News review | March 31 2015

Veteran insurance chief Richard Brindle is set to head up a new $2 billion insurance venture on the Island. The former CEO of Bermuda-based Lancashire Holdings will lead Fidelis Insurance Holdings, according to reports. The new firm is backed by Los Angeles-based Oaktree Capital and other investors and aims to hold an IPO within five years. The operation intends to “capitalise on opportunities that neither the traditional insurance model nor the hedge fund reinsurance model effectively capture”.

Lloyd's is continuing to diversify its capital base, "particularly by attracting non-traditional sources of capital," according to the corporation's director of global markets, Vincent Candendael. "The growth of alternative products and capital is well established in the reinsurance industry and we are determined to harness this trend in the years to come. We know that maintaining the attractiveness of Lloyd’s to a range of capital providers is fundamental to the future success of the market."

Allstate may be set to reprice, restructure or pull its seven-year Sanders Re cat bond from the market after failing to gain sufficient investor interest within its initial targets. "The order book is building outside the price guidance and Allstate is evaluating all of its options," said Aon Benfield Securities CEO Paul Schultz.
Trading Risk

Florida insurer Heritage could see its Citrus Re catastrophe bond hit as much as $327.5m in size thanks to demand from investors, while pricing has moved to the mid and lower ends of guidance. Heritage’s third cat bond is set to be the insurers largest yet by quite a margin. The cat bond was launched almost a fortnight ago and sees Heritage seeking a collateralized source of reinsurance protection for Florida named storms initially, with an ability to update the covered area to include more states should the insurer choose, or expand into new states.

Amer Ahmed, the chief executive of Allianz Re, believes that partnering with government bodies to help mitigate disaster risk provides an incredible opportunity for re/insurers. “Partnering with government bodies to reduce risk exposure would help create more diversification in our industry, which is ultimately better from a cost of risk point of view,” he explained. "We need to make reinsurance more acceptable to individuals, to businesses and to governments. The opportunities for different types of risk transfer are plentiful.
Intelligent Insurer

Seven years after the financial crisis, central banks are still keeping interest rates at historically low levels. Low interest rates help finance governments' debt and lower funding costs, as well as support growth. But such policy actions cause financial repression. This comes at a substantial cost for both households and long-term investors such as insurance companies and pension funds, according to a Swiss Re report Financial repression: The unintended consequences.
Swiss Re

Australia's Federal Government has announced a taskforce will examine options to reduce insurance premiums in cyclone-prone communities in Northern Australia. The taskforce will examine government support for a reinsurance pool among other options.
Insurance Council of Australia

Global insured losses from natural catastrophes and man-made disasters were $35 billion in 2014, down from $44 billion in 2013 and well below the $64 billion-average of the previous ten years. There were 189 natural catastrophe events in 2014, the highest ever on sigma records, causing global economic losses of $110 billion.
Swiss Re

Posted: Monday, March 30th, 2015