Tropical Storm Gustav crossed Jamaica and headed for the Cayman Islands as residents of the U.S. state of Louisiana prepared for the system to strengthen to a hurricane and hit areas devastated by Katrina three years ago. Gustav's maximum sustained winds fell to 65 miles per hour at 2 a.m. Miami time today from 70 mph late yesterday as it passed over land, the National Hurricane Center said. The eye of Gustav was 60 miles west of Kingston, Jamaica. The storm is expected to regain strength and become a hurricane today as it moves back over water. “We're really going to have to watch it once it gets off land,” Josh Newhard, a meteorologist with private forecaster AccuWeather.com, said in an interview yesterday. “It could be a pretty strong hurricane by day's end.” As much as 25 inches of rain may fall in Jamaica and the Cayman Islands, where hurricane warnings are in effect. The storm, which killed more than 50 people in Haiti and the Dominican Republic, prompted the evacuation of offshore oil workers in the Gulf of Mexico and the governors of Louisiana, Mississippi and Texas declared emergencies. The system was heading west at 8 mph last night. Gustav may weaken tonight over Jamaica and then regain strength during the next two days as it sweeps over the Cayman Islands, the U.S. centre said.

Bloomberg

Specialist insurer Hardy Underwriting Bermuda Ltd. reported pretax profit of £8.7mfor the six months to end-June, down from £9.1m in 2007. Gross written premium for the half-year was £97.0m, up from £88.8m and the group said its net tangible assets amounted to 212.8 pence per share at the period end, up from 181.7 pence. The board raised the interim dividend to 3.6 pence from 3.3 pence. Chairman David Mann said that in the half-year the group has achieved returns broadly in line with expectations, despite general market weakness. "The group has demonstrated its ability to overcome challenging market conditions over more than three decades, to manage the insurance cycle effectively and to embrace and enhance the professionalism and expertise of its people," he said. As and when market conditions are judged suitable, the business will be poised and ready to capitalise on the opportunities which the Bermuda platform will afford and to build the business for the future, he added. The board's expectation is that rates will begin to harden in 12 to 18 months by which time Hardy will be in a good position to deliver even higher returns, it added.

Thomson Financial

Crude oil rose for a fourth day in New York on speculation Tropical Storm Gustav will be the most damaging since Hurricane Katrina as it moves toward production platforms in the Gulf of Mexico. Gustav may reach the coast of Louisiana, where U.S. oil and gas offshore platforms and pipelines are most concentrated, by 2 p.m. on Sept. 1, the National Hurricane Center said at 8 p.m. Miami time. The storm may become a “hurricane rivalling Rita and Katrina,” whose disruption caused record prices, Joe Bastardi of AccuWeather.com said yesterday. “The worst-case scenario is that it develops into a hurricane as it moves into the Gulf and hits oil infrastructure or refinery infrastructure,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. Gustav was packing sustained winds of about 45 miles an hour, the National Hurricane Center said at 11 p.m. Miami time. The storm was about 100 miles south of Guantanamo, Cuba, and moving west-southwest at 8 mph. It is expected to turn west-northwest tomorrow and regain hurricane strength over the next 48 hours.

Bloomberg

Ecclesiastical has reported a pre-tax loss of £21.5m for the first six months of 2008, compared to a £28.7m profit in its H1 results last year. Gross written premiums were up £9m (4.5%) to £210.8m, on the same period last year. The group posted an overall combined ratio of 104.5%, compared to 101.2% in 2007, and an investment loss of £35.3m, compared to a profit of £48.1m in the same period last year. In a statement, Ecclesiastical said South Essex Insurance Brokers, which it acquired in February, delivered a £0.4m profit in the first three months since completing the deal. It added that UK claims costs had fallen from £49.8m in 2007 to £44.7m in 2008.

Insurance Times

Chaucer profits slide to £3.9m.

Chaucer has reported a drop in profits to £3.9m in the first half of 2008 (H1 2007: £47.9m). Post-tax annualised return on equity fell to 1.9% (H1 2007: 31.8%). Gross written premiums were up slightly at £355.3m (H1 2007: £323.9m) and the combined ratio deteriorated to 97.0% from 84.4% in the first six months of 2007. Chaucer reported an investment return of £1.5m (H1 2007: £29.2m) and an interim dividend of 1.8p declared, an increase of 20% (2007: 1.5p). Earnings per share was 0.8p (H1 2007: 11.2p). Other features of the interim results include: contribution of £2.4m from syndicate participation and management activities (2007: £2.4m); proposed sale of interests in Pembroke Managing Agency and Syndicate 4000 for £14.9m; announced closure of Syndicate 1245 into Chaucer Syndicate 1084. Ewen Gilmour, chief executive officer, said: “The first half of this year has been tough, with a difficult investment environment and above average claims combining to hold back our headline result. However, the board remains satisfied with the continued development of the business during the period.

Post Magazine

Hurricane Gustav weakened to a tropical storm after crossing Haiti yesterday, leaving at least five people dead, and headed for open water where it may pick up strength and threaten oil production in the Gulf of Mexico. Gustav's sustained winds fell to 60 miles per hour, down from 90 mph yesterday, the U.S. National Hurricane Center said in an advisory at 2 a.m. Miami time today. The storm's eye was over the western coast of Haiti about 80 miles west of the Haitian capital, Port-au-Prince, and was heading west-northwest at 5 mph. “Gustav could regain hurricane strength later today or tomorrow,” the weather agency said. “More significant strengthening is forecast on Thursday.” The storm is expected to move into waters west of Haiti and head across the Caribbean Sea toward southern Cuba where hurricane warnings are in effect. The hurricane center's longer- term forecast predicts Gustav will enter the Gulf by Aug. 31. The storm may threaten U.S. oil production next week, private forecasters say.

Bloomberg

UK-listed Brit Insurance posted a 53 percent drop in first-half pretax profit on Wednesday, in line with analyst forecasts after investment losses in volatile markets battered its bottom line. The general insurer and reinsurer said pretax profit for the six months totalled £49.9m ($92.1m). That compares with £106.8m a year ago, but is just above a consensus forecast of £47.3m. General insurers across the board have reported falling bottom lines, as turbulent financial markets hit investment income and pricing pressure remains high. Brit's investment return tumbled to £2.1m in the first six months of 2008, from £55.9m a year ago. But the insurer said it expected a "much better performance" in the second half if the interest rate environment performs in line with expectations, after a "good" July and August. The group also left its provision for possible subprime related losses - mostly from cover for executives - unchanged. Brit said gross written premiums grew 3.8 percent to 754.8 million pounds in the first half, and said it expected 3 to 5 percent growth in 2008, broadly in line with its target.

Reuters

Aon Corp., the world's biggest insurance broker, agreed to buy London-based Benfield Group Ltd. for £844 million ($1.6 billion), including new shares. Benfield surged 30 percent to 351 pence at 8:30 a.m., more than the 350 pence that Aon offered for Benfield, a reinsurance broker. Chicago-based Aon will fund the cash offer without outside financing, it said today in a statement. The acquisition will increase Aon's presence in Florida, the Southeast U.S. property-catastrophe markets, Asia-Pacific and Latin America, the company said. Benfield's directors recommended the deal, which will generate about £20 million in cost savings by 2009 as the companies share administrative and support services, they told journalists today.

Reuters

Tropical Storm Fay churned off the coast of east Florida on Thursday a day after dumping heavy rain on the state and causing Florida's governor to ask for federal aid. The storm was moving slowly but could make landfall again on Thursday morning in northern Florida, possibly in the Jacksonville-Daytona Beach area, forecasters said. It would be the fourth time the storm makes landfall. Fay has come ashore in Florida twice after making landfall in Cuba. NASA reported receiving 21 inches of rain from the storm on Wednesday, said Craig Fugate, Florida's emergency management director. Forecasters said they received an unofficial report of 22 inches northwest of Melbourne, Florida. As of 2 a.m. ET on Thursday, the storm was just off the coast of central Florida about 20 miles east-southeast of Daytona Beach, the National Hurricane Center said. Florida Gov. Charlie Crist has asked President Bush to declare an emergency in the state to free up federal funding.

CNN

Losses stemming from a fatal Spanair airline accident in Madrid, Spain, on Wednesday would be covered under a policy led by a unit of ACE Ltd. for a group of airlines that includes Spanair parent Scandinavian Airlines System A.B., according to market sources. Reports indicate that the fiery accident killed more than 140 of the 173 passengers and crew onboard the McDonnell Douglas MD-82 jet, which veered off a runway during takeoff after apparent engine trouble. Spanair is covered under the hull and liability program written for the SAFIT Group, sources said. Besides SAS, the group includes Austrian Airlines, Finnair, Icelandair and TAP Portugal. Aon Ltd. in London placed the coverage. The hull of the 15-year-old jet was valued at $9m, a source said. SAFIT renews its coverage on Dec. 1, sources said.

Business Insurance

QBE Insurance Group Ltd., Australia's biggest property and casualty insurer, said first-half profit fell 7 percent on declining equity markets and gains in the nation's currency. Net income for the six months ended June 30 dropped to A$859m ($750m) from A$921m a year earlier, Sydney- based QBE said in a statement. The rising Australian dollar cut profit at the company, which gets about 80 percent of earnings from overseas, by A$74m. Chief Executive Officer Frank O'Halloran, 62, made eight acquisitions this year to fend off slowing earnings growth. QBE forecast that the takeovers, including the $146m purchase of U.S. insurer North Pointe Holdings Corp., will boost full-year profit by about A$160m. QBE, the biggest manager in the Lloyd’s of London market, affirmed its target for an insurance profit margin this year of as much as 20 percent. Earnings from insurance rose 6 percent during the first half to A$1.16 billion, with insurance profit as a proportion of net earned premiums 21.8 percent from 22.2 percent a year ago. Investment income dropped to A$379m from A$564m a year earlier as equities markets slumped.

Bloomberg

Insurer Amlin posted a 26 percent fall in first-half pretax profit on Thursday, as turbulent financial markets slashed its investment income, but it still exceeded analysts' expectations. Amlin, which operates primarily through the Lloyd's of London insurance market, said pretax profit in the six months to the end of June fell to £137.3m, from £185m in the same period a year ago. Analysts polled by Reuters Estimates had on average expected a profit of £120m, with forecasts ranging from £109.6m to £130m. "The underwriting result is the main source of the beat, with good levels of reserve releases," UBS analyst Jon Firkins said. While profits from its underwriting business remained steady at £148.7m, its investment income dropped 66 percent to £22.5m. Amlin's underwriting profits were helped by releases from reserves no longer needed to pay claims of £59.9m. "Profit before tax is down, but the real message is that we continue to deliver some very strong underwriting returns," Amlin CEO Charles Philipps said.

Reuters

Tropical Storm Fay meandered across Florida on Tuesday — spawning a tornado which damaged dozens of homes — and was expected to strengthen over the Atlantic before turning back into the state for the third time. By early Wednesday, the storm had reached the east coast of Florida's central coast. At 2 a.m. EDT, Fay was about five miles northwest of Sebastian and 15 miles south-southeast of Melbourne. Although forecasters reported earlier that the storm had unexpectedly strengthened as it moved across the state, it later began to weaken, with winds dropping to 50 mph. "After Fay's unexpected strengthening episode over the Florida peninsula earlier today, the storm is now behaving in a more normal fashion," the National Hurricane Center reported late Tuesday night. Even so, forecasters warned that the storm could strengthen as it moved across the Atlantic waters, and depending on how long it remained over water could develop into a hurricane.

DNN

Two major insurers are pulling out of Burma three weeks after the Burma Campaign UK published its report, Insuring Repression, highlighting how insurance companies have facilitated the flow of billions of dollars to the Burmese regime. The companies, XL and Chubb, separately announced the withdrawals in statements to the campaign. XL Capital stated that the company now has a policy that it will no longer “seek to insure Burmese companies or operations of companies in Burma". XL Capital owns one of the 12 largest reinsurers in the world, XL Re, and a large Lloyd’s of London syndicate, XL London Market, which has in the past insured a Burmese regime owned airline. Chubb Corporation told the campaign that after conducting an internal review it now “bars its member companies from maintaining an office in Burma, from directly writing insurance in Burma or providing insurance into Burma from outside the country”. Chubb is one of the biggest insurers in the US.

Insurance Times

Tropical Storm Fay hit the Florida Keys with heavy rain and winds that knocked down trees and signs before churning toward southwest Florida on Monday after killing more than 50 people in the Caribbean. The sixth storm of the 2008 Atlantic season did not reach hurricane strength before rolling across the vulnerable, low-lying Florida island chain with 60 mile per hour (97 km per hour) winds. Authorities reported some flooding and minor damage and said they expected to invite tourists back on Wednesday. But forecasters said there was a chance Fay would be at or near hurricane force - top sustained winds of 74 mph (119 kph) - when it strikes the west coast of Florida early on Tuesday, somewhere near the beach resort area of Naples, the Miami-based U.S. National Hurricane Center said.

Reuters

Tropical Storm Fay raked Cuba's southern coast with gusty winds and heavy rains on Sunday and was expected to move ashore overnight before heading to Florida as a likely hurricane. The U.S. National Hurricane Centre in Miami said maximum sustained winds were 50 mph (80 kph), but Cuban forecasters said gusts up to 66 miles per hour (110 kph) had been recorded at Cabo Cruz, which juts out into the Caribbean. In its latest advisory, the hurricane centre said Fay, the sixth storm of the Atlantic cyclone season, was cruising over warm Caribbean Sea waters at 15 miles per hour (24 kph) about 205 miles southeast of Havana and 270 miles south-southeast of Key West, Florida. Fay, which killed at least five people when it struck Haiti and the Dominican Republic on Saturday, was expected to make landfall around midnight, cross the island and enter the Florida Straits by mid-morning on Monday. But once back out over water, the U.S. hurricane centre said Fay would pick up steam and possibly hit the Florida Keys on Monday night as a hurricane. Hurricane watches were posted in the Keys and along Florida's west coast.

Reuters

Munich Re could see further write-downs in the second half of the year, as a result of unrealised losses on securities, according to press reports. As of the end of June, the losses were more than 2.6bn euros. It is believed the group’s revised annual forecast for 2008 has already given scope for further write-downs. Profit forecasts for the full year have been reduced by 1.4bn euros. Munich Re was originally targeting post-tax profits of up to 3.4bn euros in 2008, but this has now been reduced to 2bn euros. Record profits of 3.9bn euros were reported in 2007.

Global Re

RSA Insurance stood out on the London market's leader board yesterday, with the insurer climbing 4.1 per cent to 146.7p as gossip about takeover interest circulated. Traders said RSA may be attractive to a European peer such as Zurich Financial Services, or to QBE, the acquisitive Australian insurance group. However, they said nothing looked imminent, while people familiar with RSA played down all talk of an approach. The takeover theory was far from novel. RSA's move last year to buy out its Scandinavian minority interests made the group appear a neater acquisition target, while its settlement last month of a long-running legal dispute with General Motors removed a big source of uncertainty. The only new twist to the tale was that Andy Haste, RSA chief executive, this week took his first outside directorship by joining ITV. The obvious parallel was with Resolution founder Clive Cowdery, who chose a non-executive role at British Land six months before selling the company.

Financial Times

Ratings agency Standard & Poor’s (S&P) revised its outlook for the US commercial lines and property & casualty sector to negative yesterday on the back of continued price softening and declining investment returns. Rates were still falling in the sector in the second quarter, at “mid-single-digit rate” in most lines and at a “low-double-digit rate for new business”, noted S&P analyst John Iten. It means S&P now expects to downgrade more (re)insurers than give upgrades. The negative outlook is the first downward revision of the sector since June 2005, when S&P revised the outlook to negative on the back of the then New York attorney general Eliot Spitzer’s investigations into the sector’s alleged anti-competitive practices. S&P noted that in 2008 to date, the number of upgrades of individual companies in the commercial lines sector was double that of downgrades, but Iten added that “at this point, we see few - if any - of our rated insurers as likely upgrade candidates over the next 12 months.”

Insurance Insider

Japan's non-life insurance companies revealed dismal first quarter results yesterday, with Tokio Marine, the largest, suffering a 42 per cent drop in net profits. But amid the gloomy news, one positive figure stood out - the Y3bn ($27.6m) net profit contribution of Kiln, the Lloyd’s management agency that Tokio Marine acquired in March. The contribution from Kiln is a small but sweet blessing for Tokio Marine, and its chief executive, Shuzo Sumi, who has spearheaded the company's latest and most ambitious, overseas foray. Mr Sumi has made no secret of his intention to build up the group globally through mergers and acquisitions, such as the $903m acquisition in March of Kiln, the fourth-largest Lloyd’s managing agency.

Financial Times

Warren Buffett’s Berkshire Hathaway posted a drop in quarterly profits, as the conglomerate’s insurance underwriting divisions continue to weigh on results. Berkshire, the corporate entity that controls Mr Buffett’s portfolio of investments, did rebound from a first quarter noted for the $1.6bn non-cash loss the company recorded to mark down the value of derivatives. Gains from investments and derivatives totalled $610m during the second quarter. Net earnings fell 7.6 per cent in the quarter to $2.88bn, or $1,859 per class A share. Excluding investment and derivative gains, the company earned $2.27bn, or $1,465 a share, exceeding analysts’ average estimates. Insurance underwriting income dropped 43 per cent to $360m. Mr Buffett had warned earlier this year that the insurance business would struggle as premiums fell and the industry’s recent luck of avoiding large natural disasters ran out.

Financial Times

The Atlantic hurricane season will be slightly more active this year than first predicted, with up to 10 hurricanes expected to form, the U.S. government's top climate agency predicted on Thursday. The National Oceanic and Atmospheric Administration said the 2008 season could produce between 14 and 18 named storms, with seven to 10 becoming hurricanes and three to six of them being classified as "major" hurricanes. In May, NOAA forecast 12 to 16 named storms this season, with six to nine developing into hurricanes. Two to five could be major ones of Category 3 or higher with winds above 110 miles per hour (177 km per hour).

Reuters

Axa UK is making up to 500 redundancies on top of the 120 jobs it is shedding in Ireland after reporting its interim results. The company says to help drive future growth and improve customer service Axa UK is moving to the next phase of its new operating model with the creation of 11 strategic business units. In its interim results report, the company said: “As a result up to 500 redundancies are expected to be made within the support services and related functions subject to consultation. The company will manage the process with sensitivity to limit the number of compulsory redundancies where possible by focusing on reducing headcount through natural attrition, redeployment and more efficient use of contractors.”

Post Magazine

London-listed insurer Catlin said on Friday its profit for the first half of 2008 fell 21 percent, weighed down by weaker investment returns. Catlin said its pretax profit for the six months to June 30 was $150 million, down from $190 million in the same period last year. Analysts had expected a profit of $158 million, according to the average of six forecasts collected by the company.

Reuters

Hannover Re net falls 40%, missing analyst estimates.

Hannover Re, Germany's second-biggest reinsurer, posted a 40 percent decline in second-quarter profit, missing analysts' estimates, as falling stock markets weighed on income from investments. Net income dropped to €100.8 million ($156 million), or 84 cents a share, from €169.4 million, or €1.41, a year earlier, the Hanover, Germany-based company said today on its website. That was less than the €142 million median estimate of nine analysts surveyed by Bloomberg, and the shares slid as much as 6.4 percent. Hannover Re, led by 64-year-old Chief Executive Officer Wilhelm Zeller, said today it will be difficult to reach its full-year forecast for profit of about €5 a share if turbulence in the capital markets continues.

Bloomberg

American International Group, the world's largest insurer, lost $5.36bn (£2.68bn) in the three months to June as it continued to suffer from its involvement in the credit default swaps (CDS) market. AIG, best known in the UK for its AIG Direct Brand and for its role as Manchester United's shirt sponsor, unveiled the pre-tax loss on the back of an $11.6bn hit, made up of $5.56bn in write-downs of its CDS portfolio, and $6.08bn of capital losses from impairment charges on mortgage-backed securities. The losses come on top of first quarter losses of $7.81bn, which included $13.1bn of write-downs, in part due to the impact of illiquid CDSs held on AIG's books. Shares in AIG fell 7.2pc to $27 in extended trading after hours on Wall Street.

Daily Telegraph

A recent survey by the Risk & Insurance Management Society Inc. shows that it is still a buyer’s market for commercial insurance, with single-digit declines in average premiums in the second quarter of 2008. The RIMS Benchmark Survey results showed that directors and officers liability premiums fell 6.4% in the second quarter and that premiums for property insurance decreased 6.1%.  The decrease in average liability premiums was near 5%, while the average workers compensation premium fell just under 1.7%. “We are now in hurricane season and a bad storm could bring a quick end to the soft market,” John Phelps, member of the RIMS board of directors and director of business risk solutions for Blue Cross & Blue Shield of Florida Inc., said in a statement.

Business Insurance Europe

Munich Re, the world's biggest reinsurer, said profit declined 47 percent in the second quarter after it wrote down the value of investments. Net income was €599m ($929m) for the quarter ended June 30, down from €1.14bn a year earlier, the Munich-based company said in an e-mailed statement today. Munich Re wrote down €889m on its equity investments in the second quarter because “the financial market crisis in Europe and the U.S. is persisting.” Chief Executive Officer Nikolaus von Bomhard said July 25 that falling stock markets would force the company to mark down investment values and reduce its 2008 profit forecast, triggering the biggest drop in Munich Re shares in five years. The company's second-quarter profit met von Bomhard's “very provisional” estimate of €600m euros last week. “If equity markets do not recover, further writedowns will burden the second-half result,” Stephan Kalb, an analyst at Sal. Oppenheim in Frankfurt, who recommends buying Munich Re shares, wrote in a note to clients this week. “Risk capital is still at about 170 percent of the required level, according to our estimates.”

Bloomberg

Tropical Storm Edouard disrupted shipping, cut refinery production and shut some offshore oil and natural gas output on Monday as it churned across the Gulf of Mexico toward landfall along the upper Texas Coast on Tuesday. U.S. crude oil futures hit a three-month low of $119.50 a barrel on Monday before settling down $3.69 at $121.41 as signs of a slowing U.S. economy and rising supply from OPEC outweighed storm fears. So far, Edouard has closed only 0.9 percent of crude oil production and 7.2 percent of natural gas output, according the U.S. Minerals Management Service. The Gulf of Mexico supplies about a quarter of U.S. crude oil output and 15 percent of its natural gas, while Gulf Coast refiners make about a quarter of domestic gasoline. Packing 50 miles per hour (85 kph) winds, Edouard swept across the northern Gulf of Mexico about 80 miles (135 km) south-southwest of Grand Isle, Louisiana. The storm has a 20 percent chance of reaching hurricane speeds of 74 mph before it makes landfall on Tuesday near Galveston, Texas, the U.S. National Hurricane Center said. At its predicted strength, Edouard is unlikely to do much damage to coastal area refineries that were swamped by the storm surge from hurricanes Rita and Katrina in 2005, said Kenneth Medlock, an energy fellow with Rice University's Baker Institute.

Reuters

Lancashire Holdings Limited has announced a profit before tax of $49.8m for the second quarter of 2008, down 40% on the same period last year. The insurer posted gross written premiums of $196.7 million, down 27.4% on the same period last year, and a combined ratio of 72.3%, for the second quarter of 2008. For the first six months of 2008, it posted gross written premiums of $383.4 and a combined ratio of 66.4%.

Insurance Times

Lloyd's has banned and fined two former directors of Euclidian, an insurer that stopped writing new business four years ago. The insurance market, in liaison with the FSA, said it had banned James Corrigan-Stuart and fined him £15,000 after he admitted one charge of discreditable conduct and one charge of misconduct. He agreed to contribute £20,000 towards Lloyd's costs. It has also banned Andrew Willoughby and fined him £10,000 after he admitted one charge of discreditable conduct and a charge of misconduct. He agreed to contribute £15,000 towards Lloyd's costs. Lloyd's said Mr Corrigan-Stuart and Mr Willoughby did not take necessary steps to ensure one of Euclidian's capital providers agreed to changes to a policy that protected its capital, and did not keep Lloyd's fully informed. However, Lloyd's said neither Mr Corrigan-Stuart nor Mr Willoughby acted dishonestly or in bad faith. They also admitted the charges, co-operated fully with investigations and settled proceedings without contested proceedings.

Financial Times

Swiss Reinsurance Co., the world's second-largest reinsurer, said profit dropped 53 percent after CHF362m ($345 million) of writedowns related to credit-default swaps. Second-quarter net income fell to CHF564m from CHF1.19bn a year earlier, the Zurich-based company said in a statement today. That missed the CHF773 million-franc median estimate of 11 analysts surveyed by Bloomberg as premiums earned fell a more-than-expected 23 percent to CHF6.1bn. The writedowns are on top of more than CHF2bn of losses announced since November on contracts sold to protect a client, something Chief Executive Officer Jacques Aigrain called a “tactical error.” The company today said it agreed to buy the life insurance unit of Barclays Plc. to boost earnings amid lower premium and investment income. “It was another difficult quarter, in part due to charges from structured credit-default swap insurance contracts,” said Viktor Dammann, an analyst at Bank Vontobel in Zurich, in a note to clients before earnings were released. “The evident decline in premiums will weigh on the earnings potential.”

Bloomberg
 

Hilb Rogal & Hobbs Co. reported higher revenues in the first six months of 2008, but profits plunged by more than $3  due to an $18.4m second-quarter charge, the company reported. The broker said in its earnings release that the expense—which is a non-cash asset impairment charge—relates to the departure of "certain key producers" at its London-based HRH Reinsurance Brokers Ltd. unit who were responsible for "a significant portion of the operation's revenue." The departures took place before the announcement that Willis would pay $2.1bn to acquire HRH, the broker said. Subsequently, HRH has entered into a co-brokering agreement in an effort to serve and to retain the subsidiary's clients, it said. HRH Reinsurance Brokers represents less than 1% of HRH’s overall revenues. For the six-month period, profits fell 64.9% to $16.7m, HRH said. Contributing were the impairment charge, HRH's acquisition of Banc of America Corporate Insurance Agency, increased professional and claims fees, the timing related to the shift from contingent commissions to supplemental commissions and increased costs related to the employee medical program, HRH reported.

Business Insurance

The London insurance connection propping up the murderous Burmese military dictatorship can be revealed in a development that will acutely embarrass leading City figures. Three Lloyd's of London operators will be named as helping to insure the junta's state-owned airline Myanma Airways earlier this year. They are Kiln, Atrium and Catlin. All were contacted by The Observer and asked to explain their involvement but refused to comment. Other Lloyd's syndicates have shared the risk of insuring the junta's shipping interests. Without shipping and aviation insurance, the Burmese government would not be able to export gems, timber, clothing, oil and gas, which would lead to economic ruin for the generals running the oppressed south-east Asian nation. The London insurance involvement, to be exposed this week in a report by Burma Campaign UK, will acutely damage the reputation of the City. It is likely to trigger a wave of campaigns aiming to force Lloyd's of London to recommend that its members pull business from Burma. Campaigners are demanding a face-to-face meeting with Lloyd's chairman Lord Levene.

The Observer

Aon called for mandatory commission disclosure across the insurance industry, at a public hearing on Friday in New York City. Attorney General, Steve McGill, chairman and chief executive officer of Aon Risk Services, urged the New York State Department of Insurance to put in place comprehensive transparency and consent standards that apply to all insurance producers conducting business in the state.  “At Aon, we believe in the fundamental principle that a client deserves to know whether its producer is working for the client or as an agent of an insurer, what insurers the producer approaches, how much the client will pay, and how the producer will be compensated,” said McGill. “This is essential to enable the client to make informed choices, to avoid an actual or potential conflict of interest by the producer, and to produce the best and most competitive outcomes for clients.”

Strategic Risk

Max Capital Group has become the latest Bermudian (re)insurer to acquire a Lloyd’s platform after buying Imagine Group (UK) Ltd. The (re)insurer is thought to have shrugged off competition from French reinsurer SCOR to acquire Imagine’s three Lloyd’s syndicates from its parent company, the Bermudian-domiciled Imagine Insurance Company. Imagine’s Lloyd’s syndicates – 1400, 2525 and 2526 - have £198mn of 2008 capacity with 69 percent wholly owned and the remainder provided by third party names. At the beginning of the month, The Insurance Insider revealed Max was in talks with Imagine’s advisers, the corporate financiers Lexicon Partners, over the operation. It ends Max’s search for a Lloyd’s platform which has seen it linked with a number of potential EC3 targets, such as Heritage and Pembroke, which instead were recently acquired by Max’s fellow Bermudian (re)insurers Argo Group and Ironshore respectively. Max Capital chairman and CEO W. Marston (Marty) Becker explained: “This Lloyd's operation is an ideal fit for Max. Through this acquisition, we will further diversify our business and achieve access to the important benefits of Lloyd's market participation”. For Imagine the transaction will enable it to free up around £90mn of regulatory capital tied up as letters of credit at Lloyd’s. The total consideration is expected to be approximately £11mn.

Insurance Insider

The erratic pattern of Hurricane Dolly has provoked a debate amongst rival risk modelling firms over the extent of US insured losses after the storm made landfall in Texas on Wednesday. AIR Worldwide has estimated that insured losses in the US could range from $300mn rising to as much as $1.2bn. However, rival firm Risk Management Solutions (RMS) predicted that US insured losses would be less than $750mn after Dolly skirted around Texan city Brownsville. Christine Ziehman, RMS director of model management, said the cost of insured losses would depend on the extent of flood damage caused by Dolly, as 30cm of rain was deposited in Texas, according to the National Hurricane Center in Miami.

The Insurance Insider

Amlin has confirmed it is to establish a representative office in Chicago. Amlin Illinois will work within the existing Lloyd’s infrastructure, utilising the Lloyd’s licence in Illinois to write admitted business which may not otherwise reach the London market. It will open for business in early August. Amlin has recruited Paul Glenton as vice-president to build this new operation specialising in property, casualty, auto and marine cargo business and reporting to Amlin Illinois president, David Harris. In 2002, Mr Glenton helped set up Navigators’ Midwest property and casualty operation, which has now expanded beyond the original six US states but remains centred on Illinois.

Post Magazine

Lloyd's of London insurer Beazley Group Plc's first-half profit fell by 25 percent, it said on Friday, due to a fall in investment income, though it just managed to beat market expectations. Pretax profit was 45 million pounds ($89.32 million) for the first six months of this year, down from a record 60.2 million pounds last year, and compared with analysts' average forecast of 43.8 million pounds, according to Reuters Estimates. The company said volatile market conditions had hit its investment income. Its gross written premiums fell 6 percent to 407.3 million, as it cut back on commercial business written by its Lloyd's of London unit, due to falling prices. Beazley expects premium income for the year of between 730 and 750 million pounds, lower than its previous estimate of around 780 million pounds, as it had walked away from some property business because of falling rates.

Reuters

Hurricane Dolly hit the south Texas coast on Wednesday with 95 mph winds, pouring torrential rain on the U.S.-Mexico border area and threatening floods in low-lying areas. Dolly, the second hurricane of the 2008 Atlantic hurricane season, dropped up to 12 inches of rain in the first few hours after coming ashore at the barrier island of South Padre Island, where it ripped off roofs, bent palm trees in half and left thousands of residents without power. The storm's leading edge hit the island as a Category 2 hurricane, the second level on the five-step Saffir-Simpson scale, with maximum sustained winds of 100 mph, but quickly fell back to Category 1, the National Hurricane Center said.

Business Insurance

Duke of York jibe during Willis building launch.

The Duke of York opened the new £400m Willis headquarters in London and joked that Lloyd’s chairman Lord Levene had lost a beautiful vista of London from his office window. The Willis Building, at 51 Lime Street, is situated directly opposite Lloyd’s. Sharing in the party atmosphere at Lime Street, Prince Andrew said: “I spoke to Lord Levene in his office at Lloyd’s and he told me, ‘As the senior man here I like to be able to survey various parts of the city… and this ugly building next door has completely destroyed my view’.” The building, designed by world-renowned architects Foster + Partners, won the 2007 New City Architecture Award for its unique architectural form.

Insurance Times

ACE completes move to Zurich.

ACE Ltd.'s redomestication to Switzerland from the Cayman Islands was completed on Friday, and the insurer's holding company is now located in Zurich. ACE shareholders approved the move at the company's annual general meeting in Bermuda on July 10. As part of the redomestication, ACE on Tuesday announced the appointment of Olivier Steimer, chairman of Lausanne, Switzerland-based Banque Cantonale Vaudoise, to its board of directors. Swiss law requires companies incorporated in the country to have at least one director or executive officer living in Switzerland. The company said it will maintain executive offices in Bermuda, and ACE Group Holdings executive offices will remain in New York.

Business Insurance

Germany's Hannover Re AG, one of the four largest reinsurers worldwide, provided details Wednesday about its exposure to troubled U.S. mortgage businesses Freddie Mac and Fannie Mae. The reinsurer currently has an exposure of around €40 million in Freddie Mac in its investment portfolio and around €85 million in Fannie Mae, a Hannover Re spokeswoman said. Further details weren't available ahead of the second-quarter earnings Aug. 7. A spokeswoman for Munich Re AG declined to provide more details on the composition of its structured investments ahead of its six-month earnings press conference Aug. 6. The spokeswoman referred to the company's first-quarter report, which said about €2.7 billion of its total €5.9 billion in structured investments was in U.S. agency paper. Munich Re's total investment portfolio had a volume of €171 billion at the end of March.

Dow Jones

Shares in Swiss Re tumbled yesterday after the reinsurer said it had $9.6bn of exposure to corporate debt issued by Freddie Mac and Fannie Mae, the beleaguered US mortgage finance companies. Swiss Re fell SFr1.45, or 2.3 per cent, but was down as much as 9 per cent during the day as investors worried the reinsurer could face more writedowns related to its exposure to Fannie and Freddie. Hank Paulson, US Treasury secretary, this week asked Congress for authority to buy equity stakes in and lend to Fannie and Freddie to shore up investor confidence in the government-sponsored companies. Shares in both companies have come under selling pressure amid investor fears that they are poorly capitalised. While bonds issued by Fannie and Freddie are backed by an implicit guarantee from the US government, they have lost value, which could lead to further writedowns for Swiss Re. The reinsurer also said its US agency residential mortgage-backed securities portfolio, which was worth SFr12.2bn (£6bn) at the end of the first quarter, consisted of about 47 per cent of securities guaranteed by Freddie Mac, and 44 per cent of securities guaranteed by Fannie Mae. Swiss Re said its exposure to shares of the agencies was minimal.

Financial Times

Tropical Storm Bertha buffeted the eastern shores of Bermuda with high winds and heavy rains on Monday, and forecasters said it was expected to become a hurricane again as it strengthened slowly off the British colony. However, in a 11 p.m. EDT report, the U.S. National Hurricane Center said the storm was moving steadily away from Bermuda, to the east into the open sea. The intensity forecast and organisation of the storm remained essentially unchanged, it said.  An area of disturbed weather midway between the Caribbean islands and Africa was of more interest to oil traders on Monday than Bertha. That area of low pressure located around 1,200 miles east of the Lesser Antilles was getting better organised and could become a tropical depression, the precursor to a tropical storm, later on Monday, the hurricane centre said. It was moving westward at 10 to 15 mph, the centre said. Bertha formed near the Cape Verde Islands off Africa. Its development that far east so early in the hurricane season is viewed by some experts as ominous.

Reuters

American International Group (AIG) has bought out management and staff in Ascot Underwriting Holdings Ltd as its Lloyd's arm becomes a 100 percent owned subsidiary. The deal, on undisclosed terms, sees AIG acquire the 60 percent interest in Ascot it didn't own, and comes after talks aimed at determining the role of the managing agency in the US giant's future strategy. Under the original agreement between AIG and Ascot when it was launched in the aftermath of 9/11, terms were laid out that would see the Lloyd's insurer eventually become a wholly-owned subsidiary of AIG, in the absence of a sale or divestment. With the deal to acquire Ascot, which underwrites at Lloyd's through Syndicate 1414, AIG has effectively accelerated its option to purchase the agency in 2012 - a process that was scheduled to begin in 2009. One stumbling block on the way to concluding the acquisition is thought to have arisen in the earn-out agreements set out at Ascot's launch.

Insurance Insider

Lloyd's A rating reaffirmed.

Rating agency AM Best has reaffirmed Lloyd’s A (excellent) rating. Luke Savage, director, finance, risk management and operations at Lloyd’s, said: "We are delighted that AM Best has reaffirmed our ratings, recognised the key benefits of Lloyd's, our ongoing work to maintain underwriting discipline and the attractiveness of the market." AM Best recognised a number of factors which contributed to the rating affirmations including enhanced corporate governance and analysis, international expansion, particularly in Singapore and China, a diminished strain on the Central Fund due to stabilising reserves and the closure of a significant number of Open Years. The franchise performance directorate and risk management stood out for praise, with analysts outlining material changes in oversight and risk management procedures that are likely to prevent poor performance in a soft cycle. AM Best recognised that this has yet to be tested.

Post Magazine

The SEC has issued a damning report into practices at ratings agencies Standard and Poor's, Fitch and Moody’s. Back in August 2007 the US regulator began an investigation into the agencies’ handling of the rating of sub-prime securities in the wake of the turmoil in those markets that began early in 2007. The report raised a number of questions about ratings agencies’ handling of residential mortgage-back securities and collaterised debt obligations. Quoting emails garnered by the report, the SEC cited one analyst, who “expressed concern that her firm’s model did not capture “half” of a particular deal’s risk, stating that ‘it could be structured by cows and we would rate it.’”. In another document, an analytical manager in the CDO ratings part of the agency said that the ratings would create “an even bigger monster – the CDO market.” He added: “Let’s hope we are all wealthy and retired by the time this house of cards falters.”  The SEC added that low resources at the agencies impacted the timeliness of surveillance efforts, finding that managers were constantly asking senior managers to hire more staff to cope with the influx of business.

Post Magazine

Shareholders of ACE Ltd. have voted in favour of initial steps to redomesticate the company to Switzerland. If approved, the move will transfer the company's place of incorporation from the Cayman Islands—where ACE was established in 1985—to Zurich, Switzerland. The company says its Bermuda operations will be unaffected, and ACE executive offices will remain in Bermuda principally, according to a company spokesperson. ACE Group Holdings' executive offices are expected to remain in New York. Hamilton-based ACE is one of Bermuda's largest insurers and reinsurers, writing around $12 billion in net premiums in 2007. In March, ACE Chairman and Chief Executive Officer Evan G. Greenberg announced plans to relocate the insurer's holding company to Switzerland, saying the change would offer "better strategic flexibility, a solid legal and regulatory environment, and improved ability to manage our capital and our business."

Business Insurance

Following a meeting to discuss transparency, the British Insurance Brokers’ Association and the Institute of Insurance Brokers have confirmed that they are both keen to move forward with an industry initiative to address the regulatory concerns about transparency, disclosure and conflicts of interest. Both broker trade bodies have responded in detail to the discussion paper DP08/2 – ‘Transparency, disclosure and conflicts of interest in the commercial insurance market’ and have made known to the Financial Services Authority their strong views against the imposition of mandatory commission disclosure. Both bodies support the existing ‘on request’ basis of commission disclosure but recognise that there are difficulties in establishing a common formula which would enable customers to make a straightforward comparison of intermediary remuneration.

Post Magazine

Hurricane Bertha has regained its strength after initially shrinking back into a tropical storm on Tuesday. Forecasters at the US National Hurricane Centre said the hurricane was about 600 miles south-east of Bermuda, with sustained wind speeds of 105mph. Catastrophe modelling agency Eqecat said the hurricane is not expected to make landfall in Bermuda, neither will it reach the US or Caribbean. Instead, it will track to the east of Bermuda, with the closest approach in 3 to 4 days. Bertha brings a 20-30% probability of tropical storm winds in Bermuda, an approximate 10% probability of winds in excess of 50-knots and a low probability of hurricane force winds in Bermuda. Eqecat said Bertha had attained category 3 intensity which was “a little high for this time of year” when compared to historic data. However, Eqecat added that Bertha “does not seem that incredible” when forecasters consider estimation uncertainty for offshore storm intensity estimates.

Insurance Times

Swiss Reinsurance Co., the world's largest reinsurer, appointed Stefan Lippe deputy chief executive officer and chief operating officer, effective Sept. 1. Lippe, 52, who is head of reinsurance products and a member of the company's executive committee, will replace Andreas Beerli, who plans to retire at the end of June next year, the Zurich-based reinsurer said today in an e-mailed statement. Swiss Re also said that Brian Gray, head of property and specialty underwriting, will become chief underwriting officer. Lippe has worked at Swiss Re for 25 years and will be responsible for technical and accounting services, claims management, logistics and product development and strategy, the reinsurer said. Beerli was responsible for integrating the $7.4 billion purchase of GE Insurance Solutions that in 2006 propelled Swiss Re past Munich Re to be the No. 1 reinsurer.

Bloomberg,

Hurricane Bertha weakened rapidly as it headed in the direction of Bermuda on Tuesday, just a day after suddenly burgeoning into the first major hurricane of the 2008 Atlantic storm season, forecasters said. Bertha had begun a northerly turn that would likely spare the U.S. East Coast from a hurricane or tropical storm strike, the U.S. National Hurricane Center said. The Gulf of Mexico, where the United States produces a third of its domestic crude oil and a large amount of its natural gas, was well out of the firing line. Bertha, which on Monday became a powerful Category 3 hurricane on the five-step Saffir-Simpson scale, had dropped back to Category 1 by 5 p.m. EDT on Tuesday with top sustained winds of 85 mph, the Miami-based centre said in an advisory. The centre said Bertha could weaken further in the next 24 hours as cooler waters, dry air and unfavourable atmospheric wind conditions affected the storm. But some computer models showed the hurricane regaining some strength after that.

Reuters

Tropical storm Bertha has been officially reclassified as a hurricane after passing through warmer waters 800 miles east of the Caribbean. Bertha, has moved across the Atlantic since forming off the Cape Verde islands near Africa on Thursday, but it is still too early to say whether it will make landfall, according to the US National Hurricane Centre. Forecasters say the storm is heading west-northwest at a speed of 17mph. It was originally recognised as the second Atlantic tropical storm of the year after tropical storm Arthur which made landfall in south-eastern Mexico on June 1. Storms are classified as hurricanes when sustained windspeeds pass 74mph and Bertha’s winds are now in excess of 75mph.

Insurance Times

Lloyd's is set to downgrade its presence in India after voicing concerns over the countries efforts to open up its financial services industry to foreign investors, according to the Sunday Telegraph. The paper said that Lloyd's is withdrawing its main representative in India, where it has an office in Mumbai, after being unable to secure a licence to write insurance business locally and believing it has little prospect of doing so in the near future. However, the report said it will retain the services of two junior employees in Mumbai, but has suggested that its senior representative seeks alternative employment. Lloyd's chairman Lord Levene has visited India many times to lobby for the liberalisation of its foreign investment rules and is said to be unhappy that India is now the only major market in the world to block overseas companies from participating in the domestic reinsurance market.

Insurance Times

As the M&A winds continue to bluster through EC3, Bermudian-headquartered reinsurer Imagine Group Holdings Ltd’s syndicates have emerged as the latest target for international (re)insurers interested in acquiring a Lloyd’s platform. The Insurance Insider understands SCOR and Max Capital head a shortlist of candidates who may acquire up-for-sale Imagine Syndicate Management Ltd, which manages three Lloyd’s Syndicates: 1400, 2525 and 2526. SCOR has emerged as a surprise bidder having ramped up its London presence in recent months. It has successfully integrated the Swiss reinsurer Converium and recently launched a EC3 hub which focuses its London market business. Meanwhile, Max Capital has also been linked with a number of acquisitions in the last year, most recently with the Pembroke unit of Chaucer bought by Ironshore at the beginning of July. Earlier this year, Max Re chairman and CEO Marty Becker told shareholders that the company would be looking to make acquisitions this year as it makes “economic sense” at this time in the reinsurance cycle.

Insurance Insider

The mutual insurer that covers the third-party risks of one in six ships worldwide will on Monday become the first company of its type to turn to outside investors for capital, in a move that could spark widespread change. The London-based UK Protection and Indemnity (P&I) Club will seek to raise about $100m (£50m) through an issue of “hybrid capital” to prepare for new European Union solvency requirements, due to come into force in 2012. The issue – of a kind common elsewhere in the insurance industry – will strengthen the club’s capital base without diluting the interests of members, who are all shipowners. The club hopes to have the securities listed in London. P&I Clubs have previously raised money only through insurance premiums from members, according to Hugo Wynn-Williams, chief executive of Thomas Miller P&I, which manages the UK Club. It was impossible to tell whether other P&I Clubs would now also seek outside capital, he added. “It would be surprising if we were successful in this and if others ... did not take note and see whether it would be appropriate for them.”

Financial Times

New York Insurance Superintendent Eric Dinallo is enlisting experts to examine the possibility of reviving the New York Insurance Exchange, which was seen as the U.S. equivalent of the Lloyd's of London market when it was founded to great fanfare in 1980. "He is now at the point of pulling together a working group," said David Neustadt, a spokesman for the New York Insurance Department. Dinallo, who first raised the possibility of reviving the exchange earlier this year, has also recently held meetings with those involved in the original exchange. The laws permitting the exchange are still on the state's books, and the exchange would allow underwriters to form syndicates to reinsure and insure unusual or very large exposures. The original New York Insurance Exchange, which created a centralized marketplace for brokering and underwriting, ran for about 7 years, attracting wide participation from the insurance industry.

Reuters

Hurricane season may change soft market.

The course of the softening global reinsurance market will depend heavily on how the summer Atlantic hurricane season develops and what impact that will have on renewals negotiations heading into 2009, according to ratings agency A.M. Best. And more is on the minds of reinsurers, particularly the ongoing financial turmoil arising from the subprime mortgage crisis and credit crunch, along with predictions of recession or depression in various countries.  “There’s been a general slowing down in growth, especially in the industrial countries,” said Chris Klein, global head of business intelligence at reinsurance broker Guy Carpenter & Co. “There’s pressure on costs and expenses. People are starting to review their insurance exposures and deciding what they really want. This will filter down to reinsurance, but at the moment it is too early to say what the impact will be, as there are aggravating factors involved.”

Global Reinsurance

Zurich has confirmed that it is cutting 870 jobs, or a sixth of its total UK workforce. The news will see cuts made across all parts of the business. In a statement the insurer said that due to vacancies, the total number of redundancies would be around 570. None of the company's sites will be closed, quelling fears that the insurer was set to follow Norwich Union, which recently announced plans to rationalise its UK office network by closing 13 of its 52 UK offices and reduce its headcount by up to 1,800, or 10 per cent of its UK personnel. In a statement last month, Zurich said that all aspects of the business were being reviewed, including processes and techno