Hong Kong – Insurance Authority warns against fraudulent website

The Insurance Authority (IA) today (19 May 2020) alerted the public to a fraudulent website with the domain name of “http://www.baofengins-hk.com”. The fraudulent website purports to be the official website of an authorized insurer of Hong Kong, Paofoong Insurance Company (Hong Kong) Limited (Paofoong). Paofoong has confirmed that it has no connection with the fraudulent website. The case has been reported to the Hong Kong Police Force for further investigation. Anyone who has provided personal information to the website or has conducted any insurance transactions through the website should contact Paofoong Customer Services Hotline at 2290-3580, and report the case to the Hong Kong Police Force. Any company carrying on insurance business in or from Hong Kong must be authorized by the IA under the Insurance Ordinance (Cap. 41). The full list of authorized insurers in Hong Kong can be found on the Register of Insurers on the IA website.

Higginbotham Grows San Antonio Practice with Amerman Insurance Services Merger

Higginbotham and Amerman Insurance Services, an independent broker in San Antonio, Texas, have merged operations. The union adds eight commercial and personal property/casualty insurance and employee benefit professionals to Higginbotham’s existing local practice for a combined 38-person group. Higginbotham’s San Antonio office will partner with Amerman Insurance to bring its single source solution for insurance and financial services to area businesses. The partnership is part of Higginbotham’s growth strategy that sees it merging with other independent brokers that expand its capability to support a mounting number of clients seeking all-inclusive services.

The Insurance Industry Post Covid-19

The Insurance Industry Post Covid-19
By George Worsley

The coronavirus pandemic is having a disastrous effect on the economies of many nations. The shutdown of consumer businesses and the lockdown of movement in the United Kingdom has impacted the lifestyle of almost everyone.

It is not yet known what the total cost of containment, cure and prevention will be. Where some countries believe that once the spread of the disease has peaked, certain restrictions can be relaxed bit by bit, others, like the UK, are adopting a “wait and see” attitude because they fear a second wave of the disease would be even more harmful than the first.

The British government is having “to employ” millions of people whose employers have put them on furlough, i.e. stopped paying them; the taxman is paying out huge amounts of money which it will have to recoup over the coming decades. In addition, many companies – large and small – are facing the wall. What we know is, that once the spread and the impact of the disease has been brought under control and life is back to normal, some firms will have survived but many will not.

But what is “back to normal”? It is too early to tell but it will not be the same as it was before the pandemic. One of the biggest issues has been working from home. In a relatively sophisticated IT-age, this has worked out quite well. You don’t need to be at your desk in the City of London if your laptop and mobile are available. You can telephone, e-mail, text, Skype and WhatsApp other people to communicate with them and increasingly your files are not large folders in a cabinet in the office but encrypted data files somewhere in cyberspace. In times of adversity, innovation and improvisation flourish and Zoom (although it needs a bit more fine-tuning) is very welcome.

Chances are that many people who were forced to work from home will continue to do so when the lockdown is lifted. This would not only mean fewer commuters and half empty offices but less customers for coffee shops, snack bars, pubs and restaurants in town. Whereas at the moment in the City, snack bars and tall buildings with acres of space are sprouting up all over the place, they may turn out to be bad investments.

There is also a social change being forced on many workers in London: taking the train up to London means an hour’s worth of reading, face to face contact with colleagues, banter, sports analysis, spontaneous responses and guidance to many business-related questions. Some people perform better when they are together with others rather than sitting at home on their own. They may not get the choice, however.

After Lloyd’s closed the Underwriting Room indefinitely on the 19th March it was always assumed that it would reopen. Now some people are saying that seeing as risks placed on the London Market’s electronic placement platform, Placing Platform Limited (PPL), have reached a record high volume of trade with placements soaring, the Underwriting Room will no longer be necessary. That is a poor joke. For many brokers, underwriters, claims adjusters and other experts, the Underwriting Room and associated localities for carrying out business are not just a job but a lifestyle. To be able to go to the market-place and conduct your business with friends and soul mates is something many people working in the City postpone retirement to enjoy for so long as possible.

Besides the manpower aspects of the insurance industry, the product itself is coming under scrutiny – in particular, Business Interruption. Our textbooks will have explained this as financial loss consequent upon an insured peril of material damage such as a fire. Travel and event insurances have wider and often poorly worded definitions of the trigger for an insured loss. Words like “notifiable disease” are used and often it is the timing of governmental communications which can be regarded as the trigger for cover to apply.

In the United States there have been calls for BI polices to pay out even when the wording of the policies specifically exclude this. It must be said in all fairness that there are Congressmen and Senators who do not condone this approach and have written to the President to say so. The only insurance representative on Donald Trump’s Great American Economic Revival Industry Group has said that to force this issue would bankrupt the insurance industry.

In the UK, the Financial Conduct Authority (FCA) has confirmed that it would not intervene and force carriers to pay out on coronavirus-related business interruption claims where pandemics are excluded from the policy, despite mounting pressure from insureds to do so. The Bank of England has said: “insurance firms should not be expected to cover huge things they had no expectation of covering.” Once again the wording of the small print must be clear and the reputation of the industry comes in for criticism when this is not the case.

UK carriers, along with many EU and American insurers are setting up funds to assist policyholders; in total these already add up to billions of dollars. This should go some way in showing that insurance companies do have a heart but there will doubtless be many people and firms who will unfortunately be missed out.

In a further development, UK Insurance industry leaders have combined to form a steering group, which will work with terrorism reinsurer Pool Re, with the primary objective to ensure that, working alongside the industry to support customers and communities in the current crisis, the industry can strengthen its response to future pandemics. The first group meeting was held on the 17th April to agree its objectives.

With Boris Johnson, the prime minister, now back from his illness, he is under pressure to start the process of phasing out the lockdown. It is anticipated that financial services will be one of the first sectors to be reopened. When this happens it will be months before we see what the new normal will look like but there will be many more people working from home than there were before the pandemic arrived.

The Business section of the Sunday Times intimated on the 19th April that it may be Medical Advisers who tell us when the pandemic is over, but it will be in the hands of Corporate Economists as to how the plans for rekindling the economy are worked out: Restarting, Reviving and Renewing. Elsewhere in this esteemed publication, it was pointed out that there are three types of economist: those who can count and those who can’t.

The Coronavirus crisis in the CEE insurance markets: hoping for the best, preparing for the worst

The Coronavirus crisis in the CEE insurance markets: hoping for the best, preparing for the worst
By Daniela Ghetu

The CEE countries were not spared by the Coronavirus outbreak. Yet, for the time being their situation in pandemic statistical terms seems less dramatic than in the Western Europe. At the time this article is written, the 16 countries considered in the CEE group have reported a grand total of about 13,870 confirmed cases of coronavirus disease which is 5 times less than in Germany or about 8 times less than in Italy or Spain. Yet, as the first cases were recorded in the region at the end of February, about one month after the Western Europe, the less gloomy picture may be just as well the result of these countries finding themselves at an earlier stage of the crisis and/or of timely undertaking mitigation measures based on the lessons learned from the countries were the crisis started earlier.

Regardless of the potential future developments, it is already obvious that the Coronavirus crisis will go far beyond a health one, most probably pushing the region’s economies into recession. According to ERSTE Group’s analysts, the average gross domestic product (GDP) of the CEE region is expected to shrink by 4.7% in 2020, the most affected being the tourism-oriented countries such as Croatia and Slovenia where the economy could overall shrink by 6.5 – 7.5%.

In the span of a few weeks entire economic sectors have shut down almost completely in most CEE countries – the hospitality industry was among the first hit, followed shortly by all sorts of businesses that entail the presence of numerous people together: retails shops, other than the ones providing for essential goods, events organizing, car rentals, freight transport … up to an almost endless list. All businesses able to proceed with their operations in a remote work regime have put a lot of effort in organizing their employees to work from home. Also, lots of business, especially in the retail commerce, have migrated in the online environment. Where possible, work continued “on site”, entailing extended preparations for providing an as safe as possible environment.

None of the above are only specific for the CEE countries, but the social economic impact may be harder than in the Western economies as the states in the region have less resources to help economic agents resist throughout the crisis. As a result, insurers’ business across the region will also be impacted significantly. Clear indications of the impact that the Coronavirus crisis will have on the insurance industry are already here.

The first actions taken by insurers across the region were to protect the health of both customers and employees by shifting to online means of interaction as much as possible. A significant part of the players in the region already had in place mobile apps or other digitalized systems of claims handling, as well as online sales facilities. Even less digitalized companies have very quickly adapted to the situation and set claims handling procedures that allow customers avoid visiting the insurers’ offices.

Supervisory authorities in the region have adopted similar social distancing methods, yet assuring permanent contact means with customers and supervised entities, as well as a continuous flux of information. To maintain the sector’s financial stability, EIOPA – the European Insurance and Occupational Pensions Authority has recommended insurance companies to “take measures to preserve their capital position in balance with the protection of the insured, following prudent dividend and other distribution policies, including variable remuneration.” National authorities have adopted this recommendation and in many countries already called upon re/insurers to suspend the payment of dividends from accumulated profit until October 1st, 2020 and not to undertake any irrevocable commitment to pay out dividends. In Croatia, the local market watchdog went even further: it has banned local insurers to pay dividends from realized profits until April 30th, 2021, thus retaining in the country about HRK 4 billion (~EUR 526 million) of earnings. On the other side, national authorities will show more flexibility regarding the timing of supervisory reporting and public disclosure of their 2019 and 1Q2020 results.

What is to expect in business terms for the CEE insurance markets?
No doubt, we will witness lowering business volumes all over the region. To what extent, it is yet to soon to predict. Many are already talking about a possible deeper fall than in the previous financial crisis, in 2009.

Yet, one should also take into consideration that we are only a few weeks in this new situation. In many countries across the region it is not yet clear how effective the state aid for people and businesses will be and, thus as far as the customers are concerned, both retail and corporate ones are inclined to adopt an over restrictive behavior trying to preserve their financial resources as long as possible. As such, we expect that after the first shock will fade, the consumption behavior will also stabilize at a reasonable level.

In life insurance, a large part of the business is related to the banking loan contracts that have attached a life insurance guarantee; it is expected that the lending activity will slow down in the following months, so not much business will come for the life insurance sector. We may also be witnessing a wave of lapses of capital accumulation insurance policies (UL and not only), as some insureds will face financial difficulties and will “freeze” or even drop policies. As there are very few life insurance products covering the Covid-19 risk, the direct impact of the pandemic on life insurers’ expenses will remain, in our opinion, insignificant.

Motor insurance, that makes up the largest part of the non-life business in the region, will face both positive and negative effects. On the positive side, the “empty” roads across the region will provide for a visible decrease in the number of claims following road incidents, which may help improve the technical result on this business segment, provided that underwriting will not experience a sharp fall.

On the negative side, there are a series of factors that may have a negative impact on written premiums:

  • One of the main sources of new business is cars sales financed through leasing arrangements of banking loans; given the volatility affecting incomes, it is expected that car sales will stall or decrease, affecting both the Motor Hull and MTPL line.
  • With the transport restrictions imposed by the Coronavirus outbreak, the largest part of the goods carriers’ fleets remains inactive; many carriers have already asked if not for their insurance contracts being frozen, at least for postponing premiums payments. Some countries in the CEE – as Poland, Romania or Croatia -, are the home countries for large carriers, with thousands of trucks registered, as the operational costs are lower than in the Western countries, while the EU rules allow them to operate all over the Union regardless the member country were they are registered;
  • In some countries, as Romania, purchasing MTPL for short periods is allowed; as a result, a large share of the active MTPL contracts is formed by policies with a one month duration, which means that they will soon expire and may be not renewed as long as the special measures are in place;
  • Despite the corrections applied during the last years, MTPL prices are still low in the CEE markets, which leaves a very narrow margin for insurers to offer their potential customers better deals to stimulate take-up;

This being said, insurers will have to fight to preserve profitability on the motor insurance lines. In some markets, as Romania or the smaller markets of the Adriatic region, motor insurance lines’ profitability is already an issue because of other operational reasons.

Finally, on the P&C lines (other than motor insurance), we will most probably see the impact of the economic downturn. In particular, small and medium businesses hit by the current crisis will form a market segment in distress. Hopefully, no major Nat Cat event will hit the region in the following months, thus sparing the region from an additional stress. Yet, the recent example of the 5.7-degree earthquake that has hit Croatia, right after the country’s lockdown, shows that a risk accumulation scenario is possible at all times.

On the Coronavirus front

Besides all the measures taken to preserve their functionality and allow servicing clients as best possible, insurers across the region are also trying to come to the aid of their clients and contribute to the general effort to fight the Coronavirus.

Donating medical equipment or raising funds to help hospitals or other bodies involved in the emergency situation management, setting call centers within the health insurers’ structures to help people get information or remote medical consultations, are actions that many insurance company across the region have already got involved in.

In several countries, the insurers’ associations are studying solutions that may help customers by extending coverages or allowing flexible/delayed payments of the premiums etc. In some markets authorities have eased to a certain extent the solvency criteria or the financial obligations of insurers toward the market bodies. Yet, insurers still need to comply with the EU solvency rules, meaning that they need to carefully analyze the impact of any kind of additional coverage they might wish to grant their insureds to support them throughout the crisis. For those belonging to multi national groups, this issue is even more delicate as any “favor” that a local subsidiary may afford to grant with a low impact on its business, may become an unaffordable precedent in other EU markets, with a higher exposure.

Finally, one should also not ignore the reputational risks that insurers are confronted with. In countries where the financial education is still significantly lower than in the mature markets, when it comes to the pandemic risk not being covered by the business interruption clauses, or travel insurance products etc. may rather be interpreted by the public as malevolence than as a natural limitation of the insurance industry of undertaking risks. While the current crisis may raise awareness for the future, on the short-term companies need to fight such a public perception by doing their best to support clients, even at the expense of profitability, if necessary. It might be a much-needed sacrifice to allow for future growth.

Open Hearts and Minds: a message to all of us

Open Hearts and Minds: a message to all of us

Open Hearts and Minds: a message to all of us [https://vimeo.com/405830743]

Open Hearts and Minds

Entrepreneur Fabrice de Waal started a project with the vision of sending a message of togetherness into the world. The result? The video “Open Hearts and Minds,” which according to de Waal aims to “trigger us to go soul searching, as we globally navigate through the coronavirus crisis.” It was also one way that he could give back to fellow entrepreneurs during this uncertain time. Fabrice is engaged in many diverse projects in addition to leading a third generation family owned insurance brokerage firm, Dorens & De Waal Group, based in Amsterdam, the Netherlands. Initiated by: Fabrice de Waal Copy: Johnny B.A.N.G. Reilly VO: Johnny B.A.N.G. Reilly Directed by: Bob van de Gronde Edit: Aron van Blooijs Produced by: eyeforce.nl All imagery rights belong to the respective owners