Tuesday, 2 July 2019

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EIOPA outlines key financial stability risks of the European insurance and pensions sector



The European Insurance and Occupational Pensions Authority (EIOPA) published its June 2019 Financial Stability Report of the (re)insurance and occupational pensions sectors in the European Economic Area.
The risk of a prolonged low yield environment has become more prominent in recent months, as central banks have put the process of monetary policy normalisation on hold amid concerns over economic growth following growing trade tensions and political uncertainty. The low yield environment remains the key risk for both, the insurance and pension fund sector, and continues to put pressure on profitability and solvency positions. This could trigger further search for yield behaviour by insurers and pension funds, which is slowly becoming visible in the investment portfolio of insurers. EIOPA will therefore continue to monitor closely this risk to identify at an early stage any potential vulnerabilities.
At the same time, valuations remain stretched across financial markets and a sudden re-assessment of risk premia cannot be ruled out, which could be exacerbated during a period of economic slowdown with concerns over debt sustainability. A sudden increase in yields driven by risk premia rather than an upward move of the risk free rate curve could significantly affect the financial and solvency position of insurers and pension funds in the short run, as the investment portfolios could suffer large losses, which may only be partly offset by lower liabilities. In this regard, the high degree of interconnectedness with banks and domestic sovereigns of insurers could lead to potential spillovers should a sudden reassessment of risk premia materialize. Relatively high exposures towards real estate can also be observed for insurers in certain countries, making them as well vulnerable to a potential downturn in real estate markets.
Furthermore, new types of risks are emerging with the onset of climate change and cyber risk. The climate related risks pose threats in particular for the insurance industry, as insurers act simultaneously as investors and underwriters, while the digital transformation makes insurers and pension funds increasingly exposed to cyber-attacks. In this respect, the 2019 EIOPA stress test exercise for occupational pension funds also incorporates Environmental, Social and Governance (ESG), while the results from the questionnaire on cyber risk included in the 2018 Insurance Stress Test exercise will be used to analyse the exposures of insurers towards cyber risk in more detail in the course of 2019.
This Financial Stability Report shows that while overall the insurance sector remains adequately capitalized, profitability is under increased pressure in the current low yield environment. The Solvency Capital Requirement ratio for the median company is 223% for life and 207% for non-life insurance sector, although significant disparities remain across undertakings and countries.
The reinsurance industry has proven resilient despite again suffering significant catastrophe losses in 2018, which ended up as the fourth costliest year in terms of insured catastrophe losses. In general, natural catastrophe losses are showing an upward trend, with the 10 costliest years in terms of overall losses all occurring after 2004. The price renewals continue to show only moderate price increases, indicating potential excess capacity in the reinsurance market, with the alternative reinsurance capital market in particular showing a strong appetite for insurance risks.
In the European occupational pension fund sector, total assets and cover ratios remained broadly stable. However, the current macroeconomic environment and ongoing low interest rates continue to pose significant challenges to the European occupational pension fund sector, in particular for the Defined Benefit (DB) pension schemes. The sector has also come under increased pressure in 2018 by the fall in stock values towards the end of the year, pertaining to significant losses in IORPs' equity investments.
Gabriel Bernardino, Chairman of EIOPA said: "The economic environment has become more challenging for European insurers and pension funds in recent months. The risk of a prolonged low yield environment has become more prominent again, as central banks have become more cautious about monetary tightening amid concerns over economic growth. This is particularly challenging for life insurers and pension funds with long-term liabilities and could trigger further search for yield behavior. At the same time, we continue to observe high valuations in certain equity, real estate and bond markets and a sudden reassessment of risk premia could potentially lead to significant losses in the investment portfolios of insurers, which could be exacerbated during a period of economic slowdown. EIOPA will continue to closely monitor these developments by assessing vulnerabilities at both, the macro- and micro-level and deliver its mandate of supporting the stability of the European financial system."
This Financial Stability Report also includes a thematic article assessing the impact of green bond policies on insurers. This study employs an empirical analysis based on the European equity market.

Wednesday, 12 June 2019

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Insurers ask if GDPR has delivered on its aims



Insurance Europe has published an insight briefing that examines whether the General Data Protection Regulation (GDPR) has delivered on its aims of enhanced protection and greater harmonisation of data protection rules. It also asks if the GDPR is compatible with insurers’ need to innovate for the benefit consumers.
The European Commission is currently taking stock of stakeholders’ experiences of implementing the GDPR to prepare its report on the evaluation and review of the Regulation, due by May 2020. The briefing has been published ahead of a Commission event on the GDPR’s anniversary which takes place on 13 June.
The briefing highlights the positive effects that the introduction of new rights has had on consumers and how this helps insurers to build and maintain trustworthy relationships with consumers.
Importantly, the document notes that the GDPR has not fully achieved the level of harmonisation that was initially intended. While the GDPR has secured the same level of protection for consumers in all EU member states to a certain degree, it is not always applied uniformly across member states.
The briefing also highlights how — despite significant efforts to modernise privacy rules — the GDPR and the guidelines adopted by the European Data Protection Board (EDPB) introduce, in some instances, requirements that are at odds with fast-evolving technology and that may slow the pace of insurers’ digital innovation.
Looking ahead, it will be crucial for the Commission to ensure that the application of the GDPR and its guidelines allow insurers to continue operating cross border and guarantee the safe development and introduction of innovative products that can benefit consumers. 

Wednesday, 5 June 2019

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AMICE further strengthens Board membership for comprehensive representation across diverse countries and members



At its General Meeting in Brussels (5 June), the AMICE (the Association of Mutual Insurers and Insurance Cooperatives in Europe) membership unanimously agreed the appointment of all proposed members of the Board. AMICE is a key stakeholder in the European advocacy sector for the insurance industry, representing distinct models and structures which are responsible for more than one-third of all European insurance business.
AMICE’s Board, which is elected for a three-year term, now comprises:
       Grzegorz Buczkowski, Saltus (PL)
       Odilo Bürgy, Swiss Mobiliar (CH)
       Stephane Cossé, Covéa (FR)
       Carlo Enrico de Fernex, Reale Mutua (IT)
       Jari Eklund, LähiTapiola (FI)
       Cornélia Federkeil, AAM (FR)
       Michael Garvey, IPB Insurance CLG (IE)
       Klaus-Jürgen Heitmann, HUK-Coburg (DE)
       Róbert Lilli, KÖBE (HU)
       Christopher Lohmann, Gothaer (DE)
       Allan Luplau, Sygeforsikringen “danmark“ (DK)
       Tom Meeus, Fédérale Assurance, (BE)
       Pablo Mongelos García, Seguros Lagun Aro (ES)
       Christophe Ollivier, FNMF (FR)
       Robert Otto, Achmea (NL)
       Norbert Rollinger, R+V Versicherung (DE)
       Ann Sommer, Länsförsäkringar (SE)
       Jorge Vázquez Morenés, Mutua Madrileña (ES)
       Ana Teresa Vicente Custódio de Sá, Mutua dos Pescadores (PT)
       Dimitrios Zorbas, Syneteristiki (GR)

Grzegorz Buczkowski was unanimously reappointed as President of AMICE for a second three-year term. Christophe Ollivier was unanimously reappointed Vice-President for a second three-year term, and Christopher Lohmann was unanimously appointed Vice-President for the first time. Róbert Lilli was reappointed – also unanimously – as AMICE’s Treasurer.

The Board welcomed two new members to its ranks, Michael Garvey, CEO of IPB in Ireland, and Ana Vincente, CEO of Mútua dos Pescadores in Portugal. They both represent more specialised and smaller mutual insurers, and reflect the geographic diversity of AMICE’s membership. Michael Garvey is the first Irish member of the AMICE Board.


Sarah Goddard, Secretary General of AMICE, said: “AMICE’s core strength lies in its ability to represent our diverse membership, reflecting one of our four key values – inclusiveness. We bring together insurers from different European countries, of different sizes, structures and directions, who are united under the banner of mutuality and cooperation. This value sits alongside three others – accountability, sustainability and ethical behaviour, and excellence – as the core of AMICE’s new strategy which commenced at the beginning of this year.”


The AMICE General Meeting was followed by a symposium on sustainable finance, featuring presentations from AMICE’s newest supporting member, OFI Asset Management, and Better Finance, the European Federation of Investors and Financial Services Users.

Tuesday, 28 May 2019

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Mutual insurers lead the German market


German insurance market analysis ranks CEOs in Germany; mutual insurance leaders come out top

Mutual/cooperative insurance CEOs have emerged as the top leaders according to analysis undertaken by German insurance magazine Versicherungswirtschaft.Assessing criteria such as leadership style, innovation and external perception, the magazine has placed leaders of the mutual/cooperative insurance sector firmly in the first, second and third places in a “performance check”.
The top position is given to Norbert Rollinger, CEO of R+V, who the magazine describes as versatile, convincing and approachable. Klaus-Jürgen Heitmann, CEO of HUK-Coburg, fills the second place on the list, and in third place is Ulrich Leitermann, CEO of Signal Iduna.
All three insurers are members of AMICE, the Association of Mutual Insurers and Insurance Cooperatives in Europe, the voice of the mutual and cooperative insurance sector in Europe. Mr Rollinger and Mr Heitmann are both Board members of AMICE.
Grzegorz Buczkowski, AMICE President commented,
AMICE’s Secretary General, Sarah Goddard, added:
“This ranking backs up remarks made by Oliver Bäte, Chairman of Allianz, at last week’s Insurance Europe conference, that local mutual insurers in Germany are providing benchmarks for other insurers in terms of client service.”

Thursday, 23 May 2019

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European policymakers must act to ensure insurers can fully contribute towards a sustainable Europe



EU insurers have already committed to invest an estimated €50bn in sustainable investments between 2018 and 2020
To allow European insurers to maximise their contribution towards a sustainable Europe, policymakers must: take action to ensure prudential capital requirements reflect the real risks insurers face; provide a clear taxonomy that avoids greenwashing; and ensure conduct rules give consumers real choice over environmental, social and governance (ESG) and non-ESG investment products.  
Beyond regulation, demand for sustainable and long-term investment is significantly higher than the supply of appropriate assets, as shown by recent green energy/infrastructure projects that were oversubscribed. Action is also therefore needed to achieve the creation of suitable, sustainable investment opportunities.
This was the message from Insurance Europe’s president, Andreas Brandstetter, CEO and chairman of UNIQA Insurance Group, speaking at the 11th International Insurance Conference that takes place today in Bucharest.
Brandstetter said that insurers can contribute towards a more sustainable Europe in multiple ways: through stewardship, investment and divestment strategies, and co-investment with governments in key green infrastructure programmes.
“Insurance Europe estimates that European insurers have committed to invest well over €50bn in sustainable investments between 2018 and 2020,” he said. “Through the combined efforts of all stakeholders, including industry, civil society and governments, we can make Europe sustainable for generations to come.”
Brandstetter also called on policymakers to help insurers refine the protection they offer against cyber-attacks, which are increasing in both frequency and severity. One of the main barriers to the development of the cyber insurance market is the lack of data on cyber risks. However, recent pieces of legislation that require companies to report cyber incidents to relevant authorities (eg, GDPR and the NIS Directive) have created a wealth of useful data.
“Policymakers could help insurers to better protect society by providing them with access to anonymised information about cyber-attacks,” he said.
Brandstetter also highlighted closing the pension savings gap as a key priority. This is another challenge where insurers can play a key role but requires EU policymakers to improve Solvency II, so that capital requirements reflect the real risks insurers face. This will enable them to offer the best possible returns to customers with long-term insurance savings products and, in turn, could help to address the growing pension savings gap by encouraging more people to save in private pension products.
“Pension provision is and will remain under the remit of national governments. However, their solvency regulation falls under the remit of EU co-legislators, so it is encouraging to see that they recognise the potential of personal pensions as a way to stimulate long-term savings,” he said.

Wednesday, 22 May 2019

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Frédéric de Courtois named vice-president of Insurance Europe



Frédéric de Courtois, general manager of Generali Group, has been elected vice-president of Insurance Europe, the European insurance and reinsurance federation, for a three-year term. A French citizen, de Courtois began his career in the insurance sector in 1993, holding several management positions in different markets all over the world.
Commenting on de Courtois’ appointment, Insurance Europe’s president, Andreas Brandstetter, CEO & chairman of UNIQA Insurance Group, said: “I am delighted to welcome Frédéric to this important role. Frédéric brings with him a vast wealth of knowledge about our industry and I am looking forward to working together with him to represent our industry.”
De Courtois was elected today at Insurance Europe’s General Assembly meeting in Bucharest. He succeeds Torbjörn Magnusson, group CEO and president of Sampo Insurance Group.
Brandstetter continued: “I would like to thank Torbjörn for the huge contribution that he has made to our industry over the last six years. He has been particularly engaged in the area of new technologies and how they impact insurers. We would like to thank him for driving these debates so strongly within Insurance Europe.”
Commenting on his appointment, de Courtois said: “I am honoured to have been elected vice president and look forward to representing the European insurance industry, which makes a huge contribution both to our society and our economy. I will work hard to ensure that the regulatory environment for insurers properly reflects their business model and enables them to continue to deliver the best results for their clients.”
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Insurance Europe publishes 2018-2019 Annual Report




Insurance Europe has published its 2018–2019 Annual Report, setting out the European insurance industry’s positions on the main insurance issues of the day.
Topics in this year’s Report include: Solvency II, climate change, sustainable finance, pensions, cyber risk and data protection.
Guest contributors include: Denis Kessler, chairman & CEO, SCOR; Alison Martin, group CRO, Zurich Insurance Group and Christian Mumenthaler, CEO, Swiss Re and chair, Insurance Europe Reinsurance Advisory Board.

Saturday, 11 May 2019

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EIOPA reviews the use of Big Data Analytics in motor and health insurance


The European Insurance and Occupational Pensions Authority (EIOPA) published its report on Big Data Analytics in motor and health insurance.
Data processing has historically been at the very core of the business of insurance undertakings, which is rooted strongly in data-led statistical analysis. Data has always been collected and processed to inform underwriting decisions, price policies, settle claims and prevent fraud. There has long been a pursuit of more granular datasets and predictive models, such that the relevance of Big Data Analytics for the sector is no surprise.


For further details please refer to the press releasefact sheet and the report.

Friday, 10 May 2019

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2019 starts well for Munich Re – Quarterly profit of €633m





  • April renewals once again result in growth (10.3%) and rising prices (1.4%)
  • Greater expenditure for claims from previous years and medium-sized events
  • Profit guidance for 2019 remains unchanged at around €2.5bn

“Munich Re has begun 2019 with a good first quarter. Munich Re continues to grow organically in its core business of property-casualty reinsurance. The April renewals were the sixth consecutive round of renewals in which we are able to expand our business robustly in some areas. Prices for reinsurance coverage have continued to rise following the high losses in previous years. In primary insurance, the implementation of the ERGO Strategy Programme is making good progress.”
Christoph Jurecka, Chief Financial Officer



Summary of the Q1 figures
In the first quarter of 2019, Munich Re generated a profit of €633m (827m). Higher basic losses and greater expenditure for claims from previous years prevented a repeat of the extraordinary result in the same quarter last year, which was practically free of major losses. The first-quarter operating result fell year on year to €875m (1,283m). The other non-operating result remained nearly constant at –€122m (–125m); the currency translation result amounted to €58m (–68m). Taxes on income totalled €122m (212m). At €28,990m, equity was up on the start of the year (€26,500m) – primarily due to value increases in the share portfolio and fixed-interest securities. Compared with the same quarter last year, gross premiums written rose by 1.9% to €13,375m (13,126m).

The annualised return on risk-adjusted capital (RORAC) in Q1 amounted to 9.9%, and the overall return on equity (RoE) totalled 9.1%.

Moreover, the solvency ratio rose from 245% at the beginning of the year to about 250% at the end of Q1.

Thus far in 2019, Munich Re has repurchased shares worth €303m as part of its active capital management.

Reinsurance: Result of €548m
The reinsurance field of business contributed €548m (750m) to the consolidated result in Q1. The quarterly operating result amounted to €633m (1,059m). Compared with the same quarter last year, gross premiums written rose by 2.4% to €8,380m (8,183m).

Life and health reinsurance business generated €128m (159m) in profit; premium income rose slightly to €2,896m (2,865m). The technical result, including the result from business with non-significant risk transfer, totalled €105m (155m) in Q1. This figure was impacted by reserving effects owing to a reduction in the durations of investments in Canada and the fall in interest rates in Australia. Overall, claims experience was in line with expectations. For the year 2019, Munich Re still projects that the technical result, including the result from business with non-significant risk transfer, will come to approximately €500m.

In Q1, property-casualty reinsurance business contributed €420m (591m) to the consolidated result. Premium volume rose to €5,484m (5,317m). The combined ratio was 97.9% (88.6%) of net earned premium, which is on track to achieve the Munich Re target level of around 98% for the full year.

In Q1, total expenditure for major losses in excess of €10m each amounted to €479m (62m). These figures include run-off profits and losses for major claims from previous years, including additional expenditure of €267m for losses from Typhoon Jebi. Major-loss expenditure is equivalent to 9.7% (1.4%) of net earned premium for Q1. Major-loss expenditure from natural catastrophes amounted to €195m (–49m) in Q1. Man-made major losses amounted to €283m (112m).

Given that claims expenditure for basic losses in previous years remained appreciably below the expected level, it was possible to release reserves – adjusted for commissions – of about €200m. This equates to 4.0% of net earned premium. Munich Re also still seeks to set the amount of provisions for newly emerging claims at the very top end of the estimation range, so that profits from the release of a portion of these reserves are possible at a later stage.

The renewals at 1 April 2019 saw price increases in the markets and risks affected by natural catastrophes. Price stabilisation with a slightly upward trend was also observed in the third-party liability markets. With regard to all April renewals, prices rose by 1.4%. Munich Re was able to grow organically once again. Premium volume rose by 10.3% to some €1.8bn (1.7bn). It was possible to selectively tap growth opportunities in certain markets, especially in India and Japan. These two markets account for a third of the business renewed in April.

ERGO: Result of €85m
In the ERGO field of business, Munich Re generated a profit of €85m (77m) in Q1. Of this amount, €63m (36m) was contributed by the ERGO Life and Health Germany segment. The main reasons for this segment’s good result were the realisation of investments for financing the additional interest reserve and a good technical result in health insurance. The ERGO Property-casualty Germany segment boosted its profit to €14m (0m) thanks to its sound underwriting – despite losses caused by Winter Storm Eberhard in Germany. The ERGO International segment generated a quarterly profit of €8m (41m). This drop in profit was due largely to the sale of relatively small subsidiaries outside Germany. ERGO’s operating result rose to €241m (224m).

The combined ratios developed favourably. In the Property-casualty Germany segment, the combined ratio improved to 98.1% (101.7%) despite the losses from Winter Storm Eberhard. The combined ratio in the International segment amounted to 95.4% (95.3%).

Overall premium income across all lines of business was largely unchanged at €5,165m (5,156m) in Q1. Gross premiums written rose slightly by 1.1% to €4,995m (4,943m).  

Investments: Investment result of €1,741m
The Group’s investment result (excluding insurance-related investments) dropped slightly to €1,741m (1,796m) in Q1. Regular income from investments increased to €1,611m (1,493m).

The investment result in Q1 represents an overall return of 2.9% on the average market value of the portfolio. The running yield was 2.7%, and the yield on reinvestment 2.1%. The equity-backing ratio, including equity-based derivatives, rose to 6.0% as at 31 March 2019 (31 December 2018: 5.2%).

Total investments (excluding insurance-related investments) as at 31 March 2019 were up on the year-end 2018 figure, with the carrying amount rising to €223,927m (216,852m) and the market value to €240,484m (231,876m).

Outlook: 2019 profit target remains unchanged at around €2.5bn
All expectations for 2019 remain unchanged compared with the figures presented in the 2018 Annual Report published in March. For the 2019 financial year, Munich Re still forecasts a consolidated result of approximately €2.5bn