IRL July 2020

July Highlights

COVID-19: How much is your life worth?
The very idea of thinking that a life has a price is truly shocking. And even more shocking is when we notice that, depending on who you are, where you live or your age, that price changes significantly. Learn what the price of life is in different parts of the world and even the variable prices for horrors of human trafficking on page 10

Why Nobody Believes They’ve Been Exposed to COVID
Have you noticed that no one is talking about contact tracing anymore when discussing Covid-19? Back in April it was a main component in the virus-fighting arsenal. Now it’s hardly ever mentioned. Learn why on page 11

Preparing Your Clients For International Travel – Cambodia: New Entry RequirementsOn June 10th, Cambodia made an announcement to change their current entry requirements for foreign travelers. While they previously required travelers have travel health insurance, these rules now mandate that foreign travelers provide a health certificate, which must be issued less than 72 hours prior to departure, clearing travelers of COVID-19. Learn what else is in store for your or your client’s next trip to Cambodia in these extraordinary times on page 8 & 11

Connected globally despite closed borders: International unisonSteadfast insurance community reunited at its first digital event
Read how this broker network turned a disappointment into a celebration of inclusion and fun with an outstanding virtual Independence Day Conference Live. Page 12

Will Covid-19 get the blame for Brexit frustrations?
The British government’s handling of the Coronavirus pandemic has been shambolic: delays in taking action, poor communications, inefficient provision of protective clothing for medical professionals, childish behaviour from ministers and advisers relating to adherence to rules and recommendations for the whole nation to follow. The list is extensive. For a while, the pandemic was regarded as a distraction by the Get Brexit Done brigade and one former chief scientific adviser has said that had Britain gone into Lockdown one week earlier, there would probably have been a quarter of the deaths. Page 13

Electronic Placement: From paper to digital
The famed Lloyd’s of London is undergoing huge change and technology is leading the way. Take a look at the numbers and names of recognised electronic placement systems and watch a YouTube video of Shirine Khoury-Haq, Chief Operating Officer, Lloyd’s, as she explains leading the implementation of electronic placement to become the only digitized insurance market in the world on page 14

Report highlights urgent need for comprehensive reform of NSW insurance taxes
The Insurance Council of Australia (ICA) strongly supports the reform of taxes on general insurance that are recommended in the draft NSW Review of Federal Financial Relations report (the Thodey report) published July 1. Read why there is “no principled case for applying a special tax on insurance” on page 17

China Banking and Insurance Regulatory Commission extends preferential treatment for the Hong Kong insurance industry to 30 June 2021
The China Banking and Insurance Regulatory Commission (CBIRC) on 23 June 2020 announced an extension of the preferential treatment accorded to Hong Kong under the “China Risk Oriented Solvency System” for another year to 30 June 2021, allowing Mainland insurers who cede businesses to qualified local professional reinsurers to enjoy lower capital requirements. Page 17

Subscribe to the IRL – Insurance Research Letter here. Each issue has articles written by experts that you won’t read anywhere else. Stay current with major developments with our Global Briefs; monthly Synopsis of insurer and broker news; and the popular BackPage with a monthly collection fun subjects.

The Insurance Information Institute and The Institutes Announce Plan to Affiliate

The Two Organizations to Unify Their Voices and Modernize Their Capabilities

New York, June 25, 2020 – The Insurance Information Institute’s (Triple-I) Board of Directors approved plans this month to have the Triple-I enter into an affiliation with The Institutes, and The Institutes’ Board yesterday agreed to the affiliation. The terms will be finalized next month. 

“With 60 years of quality work serving as the trusted voice of objective insurance information, the Insurance Information Institute’s brand is invaluable to us. Combining their assets with ours will allow both organizations to turn the page on the next chapter of their operations and sets both of us up for continued long-term success,” said Peter Miller, CPCU, president and CEO of The Institutes, a global provider of risk management and insurance education and research. “Together, we will be better empowered to serve those interested in risk management and insurance.” 

“This forward-looking decision is the culmination of several years of strategic dialogue both internally at the Triple-I and with The Institutes. Taking this next step will further unify our collective efforts when it is needed most, grant both the Triple-I and The Institutes greater access to a deeper bench of resources and expertise, and improve value for Triple-I’s member companies across the country,” said Sean Kevelighan, CEO, Triple-I, a trusted source of unique, data-driven insights on insurance.

The affiliation, which will bring the Triple-I brand into the Malvern, Pennsylvania-based The Institutes structure, reflects the changing landscape of the broader industry and the economy. Moreover, it will unify two trusted data-driven organizations and continues The Institutes’ strategy in recent years to leverage the synergies of like-minded organizations.

For Triple-I, this evolution is the next step in the organization’s pursuit of a modern, transparent, and team-oriented structure that reflects the diversity and breadth of their membership.

Additional details will be announced publicly as the deal is finalized in July.

How America’s Insurance System Can Prepare For a Future Pandemic

The insurance industry, policyholders and governments throughout the world must come together on an approach that offers relief to those who need it now and develop a plan to implement mitigation strategies and a response mechanism for future pandemic events. The scale of this exposure is immense and far beyond the financial capabilities of the insurance industry alone. A public-private solution is necessary to address this risk.

The public-private partnership model is one that has worked particularly well to date for other risks that are capable of causing systemic economic shocks, such as terrorism. The Terrorism Risk Insurance Act (TRIA) and Pool Re are two fine examples where the security of backing from central governments has allowed private carriers to offer comprehensive terrorism policies at affordable costs. Whatever model is pursued for pandemics, COVID-19 has shown that any viable, long-term solution requires government participation.

Dan Glaser, Chief Executive Officer of Marsh & McLennan, authored a recent article in Fortune, discussing how a strong pandemic insurance system can make us more resilient to risk and avoid the panic-neglect cycle — and inspire more economic confidence into the future. Guy Carpenter is a business of Marsh & McLennan.


Dan Glaser
Guy Carpenter is fortunate to be able to bring the power of Marsh & McLennan Companies to bear through this process by working closing with Marsh and Oliver Wyman to understand the impact on the primary market and wider financial system. Marsh & McLennan Companies is at the forefront of conversations to create a forward-looking (re)insurance solution for pandemic risk in conjunction with policyholders, insurance markets and key policymakers.

A version of this article previously appeared in Fortune.

Here’s Why You Should Stay Away from Aon (AON) Right Now

Aon has been witnessing downward earnings estimate revisions of late. The Zacks Consensus Estimate for current-year bottom line of $9.72 per share has moved 0.2% south over the past seven days, indicative of analysts’ bearish sentiment on the stock.

So, what could be the reason for this pessimistic stance?

In the recently reported quarter, the company’s earnings failed to meet estimates. Notably, the company’s first-quarter 2020 operating earnings of $3.68 per share missed the Zacks Consensus Estimate by 0.5%.

Moreover, Aon deferred its share buyback plan and halted M&A activities due to the COVID 19-led uncertainty. Due to this suspension, the company’s bottom line will be bereft of the cushion that share repurchase programs provide, which may bother investors.

Moreover, its high debt is  a concern. Long-term debt has been continuously increasing since 2014 due to an increase in commercial paper outstanding. Interest expenses have been persistently rising since 2014 (except in 2018). Its total debt is 71.3% (comparing with 212.8% as of Mar 31, 2020) of total capital, higher than the industry’s average of 55.1%. As of Mar 31, 2020, it had cash and cash equivalents of $690 million, lower than its long-term debt of $6.2 billion. Although the company will have to pay not more than $750 million of term debt in the upcoming year, we are concerned about its solvency level.

Aon as a global corporation is exposed to foreign currency fluctuations and has been facing an unfavorable impact of forex volatility on its earnings per share since 2012. In the first quarter of 2020, forex had an adverse impact of 3 cents per share.

Moreover, management anticipates a further negative impact of 3 cents per share in the second quarter, 4 cents in the third and 6 cents in the fourth quarter.

Aon’s business operations in more than 100 countries make its financial results sensitive to foreign exchange rate fluctuations, which might distort true period-to-period comparisons of changes in revenues or pretax income.

Zacks Rank and Price Performance

Shares of this currently Zacks Rank #4 (Sell) company have lost 9.2% year to date, wider than the industry’s decline of 6.6%.

(Source: Zacks Equity Research)

Aon to offer pooled employer plans

Aon will begin offering a pooled employer plan effective Jan. 1, the company said Wednesday (June 24). [ed. Aon’s full press release below]

Employers in unrelated businesses will be able to join the pooled 401(k) plan, a new type of multiple employer plan made possible under the SECURE Act, which passed in December.

The anticipated pooled employer plans are seen within the industry as a way to help employers offload many of their fiduciary responsibilities, reduce administrative duties and lower retirement plan costs through economies of scale. They are scheduled to become available starting Jan. 1.

“We believe PEPs will transform the retirement landscape, similar to how 401(k) plans transformed the pension landscape 40 years ago,” said Paul Rangecroft, North America retirement practice leader for Aon, in a news release. “We are thrilled to enter this important market and are pleased to provide this plan as a service to employers as they look to increase efficiency, reduce risks and most importantly create better retirement outcomes for participants.”

Aon will serve as the provider of the pooled plan with Aon Investment Services USA Inc., the company’s investment services group, serving as a 3(38) fiduciary adviser. The company selected Voya Financial as the record keeper for the plan after a competitive bid process.

Aon’s PEP is aimed at a broad range of small to midsize employers in different segments and industries, said Rick Jones, a senior partner at Aon. The target market has at least 100 employees and assets of $10 million to $20 million.

“Aon has relationships with many of those organizations broadly, and we’re anxious to roll out a PEP solution more broadly across Aon’s client base,” he said in an interview.

While it’s too early to enlist employers to join the pooled plan, Aon has had a fair number of conversations with prospective organizations already, Mr. Jones said. “There’s been some pretty broad interest.”

(Source: Pensions & Investments > https://www.pionline.com/)

Aon Press Release

Chicago, June 24, 2020 – Aon plc (NYSE: AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, today announced the launch of its new Pooled Employer Plan (PEP).

Voya Financial, one of the leading retirement plan providers in the U.S., will serve as the recordkeeper for the new plan, which will be available Jan. 1. The new PEP stems from the Setting Every Community Up for Retirement Enhancement (SECURE) Act provision allowing employers to join forces to create higher performing, more efficient 401(k) plans.

Aon’s PEP will relieve employers of many fiduciary duties they have today. Due to the economies of scale, it also has the potential to lower fees for plan participants and provide access to state-of-the-art features that may be difficult for individual employers and fiduciary committees to both assess and access independently. The defined contribution plan provides the efficiency and scale of a pooled plan, while maintaining individual employer autonomy to define matching and other contribution levels, and various key plan design features. It also has the potential to provide cost savings to employers of all sizes.

The SECURE Act, which was federal legislation passed into law December 2019, was designed to encourage broader 401(k) plan participation and greater retirement savings. With the law’s passing, employers will no longer need to sponsor their own individual 401(k) plan and absorb the risks and workload associated with that role. Instead, employers from all industries and sizes may pool resources together to increase efficiency and create better outcomes for participants.

The PEP will help enable better outcomes for participants at lower fee levels, reflecting the leveraged nature of investing across the whole pool of assets in the plan. Aon has also selected Voya Financial as the recordkeeper for the plan after a competitive bid process.

For more than 40 years, Voya has helped Americans plan, invest and protect their savings to get ready to retire better by serving the financial needs of approximately 13.8 million individual and institutional customers in the U.S.

“We are pleased to have Voya as a partner in this initiative to provide the very best in retirement services to PEP members starting in 2021,” said Rick Jones, a senior partner at Aon. “We were greatly impressed by their commitment to plan participants and realized that there was no better institution to partner with given Voya’s expertise and retirement insight.”

“We believe PEPs will transform the retirement landscape, similar to how 401(k) plans transformed the pension landscape 40 years ago,” said Paul Rangecroft, North America Retirement Practice Leader for Aon. “We are thrilled to enter this important market and are pleased to provide this plan as a service to employers as they look to increase efficiency, reduce risks and most importantly – create better retirement outcomes for participants.”

“The signing of the SECURE Act brought numerous benefits that will help to support the financial well-being of individuals today,” said Bill Harmon, president, Retirement Corporate Markets for Voya Financial. “At Voya, we are committed to bringing holistic financial wellness solutions forward so that a secure financial future is reachable for all Americans. We are excited that Aon has selected us to share this opportunity and look forward to working together as we support their 401(k) retirement plan services.”

For more information about the Aon Pooled Employer Plan (PEP), email retirement@aon.com.