for listed company D&O and professional indemnity,” Marsh Head of Global Placement Asia Pacific John Donnelly told insuranceNEWS.com.au.

“In the listed company D&O space, there have been positive signs with pricing increases starting to moderate and the current rating environment has seen new capacity emerging in the London market.

“However, significant premium increases are still evident for several professions in the professional indemnity classes.

“Cyber insurance pricing is also increasing, driven by a rise in the frequency and severity of losses.”

Pacific pricing on the whole rose 29% on average in the three months to March, slower than the 35% increase in the prior December quarter.

Mr Donnelly says the weaker pace of increases possibly “marks a turning point in the longstanding upward trend we have seen over the last several years”.

Globally rates went up 18%, down from the 22% surge seen in the December quarter, with all six geographic regions covered by the index seeing lower price increases.

The UK recorded the steepest increase of 35% during the first quarter, compared with 44% in the previous December quarter, followed by the Pacific region where Australia is the largest market.

US prices advanced 14% (versus 17% in December quarter), Continental Europe 13% (versus 14%), Asia 8% (versus 11%) and Latin America 5% (versus 9%).

“Although we will continue to see price increases in some lines and the market overall will remain challenging for our clients, we expect price increases to continue to moderate throughout the rest of the year,” Marsh Specialty and Global Placement President Lucy Clarke said.

Finpro pricing surged 40%, the biggest out of the three product categories tracked by the index. Property grew 15% and casualty 6%.

Click here to access the report.

UK actuary flags idea to 'insure the uninsurable'

An actuary with the Financial Reporting Council, a UK regulator, has suggested there may be a way for the insurance industry globally to underwrite pandemics, wars and other uninsurable risks as well as black swan events.

Richard Hartigan says his plan involves doing away with the default exclusions for such perils and in exchange for underwriting the risks, insurers are “legally permitted to pay out less than a 100% of each claim” when such a loss event occurs.

“I’m not saying that the insurer must offer a policy with no exclusion,” Mr Hartigan told the Actuaries Summit last week. “I’m saying they may offer a policy of no exclusions as one element of their library of policies that they may or may not offer.

“Of course to do that, there must be some quid pro quo for the insurer and what I propose ... is that if a collective event loss is large enough [then] the insurer is legally permitted to pay out less than 100% of each claim.

“Now how we achieve this is a matter of discussion or debate.”

He says one way for his idea to work is through “robust policy and language” so that insureds “know that occasionally if a very large collective loss event occurs, the insurer will pay out less than 100% of their claims.”

Mr Hartigan says legislation may also be needed to make his plan workable.

He says the recent court disputes in the UK over business interruption claims for pandemic-related losses got him thinking about what could be done to avoid such legal fights in future.

“This is an idea to create a sensible trade-off to achieve a higher good, a higher good that is acceptable to all three parties, the insured, the insurer and the government,” Mr Hartigan said.

“The alterative of course for many perils that would otherwise be excluded is that no cover at all is offered.

“So it seems to be there is low downside to this idea if we can get the mechanics working.”

He says it’s not a good outcome for society if insurance is viewed as a “low value” product.

“Maybe put yourself in an insured’s shoes and work out how you would feel if the insurance you purchased did not respond,” Mr Hartigan said. “Naturally you’d feel or view insurance as a poor value product and that poor value, or view of insurance as poor value, serves neither the insurer nor the government.

“Clearly it does not serve the insured either. We see unfortunately after every catastrophe, large numbers of people have no insurance and they are left with very limited ability to rebuild their balance sheets when their house is swept away or their business is interrupted,” Mr Hartigan said.

He says that by sharing his idea at the summit, he hopes to get ideas and contributions to improve it further.

ICA appoints IAG, Munich Re, Chubb executives to board

The Insurance Council of Australia (ICA) has added IAG CEO Nick Hawkins, Munich Re Australasia MD Scott Hawkins and Chubb Country President Peter Kelaher to its board.

“The board is pleased Nick, Scott and Peter have all agreed to join as directors,” ICA President Sue Houghton said today.

“There is no shortage of issues confronting the general insurance sector, and their many years of combined experience will add immeasurably to the already considerable knowledge and understanding around the ICA board table.”

ICA says challenges and opportunities facing the industry include the changing regulatory landscape, the economic recovery from COVID-19, consumer protections and support, ongoing prudential responsibilities and the design and delivery of the Federal Government’s reinsurance scheme announced last week.

The board already includes insurance industry representatives from Westpac, Zurich, QBE, Hollard, Allianz Australia, Avant Mutual, RACQ, Suncorp and Lloyd’s.

Perils puts NSW, Queensland flood losses at $1.06 billion

Zurich-based catastrophe data company Perils has put its initial insured loss estimate for the NSW and Queensland flooding catastrophe at $1.06 billion.

The losses cover property and motor lines of business, and are based on data collected from the majority of the Australian insurance market.

The March 18-24 disaster affected mainly NSW’s Mid North Coast, and the Hunter and Greater Sydney regions, as well as adjacent parts of south-east Queensland.

“During the week ending March 24, the east coast of Australia experienced extreme rainfall over both a wide geographic area and an extended period,” Head of Perils Asia Pacific Darryl Pidcock said.

“The resulting damage from storm drain water and river flooding was considerable, especially for NSW, where the event represents the largest industry flood loss on record.

“While damage to private property was largely insured, there were cases where policyholders decided to opt out of flood cover reminding us of the challenges the industry still faces in offering sustainable and affordable flood risk protection in Australia.”

In a separate update, Perils has revised its insured property and motor loss estimates for last October’s “Halloween” hailstorms in Queensland to $1.17 billion.

The revised number is down from the $1.3 billion Perils provided in its previous loss report for the storm event.

The latest third loss report provides a detailed breakdown of property and motor losses by postcode, with the data further divided by residential and commercial lines, and loss amounts split into buildings, contents and business interruption losses where available.

The Insurance Council of Australia declared the October 31 storm event a catastrophe.

Bushfire costs to rise as winter rainfall skips Australia

Australia faces drier conditions and an increased risk of extreme bushfires peppered with bouts of intense rainfall and floods during severe La Nina phases, representatives from Chubb and Suncorp told attendees at this year’s Actuaries Summit.

The presentation, which summarised the latest research from around 20 scientific papers, warned insurance modelling is missing key drivers of natural hazard claim costs as they fail to reflect how natural climate variability will interplay with climate change.

Natural climate variability drivers include the Indian Ocean Dipole (IOD) and Southern Annular Mode (SAM), as well as El Nino and La Nina which are determined by where the body of warm water sits in the Pacific ocean from year to year to the north east of Australia.

If the warm water gets close to Australia then moist air and more rainfall – the La Nina years – result. When the quantity of warm water sits close to South America, there is dry air to the north east of Australia and less rainfall – the El Nino years. Around half the years are “neutral” as the warm water is halfway in the middle.

“We’re projecting the warmer waters are going to be more towards South America and therefore conditions being more El Nino like. So actually what we’re looking at in future is generally drier conditions for Australia,” Chubb COO Analytics Tim Andrews said.

Scientists predict a doubling of El Ninos by 2050 but also extreme La Ninas.

“Many of the things that we see are linked to extreme episodes of the natural variability so if we’ve got more of the extremes, that would lead to more and higher claims costs going forward,” Mr Andrews said.

The natural climate variables “really complicate things like assessing the impact of climate change,” Mr Andrews says, noting that in the last ten years natural claims costs have been materially higher than in the preceding ten years.

“Is that climate change? Perhaps a quite modest component of it would be seen as climate change – maybe the larger component would be natural climate variability,” he said.

“An overarching view we have got to from having looked at the data is that the influence of natural variability on weather is so significant that any assessment of how climate change is going to impact extreme weather needs to consider how climate change will impact on natural variability,” he said.

“In any assessment we are making as insurers of climate change impacts, I think we want to be building in an assessment of how our natural climate variability is changing.”

He explained this dual influence as a gradual increase in temperatures as a result of climate change and “around that we have got variability in temperatures from year to year, and those variations are driven largely by this natural climate variability”.

“That drives a lot of what we see in terms of the climate over time,” Mr Andrews said.

Suncorp Natural Perils Senior Pricing Advisor Tatiana Potemina, who jointly presented the findings, said disclosure requirements have exceeded the capabilities of climate models “by at least a decade” as current global climate models do not have either the temporal or spatial resolution to support this mandatory reporting.

“For insurers, it’s important to understand natural climate variability because without this understanding some incorrect assumptions can be made about the trend,” she says.

“Climate change is likely to change the natural variability drivers and so what we know about how certain drivers lead to specific precipitation or temperature might change.

“The response we see in Australia might be different with climate change so it is important to continue to study how natural climate variability is going to change under the effect of climate change.”

Mr Andrews says bushfire is a good example of a peril that “may have varied in terms of its average annual cost to a material extent already,” influenced by strong positive IODs which can promote six months of very dry conditions, exacerbated by SAM which means Australia is missing winter rainfall to a greater extent.

“That’s going to continue – and we’re also being told there might be more El Nino-like conditions going forward on average and that also means dryness on much of the east coast. Clearly that is very significant for agriculture but also it is quite important in the context of bushfire costs.”

Liberty Mutual 'evaluating alternatives' for Queensland coal mine

US insurer Liberty Mutual has confirmed it will not be lodging an environmental impact statement for a Queensland coal mine project that it owns through subsidiary Liberty Metals and Mining Holdings.

The decision has been welcomed by climate activists and the local community, who have been campaigning against the development of the Baralaba South open-cut coal mine in central Queensland.

“As part of our ongoing investment processes, we’ve been evaluating alternatives for our Baralaba investment for some time and will not be submitting an environmental impact assessment for the South mine at this stage,” a spokesman for the insurer told insuranceNEWS.com.au.

“We remain committed to collaborating with all stakeholders as we work through next steps.”

The environment impact statement needed to have been submitted by April 30 as part of the multi-stage process for the assessment of the project, according to public information about the mine on the Queensland Government’s website.

Save the Dawson, a community group that has campaigned against the project, has called the move by Liberty Mutual a “win for the environment”.

“I’m confident that this is game over for the mine,” Paul Stephenson, a member of the group, told insuranceNEWS.com.au.

“What we need Liberty Mutual to do is just be upfront about what they are proposing to do. We want them to be clear about what they intend to do.”

The mine is located 115km south-west of Rockhampton with a lifespan of about 19 years, according to the Queensland Government website. If developed, up to five million tonnes of run-of-mine coal can be extracted annually.

Brought to you by:

Corporate

AUB 'performs strongly' in third quarter

AUB Group says it performed strongly in the third quarter with Austbrokers premium rate increases of 5.9% at the top end of its estimated range and margin improvements flowing from the network consolidation strategy.

The company says acquisitions last financial year have also contributed, while Austagencies’ financial performance is improving with growth in revenue and margin compared with the prior period.

Head office cost reductions at the end of the quarter had reached $2.3 million, compared with a full-year target of $2.4 million.

“While still in the early stages, there is no evidence to indicate that the removal of JobKeeper benefits is impacting the placement of insurance by clients,” AUB says in a presentation to the Macquarie Conference.

AUB Group says, as foreshadowed, its own insurances renewing in the third and fourth quarters are about 20% more expensive than the prior year.

The company maintained its full-year guidance for underlying net profit of $63-65 million, given the historical significance of June as well as the unknown impacts on the broader economy from the end of JobKeeper.

Steadfast gives more details on year-to-date performance

Broking network Steadfast Group has provided further details on how its business performed so far in this financial year at a Macquarie Conference last week.

The broking arm, comprising of equity brokers and network - assuming 100% ownership – achieved underlying net revenue of $417.2 million in the nine months to March, up 8% from a year earlier.

Underlying earnings before interest, tax and amortisation (EBITA) surged 24% to $149.9 million.

For the Steadfast Underwriting Agencies arm, underlying net revenue grew 8.5% to $168.2 million and underlying EBITA climbed up 13.6% to $82.6 million.

“Performance for the nine months to March continues to be strong, principally driven through organic growth,” Steadfast says in its presentation materials for the conference.

Before last week’s conference, Steadfast announced another upward revision to its earnings guidance for this financial year.

Underlying EBITA is now projected at $259-266 million, up from $245-255 million previously while underlying net profit after tax is forecast at $127-132 million from $120-127 million.

The new forecast was based largely from the business’s strong performance in the nine-month period to March 31 with underlying revenue up 7.2% to $641.1 million and underlying EBITA rising 20.5% to $178.2 million.

Allianz Partners returns to travel cover

Allianz Partners is returning to the travel insurance market after revamping its policies and including cover that takes account of COVID-19 border-closure risks.

A simplified platform offers some cover to those diagnosed with COVID-19 while travelling, while policyholders are entitled to a partial or full premium refund if virus-sparked border closures or mandatory quarantine shortens travel plans or causes a cancellation.

“Travel has changed dramatically since COVID-19 and we want to offer our partners and customers a better experience when they return to travelling, making it easier for them to more fully understand travel insurance in this pandemic market,” Chief Underwriting Officer Aimee McGuinness said.

“We’ve invested thousands of hours developing the platform to ensure it adapts to constant change - like what has been brought on by COVID-19 - with minimal disruption.”

Allianz says the online purchasing process guides customers through their decision-making using easy-to-understand language, and they have access to the product disclosure statement at any stage.

“This helps customers make an informed decision and offers full transparency on the product,” Ms McGuinness said.

The policies cover Australians and eligible visa-holders for domestic and international trips as long as they are travelling to a country included in the Government’s travel zone arrangement.

Gallagher acquires Canberra broker

Gallagher has acquired Canberra-based Mutual Brokers for an undisclosed sum, further accelerating its presence in the Australian market.

The US broking giant has a significant operation here and in the last several months, it has strategically invested in brokerages to strengthen its offerings. In June last year, it acquired Brisbane brokerage CA Insurance Brokers.

Mutual Brokers is an independent brokerage serving a broad cross-section of commercial and small corporate clients in Canberra and the ACT.

“We are delighted that Mutual Brokers has joined Gallagher,” Gallagher Australia CEO Sarah Lyons told insuranceNEWS.com.au.

“With ten new colleagues joining us, we have a talented team of 23 employees based in Canberra.

“The acquisition has boosted our ability to serve a diverse range of commercial and corporate clients, particularly within the Technology, Hospitality, Property and Construction sectors.”

Owners Lou Pennetta and Adrian Dodd, and their team, will come under the direction of Head of Metro Branches Mark Saunderson and will relocate to join the Gallagher Canberra branch later in the year.

Allianz launches 'behind you for what's ahead' campaign

Allianz Australia has launched an advertising campaign that features the theme “behind you for what’s ahead” as the global insurer refreshes its brand.

The campaign is the first work from creative start-up Howatson+White, launched in early March with Allianz as a foundation client, and the insurer says it builds on the group purpose, stated as “we secure your future”.

Material as part of the campaign will appear on TV, in cinemas, on YouTube and across digital, radio, print and outdoor media.

“As our industry continues to navigate change, evolving to meet our customers’ needs, and ensure trust, is pivotal,” Allianz Australia GM Marketing Sophie Finn said. “We are proud to be elevating the Allianz brand, and launching our new future-fit positioning and experience.”

Howatson+White CEO and Founder Chris Howatson says the campaign focuses on life’s “every day, real and raw moments and celebrates the courageous choices” people make to determine their future in seemingly small but significant ways.

“To determine our own future is something we all control and something Allianz values,” he said.

QBE puts year-to-date net cat cost at $334 million

QBE Insurance Group says the massive flooding in the Hawkesbury-Nepean River region and parts of Queensland, deep winter freeze in the US state of Texas and other natural disasters have led to a net catastrophe cost of $US260 million ($334 million) so far this year.

The $US260 million figure is above the group’s first quarter allowance of around $US180 million ($231 million) and the $US230 million ($296 million) of catastrophe claims incurred in the first quarter of last year, Chairman Mike Wilkins told shareholders in an address at last week’s AGM.

“[WA] was also recently impacted by Cyclone Seroja with widespread property damage and power outages,” Mr Wilkins said. “Despite the adverse catastrophe outcome, the group’s overall first quarter combined operating ratio is in line with expectations.

“Our position with respect to the net ultimate cost of COVID-19 remains unchanged.”

Mr Wilkins says the $US1.52 billion ($1.95 billion) headline loss reported last year is “disappointing” but stresses the group’s underlying performance continues to exhibit “strength and resilience”.

The strong market conditions from last year show no signs of abating, with the business achieving an 8.9% rise in premium rate in the first quarter, Mr Wilkins said. In the corresponding quarter of last year, pricing rose 7.3%.

“Each of our divisions achieved premium rate increases in line with expectations and stronger than the increases recorded in the prior corresponding period, including 10.2% in North America, 9.1% in International and 7.5% in Australia Pacific,” Mr Wilkins said.

“The top-line has improved meaningfully with headline [gross written premium] increasing 28% compared with the first quarter of 2020 or 23% on a constant currency basis.”

Mr Wilkins in his address also touched on climate change as well as diversity and inclusion.

He reiterated the insurer is pushing ahead with the “orderly transition” of its business towards goals set by the Paris Agreement.

“Make no mistake, the board acknowledges that climate change is a material risk for QBE,” Mr Wilkins said. “We are proud of our commitment towards addressing this and the progress we have made.”

He says from January 1 next year for existing clients who derive at least 30% of their revenues from oil sands and Arctic drilling, the insurer will only provide insurance if they are on a pathway “consistent” with achieving the carbon emission reduction targets as set by the Paris accord.

Similar underwriting criteria will apply from January 2030 for companies with 60% or more revenue from oil and gas extraction.

At the AGM the majority of shareholders again rejected a resolution demanding the business set fossil fuel exposure reduction targets.

The resolution, promoted by shareholder Australian Ethical and requisitioned by a group of other investors, is similar to the one last year that was also voted down by shareholders.

QBE had urged shareholders not to back the resolution.

On diversity and inclusion, Mr Wilkins says the business is now aiming to have 40% of its leadership roles filled by women.

“We came close to achieving our goal of having 35% women in leadership by 2020 with 34.8% and we achieved our target of having 30% women on the group board,” Mr Wilkins said. “However, we know there is more to do and have since developed a new target of having 40% women in leadership and on the Group Board by 2025.”

McLardy McShane adds ARs in three states

McLardy McShane has added seven corporate authorised representatives in WA, Victoria and Queensland as part of its national expansion.

In WA it has partnered with JJS Insurance, Pinnacle Insurance Brokers, Vesta Insurance and Refined Insurance Brokers, while it has added Atom General Insurance in Queensland and Watson Risk Services and Tyridge in Victoria.

“It is very encouraging to have quality, like-minded people adding to the unique culture, values and excitement within the McLardy McShane Group,” CEO Don McLardy said.

The firm has expanded to 22 branches and 52 corporate ARs as the group continues to move through a “challenging but positive phase” as it builds a strong national major city and regional presence.

“We are currently in discussion with many potential new authorised reps, branches and joint venture partners that will ensure this strong growth continues for at least the foreseeable future,” he said.

Mr McLardy says the AR additions include some start-ups but most have joined from other networks.

“Our WA expansion was mainly through referral, we hope that continues to happen,” he told insuranceNEWS.com.au. “We have no set targets or geographic areas, we build the network around good people who come to us.”

D&O modelling service brings 'new insights' on potential class action risk

A new shareholder class action exposure modelling service launched last week by Aon will offer “new insights” to clients of potential risk, according to the broker.

Aon says the D&O Decoder was developed in response to clients’ needs for support to manage the challenging directors’ and officers’ (D&O) insurance market.

The service provides data and analytics on the probable level of securities litigation risk facing a company and the chances of the event occurring, the nature of their exposure and how it compares to their peers.

It has crunched 250,000 simulated class actions based on data sourced from Australian historical representative lawsuits and traces the impact on a company’s share price and resulting claims.

Outputs of the model can be used by organisations to help inform the decision-making process with respect to proposed limit reductions or dropping the limit completely.

Aon Global Risk Consulting MD Jennifer Richards says the service “brings new insights to organisations, illuminating aspects of exposure that may not otherwise be known”.

“The threat of D&O shareholder class action activity remains high in Australia, and for those companies potentially subjected to class actions, the rapid increase of insurers’ premium expectations coupled with capacity restrictions has resulted in increased scrutiny and reductions in the amount of insurance procured to protect organisations from their exposure to securities class actions,” Ms Richards said.

“This additional scrutiny in the D&O market over limit decisions has created a surge in demand for analytics beyond what is typically available.

“Sophisticated modelling is key to addressing and exposing the level of risk of a shareholder class action, and the resulting impact on availability of D&O insurance.”

Brought to you by:

Regulatory & Government

Budget to allocate $600 million for mitigation program

The Federal Budget will tomorrow include a $600 million mitigation program, overseen by a new National Recovery and Resilience Agency, that will support community and household resilience projects.

Prime Minister Scott Morrison says the Preparing Australia Program will both provide assistance for locally identified and led risk reduction measures and help address risks outside communities’ control.

“The new program will enable the Commonwealth to directly fund projects that mitigate or reduce risk, that minimise the impact of large-scale natural disasters like floods, bushfires and cyclones,” Mr Morrison told the Townsville Chamber of Commerce last week.

The program will comprise two parts, Preparing Australian Communities and Preparing Australian Homes.

“In the home program we will work with the insurance sector to identify priority activities and projects that will support beneficial reductions in insurance premiums,” Mr Morrison said.

The Government will also establish an Australian Climate Service to bring together information from bodies including the Bureau of Meteorology, CSIRO, Geoscience and the Bureau of Statistics.

The National Recovery and Resilience Agency, to be led by Coordinator-General Shane Stone, will work with Emergency Management Australia and the climate service to support decision making in a crisis and afterwards, and will help target spending under the Preparing Australia Program, Mr Morrison says.

The program builds on the five-year $130 million Disaster Risk Reduction Funding Package and the $50 million a year available from the Emergency Response Fund for risk reduction, preparedness and resilience.

The new agency, which brings together the former National Drought and North Queensland Flood Response and Recovery Agency and the National Bushfire Recovery Agency, will also take responsibility for supporting communities hit by recent storms and floods in NSW and Queensland and cyclones in WA.

Insurance Council of Australia CEO Andrew Hall says the industry has been calling for some time for this scale of investment.

“It’s pleasing to see the Morrison Government has heard these calls with this action,” Mr Hall said. “We look forward to seeing the details of these projects in the Federal Budget next week.”

The Government also announced $4.5 million to support disaster recovery scenario training to help regional communities prepare for high-risk hazards.

IAG says the announcements are a positive step in ensuring a national co-ordinated approach to disaster management and targeted investment in mitigation projects for vulnerable communities.

“This will help create safer communities and reduce the financial and social impact of future natural disasters, which we know will be more severe and frequent in a changing climate,” CEO Nick Hawkins said.

Suncorp CEO Steve Johnston said the new agency would be an important part of delivering reforms recommended in last year’s Natural Disaster Royal Commission.

“We welcome a national approach so Australia is better prepared, better equipped and better resourced to tackle growing disaster risk,” he said.

“More funding for natural disaster mitigation projects is vital and must focus on areas where there is high risk of extreme weather and low levels of financial and physical resilience.”

NIBA presses personal advice issues at ASIC roundtable

The National Insurance Brokers Association (NIBA) has pressed for changes to make it easier to provide personal advice to clients at an Australian Securities and Investments Commission (ASIC) roundtable.

ASIC hosted the roundtable, attended by a number of financial services industry associations, following release of a consultation paper on challenges in making personal advice more accessible and affordable.

The personal advice model has mostly targeted financial planning and investments, retirement and superannuation, but NIBA says it is also important in general insurance.

“Clients must be given good advice which they can trust and rely on, but insurance brokers and other financial advisers must also be able to do this in a cost efficient and viable manner,” CEO Dallas Booth said.

At the roundtable there was general agreement that personal advice should concentrate on information clients are keen to hear about, without being burdened by the excessive background information, which makes Statements of Advice complex and difficult to understand, Mr Booth says.

“The need to keep mandatory information to that which is critical to help clients make good decisions was also stressed,” he said.

Victoria spends $517 million to address bushfire threat

The Victorian state government has allocated a record $517 million funding package aimed at reducing bushfire risk for what it says are “longer, hotter fire seasons to come”.

The investment, unveiled as part of the Victorian Budget 2021/22, will deliver technology upgrades for firefighters and improve risk management across agencies “to reduce the risk of bushfires in a changing climate,” the government says.

Minister for Energy Environment and Climate Change Lily D’Ambrosio says investing in equipment, technology and infrastructure to reduce the risk of the next bushfire season will help first responders and local communities, who “band together to do an incredible job protecting Victorians throughout bushfire season”.

“We can’t ever thank them enough,” she said.

Under the package, $339.5 million will fund Forest Fire Management workers and firefighters to modernise technology, fire towers and equipment. A further $133 million will fund new digital radios for Forest Fire Management Victoria staff, helping them avoid black spots and communicate better with other emergency services.

“Better communication on the ground and in remote areas will help detect fires earlier and improve efforts to contain them faster,” the government says.

More than $21 million will be provided for a new Office of Bushfire Risk Management. This will bring together land and fire managers and work with Forest Fire Management Victoria, the Country Fire Authority, Emergency Management Victoria, local government, landholders, road authorities and the community.

The investment follows recommendations of two inquiries into the devastating 2019 and 2020 bushfires by the Inspector General for Emergency Management and the bushfires royal commission

“It will have a key role in delivering the improvements to land and fire management recommended by the Inspector-General,” the government says.

A further $15.6 million will address long grasses and other flammable undergrowth across Victoria via fuel management along major arterial road and rail corridors, planned burns, new specialist skills and machinery and advanced bushfire risk modelling.

Industry 'committed' to natural disaster royal commission recommendation

The insurance industry is working on a response to a natural disaster royal commission recommendation on consumer guidance for recognised retrofitting and mitigation works that will help with premium reductions.

A spokesman for the Insurance Council of Australia (ICA) says the peak body is “committed to working with governments and other stakeholders to drive risk reduction and mitigation initiatives that will put downward pressure on premiums”.

“We are currently working to finalise our response to the Government on this important recommendation of the royal commission.”

The ICA comments came after Emergency Management Minister David Littleproud said the peak body did not respond to a request from him for more details on how it intends to carry out the recommendation.

The recommendation, one of 80 proposals made by the Royal Commission into National Natural Disaster Arrangements, has “in-principle” support from the Morrison Government.

It proposes that the insurance industry, as represented by the ICA, should work with state and territory governments and other relevant stakeholders to produce and communicate to consumers clear guidance on individual-level natural hazard risk mitigation actions that insurers will recognise in setting premiums.

“The Commonwealth Government is committed to building the resilience of Australian communities to natural disasters and putting downward pressure on insurance premiums,” the Government said in its response paper to the royal commission recommendations.

“The Commonwealth urges insurers to provide clear consumer guidance on actions to reduce natural hazard risk that will lower insurance premiums.”

Mr Littleproud says he wrote to ICA “asking how they will improve their consumer guidance on getting a fair premium through recognised risk mitigation actions, but I have had no response from them”.

“We have a responsibility to work together on this and not lose our focus on a better prepared and more resilient Australia,” he said.

NSW seeks to drive natural hazard planning

NSW has called for feedback on draft guidelines that aim to drive greater consideration of natural hazards in local council and state authority strategic planning.

“In the last few years, we’ve experienced some of the worst drought, bushfires and flooding on record so it’s important we continually learn and adapt how we plan for these hazards,” Planning and Public Spaces Minister Rob Stokes said.

“This draft guide supports the findings of the Bushfire Royal Commission that we need to better address legacy risk in our communities by making sure that strategic land use planning builds resilience to known hazards.”

The document says NSW was affected by 198 natural disasters between 2009 and 2019 and more than 550 lives were lost between 1970 and 2015. The total economic cost of natural disasters in the state is estimated at $3.6 billion a year.

The eight guiding principles call for authorities to consider risks early, protect vulnerable people and assets, adopt an all-hazards approach and involve the community.

Authorities should plan for emergency responses and evacuation, be information driven, plan to rebuild for the future, not the present and understand the relationship between natural processes and natural hazards.

“This guideline is not intended to be a technical document and does not replicate or replace the existing legislation, statutory functions and policies that deal with natural hazards or emergency management,” it says.

“This document is a tool with which strategic planning for the most relevant natural hazards can be looked at in a more integrated, multi-disciplinary way.”

Consultation on the document is open until June 8. More details are available here.

Brought to you by:

Life Insurance

Couple wins 'frozen premium' life insurance dispute

A couple who ended up paying more for their life policies because AMP Financial Planning failed to sign them up for a “frozen premium” plan as discussed has won their complaint against the advisory firm.

The Australian Financial Complaints Authority (AFCA) says the couple would not have suffered losses in their superannuation accounts had the AMP adviser acted accordingly to what had been communicated and mapped out in the statement of advice (SOA).

As a result the premiums that were deducted from the couple’s individual superannuation accounts increased every year, pegged to the consumer price index (CPI) and did not stay “frozen”.

“The frozen premium plan was never put into effect,” the AFCA ruling says. “The insured benefits offered each year did not ‘reduce by a proportional amount’.

“They increased by large amounts each year, partly because of the increasing benefit, and partly because of the stepped premium making each dollar of cover more expensive each year.”

The adviser, who is no longer with the firm, never put the SOA plan into effect.

AFCA says the adviser did not provide the couple with forms allowing them to apply for cover with the “premium freeze”.

“Instead, she provided them with applications for insurance which was bound to become much more expensive over time,” AFCA says. “At that point, there was no reasonable basis for her to be confident that the goal of superannuation growth could be achieved.”

AFCA says the financial firm has not given a reason for the failure to implement the “frozen premium” plan.

The firm was also asked to provide submissions on whether the increased premiums meant that the strategy no longer balanced the need to insurance and superannuation growth.

AFCA says it does not accept the firm’s explanation that the SOA had made clear that “projections were only projections, not guarantees, and that the SOA also pointed out that insurance premiums can have an effect of superannuation balances”.

“The SOA assumes that the goal of superannuation growth could be achieved,” AFCA says. “If, in the implementation of the strategy in the SOA, it becomes clear that one of the key goals of the strategy cannot be met, that undermines the SOA itself.

“An expert adviser cannot expect their client to notice the problem without prompting, much less understand it, from boilerplate warnings in the SOA they were previously given.”

AFCA ordered AMP to pay $24,138.05 into a super fund nominated by the husband and $9796.31 to one nominated by his wife. The amounts represent what they would have had in their super accounts had their life premiums been “frozen” as stated in the SOA.

AMP must also pay $7671 to the husband, the loss he suffered for his trauma policy after the adviser signed him up for one with loading and CPI-linked increases.

Click here for the ruling.

FSC debunks COVID vaccine impact on life cover rumours

The Financial Services Council (FSC) is reassuring Australians who choose to be vaccinated for COVID-19 that this will not invalidate their life insurance policies.

False rumours had wrongly suggested otherwise, the FSC says.

“This scare mongering is wrong,” FSC CEO Sally Loane said. “It is entirely inappropriate and it needs to stop immediately.”

The FSC says the rumours circulated on social media, incorrectly suggesting the COVID-19 vaccine was an “experimental” medical treatment and this meant having the vaccine would be classified a “self-inflicted injury” and could void life insurance policies.

“The COVID-19 vaccine is not experimental treatment. Receiving approved treatment from a qualified medical professional at an approved medical facility is not a self-inflicted injury,” Ms Loane said.

“The FSC would like to reassure Australians that when they get vaccinated their life insurance will be there for them, completely unaffected.”

AFA announces GM appointments

The Association of Financial Advisers (AFA) has appointed Candice Spence as GM Marketing and Cameron Burne as GM Partnerships.

Ms Spence most recently headed up marketing at the IOOF group and brings with her more than 25 years’ experience in the financial services sector, AFA says.

Mr Burne was most recently partnership manager with AMP Financial Planning. He also has more than 25 years’ experience in the financial services industry, specialising in wealth management, insurance and superannuation.

“We are delighted to be welcoming [them] to the AFA team,” acting CEO Phil Anderson said. “They are both highly skilled, seasoned professionals that join the AFA as we celebrate our 75th anniversary and build on our solid foundations.

“They will be integral to helping the AFA achieve its strategic objectives and mission to support our essential and valuable advice community.”

Ms Spence started with the AFA last month and Mr Burne was appointed in March.

PPS Mutual adds business development manager in Victoria

PPS Mutual has appointed Rory-John Jacobs to the role of Senior Business Development Manager in Victoria, responsible for the management of key financial adviser relationships within the region.

Mr Jacobs, who spent nine years at AIA Australia in various client development roles, says the principles of mutuality and exclusivity at PPS Mutual “act to protect the long-term best interests of insured members”.

“I am excited to present these unique benefits to my network of advisers,” he said.

PPS Mutual, which is supported by PPS South Africa, is owned by its Australian professional members who will share in the profits of the insurance that they buy.

“Rory-John’s expertise aligns with PPS Mutual’s unique proposition,” State Manager for Victoria and Tasmania Shadia Kouzma said. “His appointment is a strong addition to an already high-performing team.”

AIA Australia partners with Fremantle Football Club

AIA Australia has become the official Life, Health and Wellbeing Partner of the Fremantle Football Club.

The insurer has partnered with a number of Australian Football League clubs in the last year which AIA says reflects a strong alignment in physical and mental health values.

“We know how important footy is for so many people,” AIA Australia CEO and MD Damien Mu said. “It’s a real privilege to work with Fremantle to inspire their fans and members to take small steps to improve their physical and mental wellbeing.”

Under the agreement, Fremantle supporters will receive special offers from the insurer.

“Thanks to AIA Australia, we will have an exciting offer coming soon for our members and supporters,” Club CEO Simon Garlick said, adding that Freemantle’s position as a prominent sporting organisation was a chance to inspire members and supporters to live healthier, longer lives.

“We’re thrilled to partner with AIA Australia who are equally committed to their customers as one of Australia’s leading life and health insurers,” he said.

Brought to you by:

The Professional

ANZIIF seeks 2021 award submissions

The Australian and New Zealand Institute of Insurance and Finance (ANZIIF) is seeking submissions for this year’s Australian Insurance Industry Awards until July 2.

The awards acknowledge the accomplishments of individuals and businesses and recognise talent across the Australian insurance industry.

The judging panel will this year look for organisations and individuals who can showcase how they have supported the customer, community, and their people over the last 12 months.

The 2021 annual awards celebration is to be held at The Star Event Centre in Sydney on October 26, marking a return after COVID forced cancellation of the 2020 gala.

“We are overjoyed to see the return of the industry’s night of nights following a year without physical events,” ANZIIF CEO Prue Willsford said.

Changes have been made to the general insurance categories this year to include categories for Small, Medium and Large General Insurance Companies with criteria focused on customer outcomes. Revisions have also been made for the broking and authorised representative (AR) categories. AR companies are now eligible to enter the broking categories.

Here are the 2021 Australian Insurance Industry Awards categories:

  • Small Broking Company of the Year
  • Medium Broking Company of the Year
  • Large Broking Company of the Year
  • Authorised Representative Network of the Year
  • Underwriting Agency of the Year
  • Small General Insurance Company of the Year
  • Medium General Insurance Company of the Year
  • Large General Insurance Company of the Year
  • Life Insurance Company of the Year
  • Insurtech Program of the Year
  • Professional Services Firm of the Year
  • Service Provider to the Insurance Industry
  • Excellence in Workplace Diversity and Inclusion
  • Insurance Learning Program of the Year
  • Young Insurance Professional of the Year
  • Insurance Leader of the Year
  • ANZIIF Lifetime Achievement Award

Submissions can be made here.

Chubb names new Property & Casualty head

Chubb has promoted Chris Gough to head of Property & Casualty for Australia and New Zealand, replacing Peter Kelaher who became the local Country President in March.

Mr Gough has been Chubb’s local Casualty Manager since 2017. He has two decades of insurance industry experience and joined Chubb in Hong Kong in 2013 to build its Employee Compensation Insurance portfolio.

His new role is responsible for Energy, Construction, Casualty, Financial Lines, Surety, Environmental Liability, Marine, Property and Industry Practice Solutions. It also oversees Chubb’s client segments: Small Commercial, Middle Market and Major Accounts.

“Chris has demonstrated leadership in underwriting, analytics and portfolio management during his successful tenure as our Casualty manager,” Mr Kelaher said. “He is a proven leader with a strong vision for the business.”

Marsh stalwart David McNeill dies

Retired Marsh broker David McNeill died suddenly on April 27, aged 64.

Sydney-based Mr McNeill started his career in the 1970s at NRMA, moving on to Sedgwick, which later merged with Marsh where he worked until retiring in 2016.

“His attention to detail was well known and cherished by many and he leaves a legacy of always putting the client first,” Rob Lasovski, Marsh’s Executive Director, National Corporate & Commercial Leader, told insuranceNEWS.com.au.

“Dave was a great mentor, generously sharing his knowledge and encouraging his team members to become self-reliant and take responsibility.”

Mr McNeill was a passionate St George and Sydney Swans supporter and was “never short of conversations,” Mr Lasovski said.

“He will be sadly missed by family, friends and colleagues.”

Mr McNeill’s life was celebrated on Thursday at the St George Motor Boat Club in Sans Souci. He is survived by his wife Frances Foote and sons Adam and Taylor and grandson Hudson.

Tributes paid to popular underwriter who died suddenly

A funeral service will take place on Wednesday (May 12) for Woodina Underwriting Head of General Liability Rado Polic, who died suddenly last week after an accident at home.

The service will start at 10am at St Nikola Tavelic Croatian Church, 86 Brisbane Road, St Johns Park, Sydney.

Mr Polic, aged 50, had worked with Brisbane-headquartered Woodina for seven years, and was based in the firm’s Sydney office. Prior to that he spent 19 years with Brooklyn Underwriting.

“He was very well-known and well-loved by those in the insurance industry,” Woodina CEO Michael Wood told insuranceNEWS.com.au.

“We are still in shock, and our hearts go out to his family and other friends who are devastated by this tragic event.”

Lion announces new underwriting appointments

Lion Underwriting has appointed Adam Thackeray to take up the newly created role of Senior Property Underwriter.

He will work alongside Matt King, who has been promoted to Senior Property Underwriter, three years after joining the business.

David Hoffman has also joined the agency, taking up the Head of Marine position.

“Lion is well-placed in the market,” MD Kurt Nilsen said. “We have a great broker following which has driven our growth and led the requirement of expanding our team.

“We are currently interviewing candidates to fill a couple more roles, to make sure we have the resources to meet the service level brokers expect of us and to manage our ongoing growth.”

Kennedys opens Perth office, lures team from rival

Insurance and litigation law firm Kennedys has added a Perth office which will be headed by new partner Jonathan Wyatt, an experienced insurance specialist with expertise in marine, property, financial lines and liability insurance.

He will lead a team of nine who all join from Clyde & Co, where Mr Wyatt was partner.

“My team and I are excited to be joining Kennedys. The global reach of the firm and the alignment of its goals to my areas of practice - Marine, Liability and Property – make it an ideal fit. We relish the opportunity to establish a leading insurance practice with Kennedys in Perth,” Mr Wyatt said.

The team is made up of special counsel Paul Graham and Alen Sinanovic, senior associate Rosie Blakey-Scholes, associates Kendall Messer, Jack Carroll and Ashleigh Weaver, paralegals Luke Docker and Quinton Roberts and secretary Danni Durrant.

Kennedys says its national team grew by a fifth over the past year, with two new partners and 10 special counsel and senior associate appointments.

Kennedys opened an office in Melbourne in 2017, which has since trebled in size, and has operated in Sydney since 2006.

“I am delighted to welcome Jonathan and his team to Kennedys, to help us build a leading insurance practice in Perth and a vital link in our growing national presence,” Australian Managing Partner Matt Andrews said.

Brought to you by:

Insurtech

Insurtech Australia backs extension of CDR to insurance

Insurtech Australia has endorsed a government plan to extend the Consumer Data Right (CDR) regime to the insurance industry.

CDR was introduced first to the banking industry in July – more commonly known as Open Banking – with energy next, followed by other sectors such as telecommunications and insurance.

It aims to give consumers greater say over the access and use of their personal information by businesses and may allow consumers to access specified data held about them by insurers, and to authorise the secure disclosure of that data to third parties.

“We would welcome insurance to be included on the roadmap,” an Insurtech Australia Open Insurance Working Group submission to Treasury shared with insuranceNEWS.com.au says.

“Our overarching position is one of support for the expansion of the CDR principles for the benefit of consumers and the industry.”

Earlier this year, the Open Insurance Working Group was established – led by The Fold Legal and Insurtech Australia – to represent insurtechs in the early stages of policy development as the CDR is expanded to life and general insurance.

A Treasury consultation into the “Inquiry into Future Directions for the CDR” released in February focused on banking and Insurtech Australia says there are “parallels and trends which are common to general and life insurance”.

Insurtech Australia – which represents 70 insurtechs and 28 corporate partners – says its members are “most interested in how CDR will support the data economy and empower customers to better use and share their data as between incumbents and innovators”.

“Insurtechs are conscious of the importance of entrenching consumer safeguards but also streamlining the process of data sharing to create efficiencies,” the submission says.

It comprehensively details the use of data in insurance, saying data is “powerful in the insurance sector because of the actuarial application of the data and its ability to affect pricing and risk decisioning”.

“Unlike banking, insurers use pricing data as a commercial point of difference and as a tool to gain competitive advantage. Insurers are reluctant to engage in any form of data sharing with competitors or with insurtechs in a manner that grants access to their proprietary data,” it says.

Data is not openly available to insurtechs or new entrants to assist in pricing or rating and understanding risk.

“Fairness is a factor in terms of protecting consumers and insurance participants such as incumbents as data used by insurers is also proprietary intellectual property,” the submission says. “There may be challenges in drawing the line between aggregated data which is used by the industry for pricing and anonymised data which can be shared industry-wide.

“These considerations will create tensions for consumers in accessing their data and being empowered to share it with those they trust and who they believe can deliver a better or more suitable insurance product.”

Insurtech Australia says data protection is a key consideration as protections under the Privacy Act are often relied upon by incumbent insurers as a basis to lawfully refuse to share data with insurtechs or other service providers.

“This is a reliable basis for refusing to share data even where a customer wants that data to be supplied and would consent to its use for the purposes of changing or switching insurance products,” the submission notes.

“One of the areas where Insurtech Australia would like to see positive developments for insurance consumers is in allowing insurtechs to access and use a particular customer’s data with the permission of the customer,” it says.

That would allow the customer to compare products, features, pricing and other criteria and assess alternative insurance offers reliably in the context of their personal insurance history and current requirements.

“Insurtech Australia supports those capabilities as explored in the report including the benefits of accessing multiple offers and providers and giving consumers greater choice.”

Insurtech Australia endorsed providing insurance customers control over their data transfer and use in switching policies and price comparison, encouraging greater competition and choice across insurance, allowing trusted advisers and brokers to operate for the benefit of their customers and lowering barriers to entry.

AuditCover ready for more growth after closing inaugural seed funding round

Insurtech AuditCover has closed its inaugural seed round funding to support the expansion of its business and technology development.

GM Adi Snir says the business, which offers digital solutions for tax audit insurance and risk mitigation, is well placed to fill the gap for smarter tax protection.

“Our model has been validated by accountants and we know the risk of audit is increasing every day,” Mr Snir said

“During [last year] the ATO stopped carrying out many of its typical tasks, but we believe with the economy now improving, the ATO will be poised to double down its debt recovery and audit activity efforts.”

The seed funding round was led by Insurtech Gateway Australia, an incubator focused on nurturing promising insurance-focused digital start-ups.

“AuditCover are in market with a competitive edge, built on digitising the user journey for the accountant and the insured client,” CEO Simon O’Dell said.

“But we’re particularly excited about their tech development roadmap, which includes integrating data analytics tools for accountants to help them strike at the root of the audit problem by identifying and managing risky returns prior to lodgement.

“This should ultimately save the client, the accountant, the insurer and auditing bodies money and resources.”

Machine learning shows promise for hazard budgeting

There are promising results in applying machine learning techniques to the significant challenge of accurately predicting natural climate variability, attendees at this year’s Actuaries Summit heard.

The ability to predict the cycles of El Niño-Southern Oscillation (ENSO), Indian Ocean Dipole (IOD) and Southern Annular Mode (SAM) – key drivers for extreme weather events – is currently limited beyond 6-12 months.

This limitation has contributed to disclosure requirements “leap-frogging” the capabilities of climate science by at least a decade, Suncorp Natural Perils Senior Pricing Advisor Tatiana Potemina says, noting this natural variability is a key element of uncertainty in climate risk modelling.

Extending the forecasting range will be vital in helping insurers manage pricing, reinsurance design and budgeting and experts are hopeful technology may hold the solution.

“Improvements so far have been incremental rather than a step change but machine learning and neural networks are increasingly being used and the results are really promising,” Ms Potemina says.

“They can predict to 17 months in advance, so that’s quite significant,” she said. “There are some promising results there.

“For insurers, it’s important to understand natural climate variability because without this understanding some incorrect assumptions can be made about the trend.”

Ms Potemina points to a scientific paper called “Deep learning for multi-year ENSO forecasts” which notes that while robust, long-lead forecasts would be valuable for managing policy responses, decades of effort has not resulted in lead times of more than one year for forecasting ENSO events.

“We show that a statistical forecast model employing a deep-learning approach produces skilful ENSO forecasts for lead times of up to one-and-a-half years,” the paper says.

That study used transfer learning to train a convolutional neural network (CNN) on historical simulations and reanalysis. It found the correlation skill of the CNN model was “much higher than those of current state-of-the-art dynamical forecast systems”.

“The CNN model is also better at predicting the detailed zonal distribution of sea surface temperatures, overcoming a weakness of dynamical forecast models,” the paper says.

“The CNN model is a powerful tool for both the prediction of ENSO events and for the analysis of their associated complex mechanisms.”

Insurtech Australia to host 'crossing the ditch' event in May

A free online event on May 27, hosted by Insurtech Australia, will compare the Australian and New Zealand insurtech markets and examine what resources are available for businesses to grow in either market.

The free online event, Insurtech Pathways: How insurtech can scale between Australia and NZ, will share key insights into scaling successfully between the two nations and present successful case studies.

Speakers include Joint CEO and Co-Founder of Huddle/Open Insurance Jason Wilby, and Javln CEO Dale Smith.

Jason Roberts, Founder and Chair of Insurtech NZ and Rita Yates, CEO and Co-Founder of Insurtech Australia are also included in the lineup.

Register for the event here.

Insurance-inspired Minecraft world gets 500,000 downloads

NRMA Insurance’s new Minecraft world, which helps youngsters learn about resilience to natural disasters, has been downloaded 500,000 times in a week.

The free educational and interactive game, called Climate Warriors, is aimed at students aged between seven and 12.

It is set in a custom-built landscape inspired by Australian coastal towns, and uses NRMA Insurance real-world data and climate change research.

Ramana James, EGM Safer Communities for parent company IAG, says the insurer, which launched the insurance board game Help! last year, is always looking for “new and innovative ways” to help Australians understand insurance and risk.

“With Climate Warriors we want to help educate the next generation of Australians on the importance of being prepared for major events such as bushfires,” he told insuranceNEWS.com.au.

“Gaming is such a popular past-time for children aged seven-12, and Minecraft is the leading platform for this age group, so by creating a bespoke game, we can connect with this group via a classroom setting, doing something they enjoy, which is very powerful.”

Brought to you by:

International

Munich Re sees 'limited' COVID impact this year

Munich Re has posted a rise in first quarter net profit of €589 ($913 million) from €221 million ($342.5 million) a year earlier, placing the business in position to meet its full-year earnings target of €2.8 billion ($4.3 billion).

The property and casualty (P&C) reinsurance arm booked €358 million ($554.7 million) in net profit in the three months to March, up sharply from the €141 million ($218 million) it made in the corresponding period last year.

P&C reinsurance premium volume increased to €6.33 billion ($9.8 billion) from €6.16 billion ($9.5 billion) and the combined ratio improved to 98.9% of net earned premium from 106%.

The reinsurer says a “considerably lower burden arising” from COVID-19 losses especially in P&C reinsurance helped the business made a strong start to the year.

“In business terms, we expect that the impact of the pandemic in 2021 will be limited for Munich Re,” CFO Christoph Jurecka said.

“On top of the anticipated COVID-19 losses, there was an unusual cold snap in the US early this year.

“We are nevertheless on track to meet our annual target of €2.8 billion thanks to robust operating earnings.”

Losses from major events - defined as €10 million ($15.5 million) and above - totalled €892 million ($1.38 billion), down from €1.18 billion ($1.82 billion) a year earlier.

Man-made major losses declined to €247 million ($382 million) from €973 million ($1.5 billion), including COVID-19 losses of around €100 million ($155 million).

However major losses from natural catastrophes tripled to €646 million ($1 billion), with about €450 million ($697 million) of it caused by the deep freeze in the US state of Texas.

AIG first-quarter earnings mark strong start to year

Higher investment income and an improved general insurance underwriting performance have contributed to a jump in AIG first-quarter earnings.

Net profit rose to $US3.9 billion ($5 billion) from $US1.7 billion ($2.2 billion) a year earlier while the combined operating ratio improved to 98.8% from 101.5%.

“In general insurance, we delivered strong growth in net premiums written, driven by our North America and international commercial businesses, and underwriting profitability,” CEO Peter Zaffino said.

“The successful repositioning of our global portfolio over the last three years allowed us to pivot from remediation to profitable growth, which we expect to continue throughout the year.”

Gross written premium (GWP) rose 6% to $US10.73 billion ($13.67 billion), with North America commercial lines seeing a 29% jump in net premiums written, while a decline in global personal insurance included pandemic impacts on the travel business.

AIG’s general insurance pre-tax income rose to $US845 million ($1.08 billion) from $US501 million ($638 million) while life and retirement income rose to $US941 million ($1.2 billion) from $US601 million ($766 million).

Hydrogen economy brings risks, opportunities: AGCS

Allianz Global Corporate and Specialty (AGCS) has predicted the growing popularity of green hydrogen as an energy source, replacing fossil fuels such as coal, will lead to increased demand for insurance coverage of the fuel.

Green hydrogen is generated using electrolysis powered by renewable electricity.

The global shift towards decarbonisation has triggered strong momentum in the hydrogen industry, the corporate arm of Allianz says in a risk bulletin.

More than 30 countries have produced hydrogen roadmaps and governments globally have committed at least $US70 billion ($90.3 billion) in public funding to support the initiatives, the bulletin says, citing figures from consultancy McKinsey.

There are more than 200 large-scale projects in the pipeline, and if all come to fruition, total investments will exceed $US300 billion ($387 billion) in hydrogen spending through 2030, the equivalent of 1.4% of global energy funding.

“Given the numerous projects planned around the world, insurers can expect to see a significant increase in demand for insurance in future to construct and operate electrolysis plants and pipelines for green hydrogen production and transportation,” AGCS says in the bulletin.

“While this has the potential to be a notable new area of growth for energy insurers, underwriters will need to stay on top of the potential downsides as this risk bulletin demonstrates.

“Insurers will need to develop a more detailed underwriting approach to this segment and apply the same rigor in risk selection and underwriting as they do on existing energy construction and operational business.”

AGCS says fire and explosion hazard is one key risk associated with green hydrogen production, storage and transportation.

The main danger when handling hydrogen is of explosion when mixed with air. In addition, leaks are hard to identify without dedicated detectors since hydrogen is colourless and odourless. And a hydrogen flame is almost invisible in daylight.

An AGCS analysis of more than 470,000 claims across all industry sectors over five years shows how costly the risk of fire and explosion can be.

Fire and explosions caused considerable damage and destroyed values of more than €14 billion ($21.7 billion) over the period under review. Excluding natural disasters, more than half of the 20 largest insurance losses analysed were due to this cause, making it the number one cause of loss for businesses worldwide.

“As with any energy risk, fire and explosion is a key peril,” AGCS Global Head of Energy and Construction Chris van Gend said.

“Business interruption and liability exposures are also key as are transit, installation and mechanical failure risks.

“There is rightly great enthusiasm around hydrogen solutions as a key driver towards a low-carbon economy, but we shouldn’t overlook that these projects involve complex industrial and energy risks and require high levels of engineering expertise and insurance know-how in order to be able to provide coverage.”

Click here to access the report.

FM Global provides free global earthquake risk map

FM Global has released a new worldwide map that paints a full picture of the global risk of earthquakes, which it says on average cause nearly $US40 billion ($51.71 billion) in direct economic loss every year.

Most businesses have locations, suppliers or customers in earthquake zones but lack a complete picture of the risk, Senior VP Engineering and Research at FM Global Brion Callori says.

The free online FM Global Worldwide Earthquake Map helps executives improve the resilience of their global supply chains and can be used to plan, site, assess and manage global operations.

“To business leaders, the seismology of an earthquake is less salient than the property damage and business disruption that can result. Our clients’ business resilience is the focus of this map,” Mr Callori says.

FM Global’s map integrates thresholds for structural vulnerability to account for varying building quality and contents around the world, allowing organisations to consistently compare earthquake risk globally.

The new map indicates above-average movement in lower risk zones including Australia, Thailand, Malaysia, Singapore, Oregon, Washington state, Spain, Germany, Austria, Hungary and the United Arab Emirates and Canada’s Ottawa-Montreal.

In high risk zones, above-average movement is indicated in China, New Zealand, India, Mexico, California, Idaho, Nevada, New Mexico, Utah, The Netherlands, France, Switzerland, Italy and Israel.

FM Global’s natural hazards map also displays climate risks such as flood and the regional risk posed by hail in the US.

View the FM Global Worldwide Earthquake Map here.

Property catastrophe bond issuance 'resilient'

Property catastrophe bond issuance totalled $US2.57 billion ($3.32 billion) in the first quarter, down from a year-earlier but the third-highest for the period over the past decade.

“A total of nine transactions were issued and received healthy support from investors, as 11 of the 13 classes upsized from their guidance,” Aon says in an insurance-linked securities (ILS) quarterly report.

The steady flow of new issuances and anticipated transactions is a confirmation of the market’s resilience, with the momentum expected anticipated to continue for the remainder of the year, Aon says.

Issuance was down from $US3.76 billion ($4.86 billion) in the first quarter last year but up from $US1.45 billion ($1.87 billion) in 2019.

Aon says issuance could not meet the increasing demand and investors turned to the secondary market in search of bonds.

Universal Insurance Holdings issued its first catastrophe bond in the quarter with coverage focused on Florida, while others involved included Sompo Japan, Tokio Marine & Nichido Fire, the US Federal Emergency Management Agency/National Flood Insurance Program and the California Earthquake Authority.

WTW creates framework to evaluate best carbon efforts

Willis Towers Watson has introduced a new accreditation framework that provides insurers with a consistent way of identifying and rewarding organisations which demonstrate robust carbon transition plans.

Called Climate Transition Pathways, the framework supports the role of insurers as “stewards” in the transition to a low-carbon economy, WTW says.

Organisations moving to a net-zero carbon environment will achieve accreditation and have access to insurance capacity and capital.

“To ensure organisations in high-carbon industries transition effectively, in line with what the science indicates is needed, they require robust transition plans and the ability to execute successfully against these,” Head of the Climate and Resilience Hub at WTW Rowan Douglas says.

Using the WTW Pathways framework will support organisations through an orderly transition and ensure they “can continue to access insurance and benefit from a greater level of certainty around the future availability of risk capacity,” Mr Douglas said.

Mark Carney, UN Special Envoy for Climate Action and Finance, says Willis Towers Watson’s work is a valuable contribution to ensuring every professional financial decision takes climate change into account.

“As insurers take steps to align their underwriting activities with the transition, companies will increasingly need to display that they have the right plans or risk losing access to insurance,” Mr Carney, who is also the Prime Minister’s Finance Adviser for COP26, said.

Every company, bank, insurer and investor will have to adjust their business models, develop credible plans for the transition and implement them, he said.

More information on Climate Transition Pathways can be found here.

Axa on track to meet full-year earnings target

Axa XL says it is on track to meet an underlying earnings target of €1.2 billion ($1.86 billion) this year after a positive first quarter.

Total revenues grew by 2% to €31 billion ($48 billion) in the first three months of the year despite COVID-19 related restrictions.

Property & Casualty revenues were up 2% to €17.4 billion ($26.97 billion) while commercial lines revenue rose 4% to €11.6 billion ($17.98 billion), with growth across all geographies. Life & Savings revenues were stable at €8.6 billion ($13.33 billion).

“Axa XL performed well in the quarter, pursuing its underwriting discipline, achieving significant price increases, targeted exposure reductions and growing revenues,” Group CFO Etienne Bouas-Laurent said.

“This good performance was underpinned by sustained growth in our preferred segments.”

Favourable pricing continued through the first quarter and Mr Bouas-Laurent told investors “the outlook remains positive” while €1.5 billion ($2.32 billion) remained Axa’s “best estimate” for the cost of COVID.

“We still think it is the best view we have on our COVID losses so far. Of course there are still some uncertainties left,” he said.

At Axa XL, price increases on renewals remained strong in the first quarter, rising 15% in insurance and 11% in reinsurance.

Axa estimates a slightly higher-than-usual natural catastrophe charge in the first quarter, including from severe winter freeze events in Texas, though a more favourable than expected non-catastrophe loss experience would help to offset that.

Talanx drops carbon, embraces renewables

HDI Global parent Talanx Group has for the first time calculated the emissions in its investments and plans to slice the carbon intensity of its liquid portfolio by almost a third.

This is “an important contribution to developing a sustainable, long-term path towards carbon neutrality by 2050,” it says.

Talanx now aims to lower carbon intensity in investments by 30% by 2025 and make all its worldwide operations climate-neutral by 2030. In underwriting, Talanx intends to phase out providing insurance for carbon-intensive industries and exit business models based on coal, oil and tar sands by 2038.

Other fossil fuels are being monitored closely and Talanx says it is making sustainable “green energy” investments in infrastructure such as wind turbines. It plans to become one of the leading insurers of renewable energy projects.

“Climate change is a serious threat and one that we, as an insurer, have to look at extremely closely in our risk modelling, investment policy, operations and underwriting,” Torsten Leue, Chairman of Talanx AG’s Board of Management said.

“We have underscored how seriously we take this by including sustainability aspects in our remuneration system.”

Talanx says its underwriting is focused on continuing to expand an ESG approach and these three dimensions of sustainability – the environment (E), social issues (S) and governance (G) – are the “yardstick by which underwriting is measured”.

Talanx is a member of the Principles for Responsible Investment initiative, an international investor network supported by the United Nations which has drawn up six principles for responsible investing.

Germany – home to more than 45% of Talanx’s workforce – has already achieved climate-neutral operations.

Brought to you by:

Analysis

When it comes to disaster pools, how good is Queensland?

After years of insurers fighting against a reinsurance pool for cyclone-prone northern Australia and various inquiries showing little enthusiasm Prime Minister Scott Morrison has embraced the idea in an outcome reflecting the impacts of recent catastrophes and the power of politics.

Northern Queensland politicians and business groups were never going to drop the ball on a reinsurance pool as prices have continued to soar and some sectors have struggled to gain cover.

“There has been a complete market failure,” Real Estate Institute of Queensland Townsville Zone Chairman Ben Kingsberry told a parliamentary committee inquiry this year. “I think government really needs to step in and do something about it, and that reinsurance pool certainly makes sense to me.”

Affordability issues gathered steam after Cyclone Yasi in 2011, gained momentum after Cyclone Debbie in 2017 and intensified again in 2019 when Townsville was inundated by flooding. Assistant Treasurer Michael Sukkar visited north Queensland in the wake of the floods and revived reinsurance pool investigations.

Last week, the Government announced the reinsurance pool for above the Tropic of Capricorn and also a $600 million mitigation commitment, to be overseen by a new National Recovery and Resilience Agency led by former NT Chief Minister Shane Stone. A pilot program for strata properties and a data-gathering Australian Climate Service were also announced.

Funding details are set to be provided in tomorrow night’s Budget, which may well be the last before the next Federal election, given it must be held by late May next year.

The northern state was crucial at the 2019 election, with Mr Morrison enthusing “how good’s Queensland” in his victory speech after his surprise win over Labor leader Bill Shorten.

Herbert, in the Townsville region swung to the Coalition last time and electorates in the north shape as critical. The Government has also looked to cross-bencher Bob Katter, who holds Kennedy, to shore up its position in the House of Representatives after Craig Kelly resigned from the Liberal Party this year.

Details of the reinsurance pool are still to be thrashed out by a Treasury-led taskforce, but ICA’s former Head of Risk and Operations Karl Sullivan says it should be designed to dovetail with mitigation measures that offer a longer-term solution and which also provide a pool exit path.

“It needs to be a short-term or a medium-term mechanism to get prices down for a core set of people while the real problem is tackled,” he told insuranceNEWS.com.au. “For every person who qualifies to go into the pool, there should be a plan by government on how they are going to get them out of the pool.”

Mr Sullivan says the pool has to be looked at in the context also of the government’s mitigation funding commitment, the creation of the new national resilience agency and other measures, after almost of a decade of relative inaction as problems have been growing.

“There is a lot going on around the outside of this pool,” he said. “It is not like they have announced a pool and said, that’s it, problem solved. They have actually looked at this in a more comprehensive way.”

Actual premium reductions from the pool and the degree to which it will encourage new market entrants remain uncertain. Just about anyone likely to be affected wants a seat at the table as the details are thrashed out by the taskforce over the next 12 months, suggesting many battles remain to be fought.

The Small Business and Family Enterprise Ombudsman, which has recommended a disaster pool that would capture risks across the country, has welcomed the pool announcement as a start.

“In the course of our Insurance Inquiry, we spoke to over 800 small businesses – about 12% of those were from Northern Australia,” Ombudsman Bruce Billson said. “That means there are still many small businesses out there experiencing difficulties with accessing necessary insurance coverage.”

The Financial Rights Legal Centre says the government would achieve better outcomes by providing direct subsidies to low-income households in high-risk areas, in line with an Australian Competition and Consumer Commission recommendation, and any taxpayer-funded scheme should assist people in high-risk regions all over Australia.

Steadfast CEO Robert Kelly told insuranceNEWS.com.au last year, when asked about the possibility of a cyclone pool, that it would be a “very brave government” that starts to specifically support certain risk areas.

“What do you do for the people that are suffering subsidence on the east coast when the big storms come, and what do you do for corporate Australia when they can’t get D&O (directors’ and officers’) cover,” he said.

“If you are going to throw a support blanket over the industry, how big a blanket do you throw?”

Whatever the drivers in relation to northern Australia, Mr Morrison also seems to have had an epiphany on the importance of widespread mitigation activity after endless inquiries over many years have promoted the value of improving resilience.

“[New resilience agency head] Shane was reminding me last night the Insurance Council of Australia says, as a nation we spend some 97 per cent on the clean-up and 3 per cent on mitigation,” he told the Townsville Chamber of Commerce last week. “Think about that. That’s not a good equation. That doesn’t add up. That has to change.”

ICA will be pleased Mr Morrison has listened to their input when it comes to increasing mitigation funding, even if he would rather listen to electoral voices when it comes disaster pools.