NEWS

The Rendez-Vous recap

Many companies use the Monte Carlo Rendez-Vous (virtual or otherwise) to launch new products, signal their strategic direction and make other important announcements. Here is a quick overview of the latest such updates.



MGAs are thriving since Lloyd’s Decile 10

Despite the pandemic, confidence is recovering fast in the managing general agent (MGA) market, according to law firm Clyde & Co’s latest survey of the MGA market, carried out with more than 50 insurers and MGAs in summer 2021.

According to the firm’s report, “2021: A year of renewal for MGAs?”, several factors are driving MGA confidence. The most dominant is that many MGAs have not only survived but thrived following the highly testing conditions triggered by the Lloyd’s Decile 10 reform programme and compounded by the pandemic.

The report also shows the impact of COVID-19 on capacity has not been long lasting for the industry. While carriers remain cautious about expanding the number of partnerships in this space, sentiment is definitely improving. Eighty-four percent of MGAs say the impact has been neutral or positive compared with 74 percent of carriers who feel the same way, a distinct improvement on last year.

James Cooper, head of insurance at Clyde & Co, said: “Our survey shows that MGA confidence has staged a significant recovery from its pandemic low in 2020 and is at its highest level in three years, with over two-thirds of businesses expecting to expand carrier partnerships in 2022.

“Our research shows that while we are not yet back to normal in terms of capacity availability for MGAs, it is already clear that COVID-19 has not precipitated a widescale insurance disaster. The big threat of an economic Armageddon has not materialised and confidence among the carrier and MGA community has improved.”

Popularity of the Lloyd’s market for MGA business was waning when the same research was conducted in 2019 and 2020, mostly due to the impact of the Decile 10 remediation process. However, 2021 has seen a significant reversal.

The market is more popular than ever before with 47 percent of carriers believing that it provides the best environment in which to grow and develop MGA business, versus only 12 percent last year.

The appeal is more muted for MGAs with 20 percent favouring Lloyd’s, still offering an improvement of three percentage points on last year.

Cooper commented: “The change in fortune for Lloyd’s is partly due to the changes initiated as part of the Lloyd’s Blueprint reforms as well as the arrival of the harder market and appetite to write more business. This enthusiasm for Lloyd’s is positive for its business and for brokers and their customers in terms of choice.”

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Rated US mutuals enjoy steady growth through pandemic

Despite significant returns of premiums during the pandemic in 2020, rated US property/casualty mutual insurance companies still managed to grow premium modestly, according to a new AM Best report.

The Best’s Market Segment Report, titled, “COVID-19 Forges a Double-Edged Sword for US Property/Casualty Mutuals”, states that net premiums written (NPW) for the rated US mutuals grew by a modest 1.4 percent in 2020.

Although the pace has slowed in recent years, these mutuals have seen NPW growth every year since 2010. The NPW growth in 2020 was attributable mainly to the market shift from greater personal auto risk to greater homeowners’ risk—homeowners multiple peril grew $2.5 billion while the personal auto lines declined $2.6 billion.

Inclusive of policyholder dividends during 2019–2020, the segment reported underwriting losses of $2.3 billion in 2020, compared with $3.5 billion in 2019. As a result, net income declined in 2020 only modestly—less than 4 percent in aggregate—despite the dramatic increase in policyholder dividends and a $1.4 billion decline in net investment income and realised capital gains from the previous year.

Overall, policyholders’ surplus among the rated population increased by 8.4 percent in 2020 to $383.1 billion.

The 10 largest AM Best-rated US mutuals accounted for 71 percent of NPW in 2020. These large companies generally reported higher incurred loss ratios than their medium-sized counterparts, which in turn reported higher incurred loss ratios than those of smaller companies.

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Protection gap widens due to COVID-19 uncertainty

Financial vulnerability and health-related concerns are more prevalent among young consumers in emerging market countries, driving an increased appetite for purchasing insurance protection.

This is according to the second edition of the EY Global Insurance Consumer Survey, a survey of 4,200 consumers in seven countries across Africa, Asia, North America and South America.

It revealed that 93 percent of emerging markets consumers plan to make at least some type of financial preparation due to COVID-19, compared to 61 percent in developed markets. Interest in purchasing new forms of insurance is nearly three times as high in emerging markets than developed markers.

The research, released on September 14, explores the growing protection gap between consumers in emerging markets and those in developed markets, and offers insights into how the COVID-19 pandemic has impacted consumers’ financial risks, vulnerabilities and needs when it comes to insurance product preferences.

The survey shows that emerging markets consumers experienced more financial impact from the COVID-19 pandemic compared to those in developed markets. Seventy-eight percent of consumers in emerging markets had to dip into their savings, 61 percent lost income and 54 percent had to skip certain bills or payments, compared to 33 percent, 30 percent and 22 percent of consumers in developed markets, respectively.

Additionally, in emerging markets, where vaccination rates are considerably lower than developed markets, concerns about losing a loved one and financial well-being were notably higher.

Fayaz Jaffer, EY Americas Insurance Product Innovation Leader, said: “Insurers have an important role to play in protecting those that need it most. They must start by building trust through personal connection and empathy to deeply understand their client’s personal and financial goals.

“Connecting with customers on a human-level—especially across digital channels, which younger consumers prefer—is imperative to meet the evolving needs of their clients, improve financial well-being and build sustainable relationships long term.”

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European life sector poised for consolidation

Chesnara’s recently announced acquisition of Sanlam Life & Pensions UK highlights the return of consolidation activity in the European life insurance sector via smaller deals, according to a research note by Fitch Ratings.

The rating agency said the deal signals that conditions in the sector are normalising and that the key structural trends observed in the industry pre-pandemic are still intact, including shrinking back-books, capital optimisation challenges, and a bifurcation of business models into ‘capital-light’ and ‘capital-intensive’.

The £39 million ($54 million) acquisition is one of the first few deals in the European life insurance sector in 2021, but Fitch said it expects more transactions of a similar size, including further acquisitions of UK life insurers with stable or shrinking books.

“Although two large tie-ups were completed last year, which dominated the deal flow by the size of liabilities, we anticipate smaller deals to continue to make up the majority of transactions.

“Consolidation allows life insurers to respond to sector challenges including low interest rates, balance-sheet pressures and regulatory burdens, by releasing capital trapped in run-off books while alleviating cost inefficiencies associated with a patchwork of legacy administration systems,” Fitch said.

It added that high barriers to entry in the life insurance industry supports in-sector consolidation, as do the differences in capital consumption profiles and the capabilities required by life insurers compared to conventional insurers.

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