Towergate’s offer for Broker Network has now been declared unconditional, according to an announcement on the Stock Exchange. The offer had been fully accepted Thursday afternoon by Broker Network’s shareholders in respect of14,592,279 shares and representing 92.9% of the company’s existing issued share capital. Because Towergate has attained more than 90% of the voting rights attached to the shares, the company is now taking steps to de-list Broker Network from AIM. It is anticipated that cancellation of listing and trading will take place at 7 a.m. on 23 January 2008. The delisting will significantly reduce the liquidity and marketability of any Broker Network Shares that are not acquired by Towergate, the statement said. Following the cancellation, Towergate intends to re-register Broker Network as a private company. Towergate offered 605 pence for each Broker Network share, valuing the company at £95m.

Insurance Times

Michael Cherkasky, the president and chief executive of Marsh & McLennan Companies Inc (MMC), has been axed by the firm following continuing criticisms of the group's performance. The former head of MMC's risk consulting and investigations arm Kroll will remain as chief executive until a successor is found. Stephen R Hardis, the non-executive chairman of the MMC Board, remarked today: "MMC's financial performance in 2007 has fallen far short of our expectations. The Board has taken this performance into account, and listened to concerns raised by some of the company's largest shareholders in recent quarters, in making this change." The move comes in the same month that MMC's insurance broking arm Marsh hired Dan Glaser, the former head of AIG Europe, to take the reins of the firm following the resignation of Brian Storms in September.

Insurance Insider
 

The sub-prime woes of Bermudian (re)insurer XL Capital Ltd continue to deepen as ratings agency Moody's Investors Service placed the firm's ratings on review for possible downgrade. The move was prompted by XL's 46 percent ownership stake in monoline bond insurer Security Capital Assurance Ltd (SCA) - which Moody's and Fitch placed on negative outlook last week and S&P reviewed yesterday - and exposures within XL's own investment portfolio. Moody's cited the reasons for Wednesday’s review as reflecting "the increased pressure on XL's profitability, capital adequacy, and financial flexibility stemming from its reinsurance of and investment in SCA, as well as XL's sub-prime exposure within its investment portfolio". To date, XL has been tight-lipped on its exposure to the sub-prime debacle, both in its investment portfolio and from its large book of directors' and officers' (D&O) and professional liability (PL) business.

Insurance Insider

Wall Street banks may have to take several billion dollars of additional charges relating to their mortgage-backed derivatives, because of a gathering crisis in the insurance industry. Shares in one of the biggest so-called "monoline" insurers, which insure the banks against bond defaults, tumbled yesterday after it revealed that it had some $8bn (£4bn) of exposure to the most risky kinds of mortgage derivatives – raising investor fears that its finances could become unstable. MBIA said it was well capitalised, but the storm came just a day after a smaller rival, ACA, was effectively put out of business by a credit-rating downgrade. ACA's rating was downgraded to junk status by Standard & Poor's; the company said its clients had agreed not to call on it for payments until 18 January. Some analysts estimate that Merrill Lynch, for example, which is set to report its results in mid-January, has about $5bn of mortgage assets insured with ACA. MBIA posted information on its website that revealed it had $8.1bn in exposure to so-called CDO-squared assets: CDOs made up of investments in other CDOs. These are one of the most highly leveraged ways to invest in mortgages.

The Independent

The White House said on Wednesday it was reviewing a bill that would renew the federal government's terrorism risk insurance program for seven years. "We are reviewing that bill," said White House spokeswoman Dana Perino in a briefing with reporters in answer to a question about whether President George W. Bush would sign the bill to renew the Terrorism Risk Insurance Act (TRIA). "Last spring, we had concerns about the bill," Perino said. "So, they're reviewing the bill now for the final scrub of it before we can decide whether or not he'll sign it." Although the Bush administration favours ending TRIA, it said earlier this year that it would not oppose extending TRIA for now along the lines of the bill now under its review. Congress sent a seven-year TRIA extension bill to Bush after the House of Representatives voted for it on Tuesday, with less than two weeks left before the program is due to expire.

Reuters

Britain's financial watchdog has fined a unit of insurer Aviva £1.26 million ($2.6 million) for exposing its customers to fraud risks, the regulator's largest penalty to date for security failures. The watchdog said on Monday that weaknesses in controls at Norwich Union Life, part of Aviva's UK unit and one of the country's largest life assurers, allowed fraudsters to use names, addresses and dates of birth to impersonate customers and, ultimately, to cash in policies worth £3.3 million. In some cases, the false clients used publicly available personal information - for example from Companies House, the public register of UK companies and their directors - to change addresses and bank account details. As a result, fraudsters cashed in 74 policies, including nine belonging to Aviva directors. In all, they managed to access confidential details in 632 cases.

Reuters

US insurance group American Finance Group Inc (AFG) has bought a majority interest in Lloyd's insurer Marketform Group Ltd. In a month that has already seen Lloyd's (re)insurers Kiln and Heritage receive takeover offers, AFG has acquired a 67 percent share in the firm which values the non-US medical malpractice specialist at £55mn. The deal, which is subject to approval by Lloyd’s and the Financial Services Authority, will give the Cincinnati-headquartered firm an international platform to expand operations. Marketform’s founder Holly Bellingham, and other key staff, will retain a one-third equity stake in the business.

Insurance Insider

Cevian, the Swedish activist investor backed by Carl Icahn of the US, is stepping up pressure on Munich Re as it seeks changes to boost the group's share price. Cevian wants to hold fresh talks with the world's second-biggest reinsurer and has not ruled out increasing its stake of almost 3 per cent. The activist fund, which met Munich executives briefly at an investor presentation in London yesterday, declined to comment on the changes it is seeking. Nikolaus von Bomhard, chief executive of Munich said no specific proposals had been put forward by Cevian, nor had letters from the activist been received. However, Munich is considered vulnerable because it has a primary insurance business, Ergo, alongside its traditional reinsurance operation. Some analysts believe that Ergo's worth is not being fully reflected in Munich's valuation and that the businesses should be split. Cevian would not say whether it would push for a seat on the Munich board although such a move remains an option. Mr von Bomhard said there had been no such request so far.

Financial Times

Lloyd’s published its new 2008 – 2010 Three-Year Plan yesterday with chief executive officer Richard Ward praising the achievements of Lloyd’s to date while urging caution as market conditions change. “In the two years since the publication of the first version of the Three-Year Plan, the market and Corporation have achieved a number of key objectives, including upgrades from two ratings agencies, the development of a solid performance management framework and strong financial assets,” he said, adding that the market remains in a “strong position to deal with any issues that it faces and capitalise on opportunities”. However, he added: “We must recognise that we operate in a fiercely competitive marketplace and there is no denying that as market conditions change significant challenges lie ahead,” he said.

Post Magazine
 

The board of Kiln plc has recommended a 150p per share cash offer for the Lloyd’s insurer by Tokio Marine & Nichido Fire Insurance Co (TMNF). The acquisition price values Lloyd’s fourth largest vehicle at £442.2mn, a premium of approximately 33 percent on the average closing price of 112.8p per share for the 12 months to 13 December 2007. Investment bank Fox-Pitt Kelton Cochran Caronia Waller advised TMNF on the deal, with Lexicon Partners advising Kiln. The acquisition is expected to close in the first quarter of 2008. In a joint statement to the London Stock Exchange this morning, the insurers said: “TMNF has a high regard for the management and underwriting teams within Kiln and values highly the culture that has made Kiln the successful business that it is. It is TMNF's intention, therefore, to retain the culture, identity and brand of Kiln.” In light of the proposed acquisition, Kiln announced that it was “unlikely to proceed” with its announced share repurchase scheme. However, the sale of its European operations, W.R. Berkley Insurance (Europe) Ltd, is expected to continue.

Insurance Insider

Specialist insurance and reinsurance group Kiln has confirmed it is in discussions regarding a possible offer for the group following a big rise in the share price earlier on. “The board intends to progress these discussions in order to establish as soon as is practicable whether an offer for the group may be made on terms which the board could recommend to shareholders,” it said in a statement on Tuesday. It said the talks are ongoing and there can be no assurance that any offer will be forthcoming. If an offer does not materialise the firm said it will proceed with its previously announced share buyback plans.

Sharecast

A law firm that focuses on shareholder lawsuits against big corporations has formed a new team to deal with cases stemming from the subprime mortgage meltdown. The new team formed by law firm Bernstein Litowitz Berger & Grossmann L.L.P. comes as investors already have filed a flurry of lawsuits stemming from the collapse of the market for risky home loans. Defendants in these cases include mortgage lenders as well as big banks accused of issuing false statements about losses tied to mortgage investments. Class action law firms see the subprime collapse as fertile ground for new investor litigation. Several firms that specialise in defending corporations against class-actions and other litigation have formed subprime task forces of their own.

Reuters

The UK Financial Services Authority (FSA) is to further investigate inefficiencies in the commercial general insurance market before deciding on whether to mandate commission disclosure. The move follows an independent report suggesting the mandating of commission disclosure “is not justified on cost benefit grounds”. “However, the FSA has wider concerns about market inefficiencies,” the regulator said. The investigation comes as a number of UK subsidiaries have either increased brokerage or announced their intentions to do so, with broking giants Marsh, Willis and Aon demanding a 2.5 percent commission on UK business. The investigation will look at “measures aimed at improving the quality, clarity and consistency of key disclosures made by firms to their commercial customers. This will include disclosures relating to commission, status, service, and conflicts of interest”, the FSA said.

The Insurance Insider

An early forecast of the 2008 Atlantic hurricane season issued on Friday by the Department of Atmospheric Science at Colorado State University predicts 13 named storms, seven of which will become hurricanes. The forecasters further predicted that three of those seven hurricanes will become “major” storms packing sustained winds of 111 mph or more. The report puts the odds of a major hurricane striking the U.S. East Coast at 60%, which is slightly higher than the 52% average over the past century. In a statement, forecasters said that the forecast is based on a new extended-range early December statistical prediction scheme that uses 58 years of data. The forecast also contains an analysis of all of the department’s extended-range forecasts that have been issued over the past 16 years.

Business Insurance

A showdown between brokers and the Financial Services Authority on commission disclosure is to start on Monday, as the regulator releases its latest report on the heated subject. A spokeswoman for the FSA confirmed to Post that most major brokers, representatives associations and the regulatory body were set to meet on Monday to discuss the publication of results from an independent research commissioned by the FSA. Brokers Aon, Marsh and Willis are expected to attend Monday’s meeting, as well as Steve White, head of compliance and training at the British Insurance Brokers’ Association.

Post Magazine

Standard & Poor's has lowered its counterparty credit rating on Marsh & McLennan (MMC) to “BBB-” from “BBB” and lowered its short-term rating on MMC to “A-3” from “A-2”. At the same time, Standard & Poor's removed the ratings from CreditWatch with negative implications. The outlook is stable. "The rating action reflects the many challenges the Marsh Inc. subsidiary faces over the next two years as demonstrated by disappointing third-quarter 2007 operating results." said Standard & Poor's credit analyst Steven Ader. “Marsh posted an operating loss resulting from the unsuccessful implementation of initiatives that, in addition to generating a substantial increase in operating expenses, posed a material distraction to servicing and selling to clients.” The current rating incorporates the expectation that prospective operating performance will continue to be adversely affected by the delay in modifying Marsh's business model to account for the elimination of contingent commissions.

Insurance Times

The Board of Hardy has announced its proposal to move the domicile of the group to Bermuda in order to improve its strategic positioning in the global insurance and reinsurance market. It is the view of the directors that Bermuda represents an important complementary market to London. The directors also believe that the group will be better placed to deliver its longer term plan if it is able to access the Bermuda insurance market and develops a platform for underwriting third party business there. In order to facilitate this move, there will be a corporate reorganisation involving the establishment of a new Bermuda based holding company, Hardy Underwriting Bermuda Limited, which will acquire via a scheme of arrangement, Hardy Underwriting Group plc. A listing for the shares of Hardy Underwriting Bermuda Limited will be sought on the London Stock Exchange and shareholders of Hardy Underwriting Group plc will become shareholders in Hardy Underwriting Bermuda Limited in the same proportions as they own Hardy at the relevant time.

Global Reinsurance

Two former General Reinsurance Corp. executives may argue at their trial that contracts they arranged with American International Group Inc. didn't defraud investors because their boss, billionaire investor Warren Buffett, knew what they were doing, defence lawyers said. General Re's former Chief Executive Officer Ronald Ferguson and ex-Chief Financial Officer Elizabeth Monrad are among five defendants accused of helping AIG inflate reserves by $500 million in late 2000 and early 2001. Jury selection for the federal criminal trial begins today in Hartford, Connecticut. Buffett, who isn't charged with wrongdoing, may testify for prosecutors, according to court papers. They're trying to prove executives at AIG, the world's biggest insurer, and General Re, a unit of Buffett's Berkshire Hathaway Inc., sought to deceive investors about AIG's ability to absorb losses.

Bloomberg

Royal & Sun Alliance has warned that 90% of businesses could face fines of up to £5,000 next year as a result of the Energy Performance Buildings Directive. A survey conducted by the insurer found that two thirds of businesses were unaware of the directive, which comes into effect in April. The Energy Performance of Buildings Directive will require property owners and landlords to provide energy performance certificates when they construct, sell or lease a commercial building. David Smith, Director of Construction, Power & Engineering at R&SA, said: “R&SA is working hard with its energy industry partner, Charterhouse Energy, to provide companies with the help they need to optimise their energy efficiency, be environmentally responsible and comply with the new regulations.”

Insurance Times

The European Commission has adopted a proposal for a directive that aims to modernise and simplify value-added-tax rules for financial and insurance services, and create a level playing field in the market. Insurance and financial services are generally exempt from VAT, but the Commission pointed out that the exemption commenced from 1977 and that legislation has failed to keep pace with the huge economic changes that have occurred since then. The Commission earlier this week conceded that the exemption is not applied uniformly by E.U. member states. As a result the European Court of Justice has increasingly been asked to “fill the legislative gap and clarify the correct interpretation,” it said. “The proposal will create more certainty and security for member states, and for financial and insurance institutions by setting clear modern definitions of exempt services,” stated the Commission.

Business Insurance

Ping An Insurance, China’s second-largest life insurer, has paid $2.7bn for a 4.18 per cent stake in Fortis, the Belgo-Dutch group, the first time a Chinese insurance company has taken a stake in an overseas insurer. The deal, although a portfolio investment rather than a strategic venture, allows the Chinese firm to expand beyond its home turf and gives Fortis a wider presence on the mainland. Beijing has been encouraging its state-owned banks to grow beyond China by buying stakes in established financial institutions. It has also launched a $200bn sovereign wealth fund. Chinese insurers have been eager to make use of their huge pool of assets to build a presence in overseas markets, but Beijing has yet to allow them to buy strategic stakes in overseas financial services groups. China Life, Ping An’s larger rival, said on Wednesday it planned to buy a stake in a big insurance company in Europe or North America. Ping An, in which banking giant HSBC has a 16.7 per cent stake, said it brought 95.01m Fortis shares on Euronext Brussels and Amsterdam in the secondary market. It is now the European firm’s single largest shareholder.

Financial Times

Towergate, the privately- owned insurance broker, has made its first acquisition of a listed company, with a £95m recommended cash offer for Aim-listed Broker Network. The 605p a share cash offer also represents the third-largest deal to date for acquisitive Towergate. Broker Network, which will be delisted, brings additional distribution to Towergate. It also enables the group to provide network services to independent brokers and increases economies of scale. Towergate said it had received irrevocable undertakings in respect of 55.2 per cent of Broker Network's issued shares. Broker Network shares rose 69½p to 592p.

Financial Times

UK-listed insurer Catlin Group said on Wednesday it is on track for 2007, despite taking a $75 million hit from subprime-related assets. "The Group is on track to meet its targets in 2007," said CEO Stephen Catlin in a statement, adding that the subprime writedown would be broadly offset by the positive effect of a largely hurricane-free year. Analysts expect Catlin to post a full-year pretax profit of $475 million, according to a poll of 11 analysts conducted by the company. Catlin said it would take the $75 million writedown following a comprehensive review of its assets. Most of its subprime-related assets are CDOs (collateralised debt obligations) and it has been able to sell some of these assets at close to book value. The book value of its subprime-related portfolio after the sales and markdown is $12 million, it said, out of total cash and investments worth $5.85 billion at Sept. 30. Rating agency Standard & Poor's said its "A-" ratings on Catlin would not be affected by the writedown.

Reuters

Gallagher London, the London arm of Arthur J. Gallagher & Co., has approached insurers and clients over its plans to charge insurers an additional 1.5% commission for placing London market business. A spokesman for the brokerage said that the London office of Itasca, Ill.-based Gallagher sent out a letter Monday informing more than 60 insurers and clients that starting next year it will seek to apply an additional commission, known as “Gallagher Market Commission,” of 1.5%. The spokesman said that the commission was “fair” and was an attempt to restore the “balance of earnings.” Average commissions at Gallagher London have been cut from 8.0% to 6.2% over the last two years, while its inwards book of business has doubled to $1.2 billion over the last three years, he noted.

Business Insurance
 

An American International Group Inc. shareholder sued several of the company's officials on Tuesday over the insurer's exposure to the subprime mortgage crisis. Doris Staehr of California alleges that AIG, under the direction of its officials, including Chief Executive Martin Sullivan and Chief Financial Officer Steven Bensinger, improperly concealed the extent of its exposure to the subprime mortgage crisis, according to the complaint filed in U.S. District Court in Manhattan. "Defendants claimed that AIG’s portfolio was so sufficiently diversified that the mortgage market would have to reach 'Depression proportions' before negatively impacting the company," the complaint states. "AIG was not as invulnerable as defendants claimed, however." AIG, the world's largest insurer by market value, reported a 13% fall in third-quarter profit earlier this month, caused in part by its exposure to the crippled mortgage market. The complaint alleges that results were hurt by about $1.4 billion in losses in AIG’s investment portfolios and mortgage insurance business.

Reuters
 

Senior executives at Munich Re last night held a hastily arranged conference call among themselves to review the German reinsurer's exposure to the credit markets, following a SFr1.2bn ($1.1bn) writedown by its Swiss rival. Swiss Re's warning weighed on insurance shares across Europe, as investors worried about potential further losses from the credit market turmoil. The warning came as Josef Ackermann, chief executive of Deutsche Bank, said recent large writedowns by US investment banks had "increased [market] nervousness significantly". Munich Re, Europe's second biggest reinsurer after Swiss Re, said it had "nothing new to say" since its third-quarter results on November 5, when it took a €150m ($220m) charge for credit market-related losses, and declined to comment further.

Financial Times
 

Markel Global Marine & Energy Inc. announced plans on Friday to open an onshore energy casualty department. The department will provide primary excess liability coverages in several areas, including oil and gas exploration and production; chemicals and petrochemicals manufacturing and marketing; power generation and distribution; specialty contractors; specialty tools and equipment manufacturing, sales and leasing; petroleum products and storage, marketing and distribution; and mining and quarrying. Houston-based MGME said the department, also in Houston, will open in January.

Business Insurance

The U.S. Senate gave its approval on Friday morning to legislation that would extend the federal terrorism insurance backstop for seven years beyond its scheduled Dec. 31 expiration. The vote came shortly before the Senate was scheduled to break for its Thanksgiving recess. The Senate bill differs significantly from a measure passed earlier by the House, which is much broader. While the Senate bill would essentially renew the existing program, the House bill would extend the backstop for 15 years, allow the program to respond to group life insurance claims and permit the backstop to respond to catastrophic acts of domestic as well as foreign terrorism. Senior Bush administration officials have said they will recommend President Bush veto the House bill if it reaches his desk. House and Senate negotiators will have to work out differences between the two bills before anything goes to the president. Insurers responded positively to the Senate action.

Business Insurance

Senate may take up terrorism backstop bill.

The Senate could as early as Tuesday night take up legislation designed to extend the federal terrorism insurance backstop for seven years. The Senate Banking, Housing and Urban Affairs Committee approved the Terrorism Risk Insurance Program Reauthorization Act last month, but the measure became mired in budgetary questions after the Congressional Budget Office estimated that the Senate’s version of the program would cost the federal government $5.1 billion over 10 years, based on estimates of the severity of a covered terrorist event. Budget rules require that Congress pay for newly proposed tax cuts or spending increases with tax increases or spending cuts, so negotiators had to devise a way to meet that requirement.

Business Insurance,

Amlin, the Lloyd's of London insurer, will return around £120m of capital to shareholders and said that its full year results are on course to beat market expectations. Charles Philipps, Amlin's CEO, said in a statement: “The strong third quarter, and a US windstorm season to date without major loss, means that Amlin's results for 2007 will most likely exceed current market forecasts. It also puts us in a strong position to now return cash to shareholders and thereby enhance next year's return on equity.” The return of capital will be made through the issue of B shares combined with a consolidation of A shares. The return of capital's the right thing to do but is not a surprise,' said an analyst at a UK-based broker. “They were committed to a trading update in November detailing return of capital in light of possible deterioration in rates and that's exactly what's happened.”

Thomson Financial

Broking giant Aon has hired an external law firm to carry out an internal review of its compliance with certain US and non-US anti-bribery laws, including the US Foreign Corrupt Practices Act following regulatory enquiries. In a regulatory filing with the Securities and Exchange Commission it said it had notified the UK’s Financial Services Authority of its actions. Aon said: “An outside law firm with significant experience in the area is overseeing the review. Aon has advised the UK Financial Services Authority, the US Securities and Exchange Commission, the US Department of Justice, and certain other non-US regulators of the review and has agreed with the US regulators to toll any applicable statute of limitations pending completion of the review. Based on current information, the Company is unable at this time to predict when the review will be completed or what regulatory or other outcomes may result.”

Post Magazine
 

The cost to insurers of claims against directors of companies caught up in the US subprime mortgage crisis could be more than $2bn, according to Guy Carpenter, the reinsurance broker. Guy Carpenter, part of Marsh & McLennan, estimates that this level of insured losses could be incurred on directors and officers' (D&O) policies, which protect a director or officer of a company from paying out of their own pocket in a case arising from their duties as a director of a corporation. "There was never any doubt that the subprime mortgage market collapse would have an insurance impact. The question was one of extent. While estimates vary from $1bn to $3bn, it looks like the reality may settle at the upper end of the scale. The final answer will not come until 2008 or maybe even 2009, but history, litigation tendencies and capital markets point toward the worst-case scenario," Guy Carpenter said in an update on the professional liability market.

Financial Times
 

Marsh & McLennan Cos. Inc. will collect from insurers an “enhanced commission” for middle-market and small commercial business, MMC Chief Executive Officer Michael Cherkasky said during the company’s earnings conference call Thursday. Marsh has already instituted a brokerage fee on U.K. business of about 2.5%, he said during a discussion of the broker’s third-quarter financial performance, in which MMC reported a 39.8% drop in profits from continuing operations to $80 million.  “In the United States, we are engaged in discussions with insurance carriers in the middle-market and small commercial segments to begin to level the playing field,” he said. “Similar to the approach in the U.K., we expect to be paid an enhanced commission in these segments of the marketplace,” Mr. Cherkasky said during the call. The extra commission would be fixed and “would not be contingent or variable on volume, profitability or any other factor,” he said. The commission will not be paid on large account business.

Business Insurance
 

AIG, the world's biggest insurer by market capitalisation, yesterday said its third-quarter earnings fell nearly 27 per cent hurt by losses in the US housing market and tight credit markets. Shares in the company fell 6.7 per cent on the results, which were dramatically short of estimates. Net income was $3.09bn, or $1.19 a share, down from $4.22bn, or $1.61 a share in the comparable quarter last year. Analysts surveyed by Thomson Financial had projected, on average, earnings of $1.62 per share. On an adjusted basis, AIG said it earned $3.49bn, or $1.35 a share. Investors have been concerned that AIG would follow several other big financial institutions in reporting big losses from subprime exposure. The company has business segments that offer mortgage originations and mortgage insurance. In addition, AIG has investments in mortgage-backed securities and credit-default protection it provides on collateralised debt obligations, or CDOs.

Financial Times

A briefing paper released Wednesday by reinsurance intermediary Guy Carpenter & Co. L.L.C. estimates that directors and officers insured losses related to the subprime market crisis could reach $2 billion for claims filed in 2007, adding that the full impact may not be clear until 2008 or 2009. Analysts estimate total insured losses could top $3 billion, according to New York-based Guy Carpenter in the briefing, with the brunt of the impact falling on underwriting. The briefing goes on to say that most of the credit woes from the subprime market collapse will affect the D&O product line, although errors and omissions suits and Employee Retirement and Income Security Act of 1974 actions have been filed and will likely lead to further substantial losses. More litigation over the coming years is expected on D&O, E&O and other professional liability exposures, according to the briefing, adding that the highest-risk D&O exposures are hedge funds, real estate agents and mortgage brokers.

Business Insurance

Goldman Sachs’ entry to Lloyd’s with a syndicate for the 2008 year – exclusively revealed by The Insurance Insider today - occurs against the backdrop of the capital markets’ increasing appetite to assume (re)insurance risk. It is also a further sign of investment banks’ apparent willingness to take exposure onto their balance sheets via dedicated (re)insurance vehicles, rather than arms-length involvement through their more traditional financing, structuring and investment roles. Arrow Syndicate 1910 will be headed by Tom Milligan, the former Aspen Insurance underwriter, with stamp capacity of £65mn for the 2008 year. Milligan heads up Goldman Sachs’ Bermudian vehicle Arrow Capital Reinsurance Co Ltd (ACR), which was launched in the aftermath of Hurricane Katrina in 2005, and will be the active underwriter on the new Syndicate.

Insurance Insider
 

London’s insurance market does not need special tax breaks to head off the threat of zero-rate Bermuda, Kitty Ussher, Treasury minister, will tell the industry on Wednesday. Ms Ussher’s comments will come as a setback to Lord Levene, chairman of Lloyd’s, who has been leading the lobbying effort to create a more even playing field with Bermuda and other low tax centres. The minister told the Financial Times she had consulted widely and concluded that the London insurance market was in good shape to fend off competition from the island. “London has, and continues to have, a huge comparative advantage in terms of skills, experience and prudential requirements,” she said, ahead of a meeting with Lord Levene’s high-level group representing the insurance industry. “It’s growing and we can’t see any reason why it won’t continue to grow under the current regime. But we will leave no stone unturned to help the industry continue to flourish.” Ms Ussher will tell the group that Britain’s move to a 28 per cent rate of corporation tax next April is highly competitive. Although she accepts Bermuda is growing as a financial centre, a Treasury consultation concludes there is little correlation between that growth and Britain’s corporation tax levels.

Financial Times

Aon, one of the world's largest insurance brokers, is cutting 2,700 jobs worldwide - more than 6 per cent of its global workforce - the company announced yesterday. "The job cuts will be primarily in the Americas and Europe," David Prosperi, the company's chief spokesman, told the FT. Aon stressed that the cuts would primarily affect workers who do not deal directly with clients. The insurance broker said the restructuring was the second phase of a strategy it began in 2005. "This restructuring plan has a similar approach to that of our 2005 restructuring plan, which has had very positive results," said Greg Case, Aon's president and chief executive. "We are continuing efforts to simplify our complex organisation." The restructuring plan at Aon, which employs 43,000 people, calls for the elimination of 1,600 jobs and outsourcing of a further 1,100 positions. The cuts came as Aon announced third-quarter results ahead of many analysts' expectations. Profits rose by 92 per cent to $204m, or 64 cents per share, from $106m, or 32 cents per share, a year earlier on an 11 per cent rise in revenues to $2.41bn. The company cited growth in brokerage and insurance underwriting premiums and higher consulting fees.

Financial Times

Beaufort Underwriting Agency Ltd has become the latest Lloyd’s insurer to be acquired this year as interest in Lime Street continues unabated. Munich Re will add Beaufort to its existing Lloyd’s insurer, the Watkins Syndicate, after agreeing to buy its parent company MSP Underwriting in a deal priced in the “mid double-digit million euro range”. Beaufort underwrites through Syndicate 318 with a £201mn stamp. It controls 47.3 percent of its own capacity with the remainder supplied by Lloyd’s Names, and is headed by founder Michael Pritchard. Peter Roder, the Munich Re board member responsible for global clients, explained: “Syndicate 318 has a proven track record of actively managing the cycle and writing business profitably throughout it.” He continued: “Through MSP Underwriting, we will gain further access to Lloyd’s business. MSP Underwriting writes highly profitable short-tail property business and complements our existing portfolio perfectly.”

The Insurance Insider

Insured losses from California wildfires could exceed $1.6 billion if the fires continue to spread, a risk modeling firm said on Thursday. Risk Management Solutions, which predicts and assesses insured damages, said in a statement that the wildfires which have devastated Southern California would likely cost insurers between $900 million and $1.6 billion. "(But) if the wildfires continue to spread in this ongoing situation, losses are expected to reach or even exceed the higher end of this estimate," RMS said. The wildfires that have destroyed 1,300 homes and forced the evacuation of 500,000 people are in their fifth day, but firefighters have largely halted the spread of destruction. Officials said cooler temperatures and weaker winds allowed them to win a measure of control and said the worst was behind them.

Reuters

XL profits are down 21% primarily due to exposures to the global credit crunch. XL Capital has reported net income available to ordinary shareholders for the quarter ended 30 September 2007 of $328m, compared with net income of $415.8m, for the quarter ended 30 September 2006. Included in net income for the quarter are net realised losses on investments of $160.2m and net realised and unrealised losses on derivative instruments of $58.2m. For the first nine months of 2007, net income available to ordinary shareholders was a record $1.42bn, compared with $1.25bn in the first nine months of 2006.

Insurance Times

New York insurance superintendent, Eric Dinallo, is spearheading new regulation that would remove collateral requirements for the highest rated foreign and non-New York reinsurers, stating that “we cannot afford to maintain outdated and unnecessary standards for the international market for reinsurance”. The new collateral credits would be calculated on a sliding scale based on a company’s financial strength ratings with the major ratings agencies. It would offer 100 percent relief to Standard & Poor’s (S&P) AAA rated and AM Best A++ rated companies and 80 percent relief to S&P A+ rated and AM Best A rated entities, such as Lloyd’s, from 1 July 2008. Equivalent ratings by Moody’s and Fitch will also be applicable. The current system, which requires non-New York reinsurers to post collateral equivalent to 100 percent of its share of its committed exposures, has long been a thorn in the side of foreign reinsurers.

Insurance Insider

Ace Bermuda International has announced the opening of a new box at Lloyd's to further complement the company's business development strategy. The box, which officially opened for business on 1 October 2007, will support ABI's international expansion and serve as an additional channel to market the company's existing products. The ABI box is located on Gallery 2 at Lloyd's of London, 1 Lime Street, London and is the company's third European location along with its offices at the International Financial Services Centre in Dublin and 100 Leadenhall Street, London.

Post Magazine

The Isle of Man has completed the first stage of a strategic review of its captive insurance industry. The report, prepared by Norman Bennet, a former chairman of the London-based Assn. of Insurance and Risk Managers, was presented to government representatives and the island’s insurance industry, according to a government statement. “The report highlights the strengths of our already well-established insurance and captives industry, but it emphasizes that in order for us to move ahead of our competitors, we need to renew our focus and raise our profile,” said Derek Patience, chairman of the Manx Insurance Managers Assn., in the statement.

Business Insurance

A U.S. Senate panel is expected on Wednesday to back extending the government's terrorism insurance program for seven years, shorter than an extension approved last month by the House of Representatives, sources familiar with the matter said on Monday. The Senate Banking Committee is also expected to reject two expansions of the program endorsed by the House - adding group life insurance coverage; and mandating nuclear, biological, chemical and radiological attack coverage, the sources said. But under a deal between senior committee members and the White House, the banking panel will follow the House's lead and vote to broaden Terrorism Risk Insurance Act (TRIA) coverage to domestic terrorism, as well as foreign.

Reuters

Insured losses in Taiwan from both wind and precipitation-induced flooding from Typhoon Krosa are unlikely to exceed $200m. The estimate by catastrophe modelling specialists AIR Worldwide, includes insured losses to property and contents for onshore properties. The typhoon has caused mudslides that have buried several houses and blocked roads, including at least one major highway in the eastern part of the country. Waist-high flooding was reported in several low-lying areas, including a suburb of Taipei. According to the Central Weather Bureau, the recreation area of Taiping Mountain in Yilan County recorded more than three feet of rainfall (933mm), and more than 34 inches (863mm) fell in parts of Hsinchu County. Schools and offices remain closed as heavy rain is expected to continue; forecasters are predicting total accumulations of up to 50 inches (1,300mm) in some mountainous regions.

Post Magazine

Connecticut files antitrust suit against Guy Carpenter.

Connecticut Attorney General Richard Blumenthal has filed antitrust charges against Guy Carpenter & Co. L.L.C. in state court, alleging that the reinsurance brokerage conspired with numerous reinsurers to fix prices and shut out competitors to the detriment of its insurer clients and consumers nationwide. The suit, filed Oct. 4 in Superior Court in Hartford, Conn., alleges that Marsh & McLennan Cos. Inc. subsidiary Guy Carpenter funnelled lucrative business to select inner circles of reinsurers or “facilities” in exchange for excessive fees and other benefits from the reinsurers. These reinsurers, the complaint charges, agreed not to compete against the prices and terms set by Guy Carpenter, instead agreeing to be bound by the same prices and terms as other participants. By not agreeing to “play ball,” reinsurers were denied access to potential reinsurance business that they otherwise were willing to compete for, the suit alleges. The lawsuit also names Excess Reinsurance Co., a reinsurer partly owned by Guy Carpenter, to which it allegedly funnelled business without disclosing to clients its ownership interest.

Business Insurance

Errors and omissions (E&O) claims arising out of the sub-prime crisis and subsequent financial markets liquidity crunch are likely to "dwarf" directors and officers (D&O) claims, according to Greg Flood, president of Ironshore's subsidiary, Ironpro. Speaking at the PLUS European D&O forum in London last week, Flood warned that the collateralised debt obligation (CDO) market, and the investment banks and hedge funds that packaged, sold and traded sub-prime loans, will suffer most from the fallout. "The real picture will take shape in the third or fourth quarter next year, as the latest 'vintage' of CDOs matures and loans begin to default," he said. Andrew Newman, director at reinsurance broker Carvill, agreed that "some impact on liability markets is inevitable", but warned that "it is too early to be definitively alarmist about the general market". "Regardless of outcome, it is a wake-up call for insurers and buyers, and more claims will be revealed in time," he said.

Insurance Insider

A representative of Willis Group Holdings Ltd. confirmed that the broker will seek a 2.5% commission from insurers in some cases, but said it would make such charges clear to buyers at the start of the process. During a panel debate at the Federation of European Risk Management Associations’ Forum in Geneva Wednesday, Sarah Turvill, chairman of Willis International, said the broker would seek commissions for services provided to insurers. She said the buyer would be informed and would be given the option to refuse the broker permission to charge such commission. “We (will) approach the insurer and say we would like more money, how about it?” Ms. Turvill said during the panel debate. She said that Willis believed it “adds value” and should be remunerated for the service it provides to insurers. She stressed, however, that buyers should be informed, and that the broker would not take such commissions if the buyer was not happy about the arrangement. Ms. Turvill said, also, that the commission is not akin to contingent or supplemental commissions based on volume or profitability of business.

Business Insurance