Thursday, 23 May 2019

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

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.”

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

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

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

Wednesday, 8 May 2019

Insurers warn against overly narrow criteria for financial products Ecolabel

Insurance Europe has published its response to a consultation by the European Commission on its proposals to extend the EU Ecolabel to retail financial products.
As very few investment funds and insurance-based investment products currently define themselves as green or sustainable, Insurance Europe warned that making the criteria too narrow will mean very few financial products would qualify for the Ecolabel.
Insurance Europe added that the development of the Ecolabel should be aligned to other dossiers on sustainability, such as the taxonomy and disclosure regulation. This is because contradicting or duplicate provisions would adversely affect both consumers and providers.
It is also important that the Ecolabel is developed for all packaged retail investment and insurance products (PRIIPs) at the same time, and should not favour a subset of PRIIPs, such as UCITS funds.

Monday, 6 May 2019

No justification for major new measures on systemic risk for EU insurers

Insurance Europe says there is no justification for new macroprudential measures for EU insurers. This comes in response to a question raised by the European Commission to the European Insurance and Occupational Pensions Authority (EIOPA) on whether the existing provisions of the Solvency II framework allow for an appropriate macro-prudential supervision.
Insurance Europe highlighted that the current Solvency II regulatory framework ensures that any issues leading to concerns about systemic risk can be identified and managed in a timely manner.
The existing framework already includes specific reporting requirements for financial stability, biannual financial stability reports and the biennial stress test, as well as liquidity management requirements that are part of the own risk and solvency assessment and the system of governance.
More generally, while it is theoretically possible for real systemic risks to emerge from the insurance sector, the existence of systemic risk in insurance has not been adequately substantiated.
Insurance Europe also noted that the scope of EIOPA’s work in this case goes beyond what it was asked to advise on by the Commission.

Saturday, 4 May 2019

EIOPA calls for candidates to join Expert Panel on Pan-European Personal Pension Product Regulation

The European Insurance and Occupational Pensions Authority (EIOPA) today issued a call for candidates to join an Expert Panel on the Pan-European Personal Pension Product (PEPP) Regulation.
Based on the forthcoming Regulation on PEPP, EIOPA is required to develop substantial policy and regulatory requirements for the effective implementation of the Regulation. It also mandates EIOPA to exercise a strong role in the future supervision of PEPPs. Hereby, EIOPA will provide for a central information hub on PEPP for all European citizens and competent authorities.  
In particular, EIOPA is working on the PEPP Regulation's empowerments for EIOPA, for which - in consultation with the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) as well as the European Central Bank (ECB) – a number of important draft technical standards need to be developed. Further, EIOPA is expected to provide technical advice to the European Commission regarding the areas where delegated acts are required.
In light of the policy perspective to design a PEPP that exhibits high quality product features around information provision, risk-mitigating techniques and a cost cap for the basic PEPP, the feedback and support from practitioners can allow EIOPA to find superior solutions and to develop smart policy advice that incentivises financial innovation for the benefit of the European consumer.
Therefore, EIOPA is setting up an Expert Panel on PEPP to inform EIOPA's policy work, to test policy proposals and to act as sounding board supporting EIOPA delivering on its mandate. The main tasks of the Expert Panel on PEPP will be:
  • Meet regularly with EIOPA's working structure – in physical meetings, conference or video calls – to share technical expertise and evidence.
  • The key areas for input will be on:
    • PEPP Key Information Document (KID), conditions for its revision and provision of the PEPP KID
    • PEPP Benefit Statement (PBS) and supplementary information
    • Cost cap for the Basic PEPP
    • Risk-mitigation techniques
EIOPA is seeking for highly knowledgeable professionals with extensive practical experience of designing personal pension products.

Wednesday, 1 May 2019

EIOPA issues Recommendationsto National Competent Authorities to address vulnerabilities identified by the 2018 Insurance Stress Test

 EIOPA analysed the Stress Test results at individual group level
 Recommendations consider the risks and vulnerabilities identified by the 2018 Insurance Stress Test
 Recommendations are addressed to the National Competent Authorities of the European Union

The European Insurance and Occupational Pensions Authority (EIOPA) published its 2018 Insurance Stress Test Recommendations. The Recommendations consider the risks and vulnerabilities identified through the findings of the 2018 Insurance Stress Test and are addressed to the National Competent Authorities (NCAs). As a first step, EIOPA analysed the 2018 Insurance Stress Test results at individual group level and, as a second step categorised the Recommendations as follows:

Supervisory convergence and financial stability (Recommendations 1 - 3)

EIOPA highlights the need to strengthen the supervision of the affected groups and requests the NCAs to review and, where necessary, to challenge capital and risk management strategies of those groups. Furthermore, NCAs should require groups to identify the range of possible management actions, assess whether these actions are realistic and consider potential second-round effects.

Efficiency and enhancing the stress test exercise process (Recommendation 4)

EIOPA requests NCAs to check the adequacy and flexibility of systems and risk models used by groups for stress testing. Furthermore, for future stress tests NCAs should ensure sufficientresources.

Cross-sectoral coordination (Recommendation 5)
EIOPA calls upon NCAs to enhance cooperation and information sharing with relevant authorities, such as the ECB Single Supervisory Mechanism and/or other national supervisory authorities of affected insurers that are part of a financial conglomerate.
Gabriel Bernardino, Chairman of EIOPA, said: “The objective of these Recommendations is to identify a set of supervisory actions deemed necessary to address risks and vulnerabilities and to strengthen the ongoing supervision of the relevant insurance groups with the aim of ensuring market stability. EIOPA will monitor the implementation of the Recommendations by the NCAs.”
The 2018 Insurance Stress Test Recommendations can be obtained via this link.