Archive for March, 2010

31
Mar
10

A chance for insurers to show they care about policyholders

As expected there are reams of coverage in today’s Insurance Times about the plight of Quinn Insurance after the company was placed into administration yesterday. The magazine’s leader column quite rightly points out the victory for the ‘I told you so’ brigade, all of whom have spoken, largely off the record that something never smelt right about this upstart company.  

An inevitable likeness to story of Independent Insurance is never far away, and having covered the demise of that company from FTSE darling to Belmarsh in the space of seven years, I wouldn’t wish a repeat of that situation again. The insurance industry is currently basking on a scandal-free beach while banks lap up all of the controversy, but it won’t take much to direct the gaze of the Daily Mail towards it if a single firm – and an Irish one at that - is found to have upset a single one of its readers, I mean how much ammunition does that paper need?

Hmmm… choices choices. The industry bodies like the ABI and BIBA will no doubt be huddled around the debating table deciding what to do. to me it feels as if there is a firing squad readying itself to march Quinn out for all to see in a very public execution, but I suggest they should stop and think if this is the right thing to do? A strategy that presents the insurance industry working collectively to protect Quinn’s policyholders and not just circling around the best bits of premium with a greedy eye would provide a vital stimulus to the ‘we’re not banks’ campaign.

26
Mar
10

Working Time Directive is out of time

Any time soon the  EU Commission will start a wide-ranging consultation on the Working Time Directive (WTD). This must be music to the ears of UK employers and overtime fanatics who treasure the UK’s opt-out from the 48 hour working week provision.

According to employment law experts at Eversheds’  European offices employers want greater flexibility around working time laws. ” However”, says Eversheds, “there is huge disparity from country to country in the aspects of the current rules which employers would wish to see addressed in this latest initiative to review the WTD. “

That’s as may be. The reality is that tougher trading and employment conditions have put flexible working in a much more favourable light. Employers want to be able to hire and fire more easily so as better to compete and even survive, while employees have, especially in the UK, shown themselves willing to accept pay cuts, shorter hours, enforced unpaid leave etc. to stay in a job.

Except, of course, those led by the estimable Bob Crow, who must be disappointed not to have got at least a walk-on part in Life on Mars. I digress.

In the real world many employers are paranoid about inadvertently breaching regulations on holidays, working hours, sick leave etc. This really is something to be decided at national or even local level but you can be sure as nuit follows jour that the commission will want to stick its oar in anyway.

It really is time that it was pulled up short in its efforts to harmonise working conditions in the EU in the name of fairness and giving employment lawyers more lucrative work to do.

25
Mar
10

Is the rise of LPO now an inevitability?

“The challenge I lay down here is for all lawyers to introspect, and to ask themselves, with their hands on their hearts, what elements of their current workload could be undertaken differently — more quickly, cheaply, efficiently, or to a higher quality — using alternative methods of working.” 

And so said Richard Susskind; IT adviser to the Lord Chief Justice, in his infamous book ‘The end of Lawyers’ back in 2007.

If you believe today’s Law Society Gazette, the means of turning Susskind’s words into reality and delivering alternative processes is about to pervade the UK legal sector.

The story explains how two of the market’s three best known legal process outsourcing (LPO) providers have announced ‘aggressive’ plans to corner the market, with their mandates recieved largely from in-house legal teams at large corporate entities rather than private practice.

The article quotes Pangea3 co-chief executive David Perla who said his company plans to boost its 350 LPO staff, who include 280 fee-earners, to 500 staff in total by the end of 2010 – and that he expects that number to ‘grow further’ from 2011 onwards.

Speaking to one in-house counsel that I know at a top ten insurer, there seems to be an acceptance that LPO is a part of the industry’s future, particularly for businesses that are acquiring or have an international footprint and very high volumes of contracts held in numerous locations and formats.

This is the kind of processing nightmare that corporates have charged their in-house teams to deal with and as the Gazette article suggests, there are firms now that claim to have the infrastructure and wherewithall to manage it profitably at a fraction of the price.

24
Mar
10

Careful what you wish for

Imagine how unpopular insurers would be if it was their bonuses and not the bankers’ that were being questioned every day…

Although the insurance industry’s “don’t tar us with the bankers’ brush” stance over all things credit crunch related is well known, one can’t help thinking that today’s Insurance Times cover story smacks of an inferiority complex nonetheless.

Looking jealously on at those rebellious bankers and their headline grabbing over-inflated bonuses, Insurance Times’ story reveals that a group of ten leading insurers and Lloyd’s, have largely made millionaires of their CEOs and so the article has a fairly good stab at making them justify their remuneration with a table juxtaposing salary v performance.

There’s a certain amount of comparison for the sake of it, such as LV= boss Michael Rogers’ earnings put up against his counterparts from Hiscox and Brit insurance, using the measurement of combined ratios as a mirror. But how are you supposed to compare the performance of a composite mutual against two London Market insurance & reinsurance specialists that have no life and pensions exposure whatsoever?

It’s a worthy attempt and on the money in terms of producing articles and research that subscribers will want to flick through, but comprehensive it certainly is not. Next time, IT should engage the services of an executive remuneration consultant or something and produce a list they can genuinely beat the banks with.

22
Mar
10

Ticking all the boxes

It is drummed into journalists to avoid using clichés wherever possible but sometimes it is unavoidable and it can even be desirable.

A story in the trade press that stood out for me this week because it certainly, to use a cliché, ‘ticked all the boxes’, and the reason it stood out was precisely because it held the UK regulator to account and helped to ensure that it does more than simply ‘tick the boxes’.

The Insurance Insider’s article headlined ‘FSA issues ‘warning notice’ on Chaucer stake building’ caught my eye for several reasons.

Firstly, it made good use of the Freedom of Information (FOI) legislation to force the Financial Services Authority (FSA) to disclose that it has issued a ‘warning notice’ that has stalled Pamplona Capital’s plans to build a significant stake in Lloyd’s insurer Chaucer.

The FSA had previously refused to confirm how its processes work as it regulates investors to building stakes or take over UK financial services companies.

Secondly, as a financial journalist it was good to see a story that held not only the regulator to public account but reminded a private equity firm that elements of the press are scrutinising city deals.

Finally, kudos to The Insurance Insider, I’ve always understood it is well connected but getting the UK Liberal Democrats deputy leader Vince Cable MP to go into bat for them as they sought answers from the FSA really was quite a coup.

19
Mar
10

Racist recruitment ads – aren’t they just telling the truth?

Recently there had been something of a kerfuffle  over job advertisements that ask for workers who speak tongues other than that of this pearl, this realm, this England, or who are of another nationality.

Jobs board Jobsite got into hot water with the thought police at the Equality and Human Rights Commission for running a job ad for an IT worker “preferably of Indian origin”. A sp0kesman for recruitment agency McGregor Boyall (MB) issued a groveling apology but I expect they were only obeying orders from their client, Torry Harris.

MB said the advert should not have been put up and “was cut and pasted from material sent to us by a client in India.” Eh? The Torry Harris post is in Bristol so how does that add up?

MB spokesman Farhaan Majid let the chapati out of the bag when he said: “Some companies prefer to employ people of Indian origin because they are immediately available and don’t mind moving.” Really? Are Britons of Indian origin more immediately available than say those of  Irish extraction?

Would it possibly be because they come cheaper and the workplaces seeking to hire them are largely Asian? No doubt the thought police will get to the bottom of it before you can say Bombay – oops thought crime, Mumbai.

While they’re about it they can look into another case at Forza AW. This an East Anglian meat producer which supplies Asda.

It emailed out an advert for factory work on its production line via employment agency OSR Recruitment which read: “Applicants must speak Polish. Please call asap!!!!!!”

Apart from wondering if Poles are more partial to exclamation marks than the rest of us, you have to wonder if anyone with any common sense signs off these adverts. They must be aware that the UK has been run by the most politically correct regime since, well since ever.

But at least these advertisers are honest. Polish speaking workers would be working with other Poles as the unemployed English are either too lazy or get too much in benefits to be bothered to work in meat processing. And for Asda – Waitrose maybe but Asda? This is not the stuff of career dreams that UK schools ladle out to their hopeless legions.

My view is that such adverts are fine because they tell the truth about what employers are after. They stop time wasting.

Ironically I was approached by a recruitment head hunter last week who asked if I was interested – don’t all laugh – in a position. I told him my age and he said it was not quite in the “client’s zone”. I said no problem mate, I’d rather not waste anyone’s time on a wild goose chase and would not sue for age discrimination.

Anyway, adverts that exclude English speakers may result in the advertiser and the recruitment agency being charged with indirect race discrimination.

Or a an invite to a night out with Harriet Harman and Trevor Philips at a meat factory of their choice.

18
Mar
10

Which will happen first; Sustainable nuclear fusion or Lloyd’s Market Reform?

It’s not often that particle physics and Post Magazine meet on the same intellectual plane but today, these two were intrinsically linked by the ‘news’ that the Lloyd’s insurance market still won’t use computers to do business. In a report so often heard, it seems that despite obvious progress – policy adjustments, endorsements and a small amount of e-trading enabled – Lloyd’s remains a very paper-based place.

As a result, it is likely that in 2010 the insurance market will be overtaken by mankind’s search for limitless  energy through nuclear fusion as this report from Radio 4′s Costing the Earth explains.

Post’s feature about Lloyd’s market reform hits the right tone between enthusiasm for the achievements made so far by the London Market group, and a healthy skepticism from those who think the market’s heart isn’t really in it and that electronic trading is still a fantasy.

But it really is a shame that the market appears to be dragging its heals on process reform as a further story today has reported how London has fallen to third in the global league table of international insurance marketplaces, behind Hong Kong and New York.

Let us pray the market doesn’t fall any further behind the world of scientific discovery; it would be embarrassing to see a day when brokers can teleport into the underwriting room at Lime Street only to be forced to wait for five hours behind a queue of people weighed down in paper.

08
Mar
10

What to do with all that cash?

The annual reporting season is now in full swing and more than one firm has already posted record profits for 2009 on the back of excellent underwriting results and the global recovery in financial assets.

Property/catastrophe (re)insurers based in both London and Bermuda have benefitted from the gentle hurricane season and the big question now is how best to deploy that excess capital?

Some may choose to return funds to their investors as Reactions reported Hiscox had done with the announcement of an increased dividend and a declaration that it was ready to buy back shares if the price fell to an “unrealistic level”.

And Bermudian reinsurer Montpelier Re was even more pro-active in this regard, according to BestWire, as it bought the 6.9 million shares previously owned by billionaire investor Wilbur Ross Jr.

Another option is to write more premiums and according to a report by Dow Jones News Service this is exactly what Novae Group is intending to do, despite a modest profit of only £4.2mn last year.

The company’s CEO Matthew Fosh says he expects gross written premiums to almost double to £590mn this year.

 

Of course what really gets investors and journalists alike excited is the though that companies awash with cash will use it to fund mergers and acquisitions.

Lloyd’s insurer Amlin’s CEO Charles Philipps was quoted in M&A Navigator as saying he would like to use the firm’s bumper profits to follow up last year’s acquisition of Dutch Fortis Corporate Insurance

“By the time we get to the half year, we’ll be more open to larger acquisitions, if we find the right thing,” Philipps said.

Back in Bermuda Max Capital and Harbor Point have agreed to merge in a pact that will rebrand their combined operations as Alterra Capital Holdings Ltd.

This follows last year’s acquisition of IPCRe by Validus and bodes for some interesting times ahead, according to Business Insurance although The Insurance Insider’s excellent commentary on the subject points out that the M&A waters are somewhat muddied by proposed US legislation.

But, it also indulges in some crystal-ball gazing on who might move for who if the landscape were to change favourably and hints that we may see increased action later this year.

04
Mar
10

Glittering prizes elude many grads while debt entraps them

Tony Blair’s promise of opening up higher education for all and sundry has predictably brought misery for many of those blinded by it.

More than 400,000 graduates entered the jobs market last summer, and they couldn’t have picked a worse time with unemployment amongst the under 25s hovering around 1 million.  Many are so desperate to get a job that they are taking internships which pay nothing, not even expenses. In effect it means that graduates are paying employers for the privilege of getting some work experience under their belts.

It doesn’t surprise me: I worked for a magazine industry body – unfortunately not Elle McPherson – for some years and it was common knowledge that glossy up market fashion magazines used eager young women as unpaid workers, sorry interns. Most of them come from wealthy homes so are supported by the Bank of Mum and Dad. If you don’t believe me look at the staff lists and the names – you won’t find them on the rolls of state comps in Liverpool.

Now a survey by student web site studentgems paints a bleak picture of the financial situation faced by many students and recent graduates.

Almost a third (31%)  of the 1,082  students polled  had little faith that their degree course held any relevance, and believed that they would not earn the £15,000 per year requirement to pay back the loan. But this ever optimistic 31% felt that the loan would be ‘wiped out’ before they earned enough money in full time employment to pay it back.

Well planet student can be an out-of-touch place.

Of course this situation will only worsen as the number and quality of graduates becomes ever more out of kilter with the jobs market.

But the internship con boom does little to enhance the reputation of those employers who offer them. Also they are likely to be breaking the law. If someone is working then almost certainly they must be paid at least the minimum wage plus statutory benefits (eg paid holidays) after a short period rather than the months for which internships often run.

Of course most graduates undertaking internships daren’t threaten such dreadful employers. The Government should take a strong line on this but won’t.

Never mind – I’m sure Tony Blair’s off spring haven’t had to suffer.

03
Mar
10

Shaken and Stirred

As I write this a series of aftershocks are reported to have hit Chile, a country still beleaguered following last weekend’s major earthquake.

Reporting on insurance issues can be a strange business, not least when catastrophes strike and you are expected to pay lip service to the humanitarian aspects of the disaster while concentrating on the economic and insured loss scenarios.

But even the cold, hard business of assessing the loss is far from straightforward. Especially following quakes where estimates of costs typically rise over time.

However, this contrasts the need for companies to inform investors of their exposure promptly and the pressure applied to the modellers (by the media amongst others) for loss estimates that are both fast and accurate – two often conflicting goals.

A Dow Jones story that was reprinted in the Wall Street Journal gives an excellent assessment of why this proves so difficult for the modellers. The modellers have come in for criticism over the years due to the wide range of estimates that they provide and the inherent lack of accuracy in a range that may extend $5bn from lower to upper limit.

As this article in Business Insurance shows the criticism hasn’t caused the cat modellers to alter their behaviour.

EQECAT Inc that insurers should expect to pay from $3 billion to $8 billion in losses while AIR Worldwide Corp would only say that it expects insured losses to exceed $2 billion.

Such estimates bring to mind a comment from a Morgan Stanley analyst a few years ago who called the loss estimates produced after Windstorm Kyrill had swept through Europe a “puzzling search for some EUR3-5bn”.




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