Insurance Jottings
What NOAA Expects in 2018 Atlantic Hurricane Season
On the heels of the costliest hurricane year on record, the Atlantic is expected to produce five to nine of the mighty storms during the six-month season which started on the 1st June, the National Oceanic and Atmospheric Administration said.
A total often to 16 named storms, tropical-strength or stronger, will likely cross the basin, threatening people, real estate, crops and energy resources in the US, Mexico and the Caribbean, according to the agency’s annual forecast on the 24th May.
Of those, one to four may become major hurricanes with winds of 111 miles (179 kilometres) per hour or more.
“Regardless of the seasonal prediction, Atlantic and Gulf coast residents need to prepare every year,” Gerry Bell, a forecaster with the Climate Prediction Center, said during a conference call. “There are over 80 million people between Atlantic coast and Gulf coast that can be affected by a hurricane.”
Hurricane season is closely watched by markets because about five percent of US natural gas and 17 percent of crude comes out of the Gulf of Mexico, according to the Energy Information Administration. In addition, the hurricane-vulnerable coastline also accounts for 45 percent of US refining capacity and 51 percent of gas processing.
Florida is the world’s second-largest producer of orange juice. Along the Atlantic and Gulf coasts there are more than 6.6 million homes with an estimated reconstruction cost of US$1.5 trillion, according to the Insurance Information Institute in New York.
Costliest Year
Last year the US was hit by three major hurricanes — Harvey, Irma and Maria — which helped drive total losses to more than US$215 billion, according to Munich Re. It was the costliest season on record, surpassing 2005 which produced Katrina. Overall 17 named storms formed in 2017, which fell in line with NOAA’s prediction of 11 to 17.
The forecast is influenced by conditions across the equatorial Pacific. Earlier this year La Niňa collapsed and the ocean returned to its neutral state with the possibility of an El Niňo forming later this year. El Niňo, when the Pacific warms and the atmosphere reacts, increases wind shear across the Atlantic which can tear apart hurricanes and tropical storms, reducing the overall numbers.
Conditions in the Atlantic will also play a role. Hurricanes need warm water to fuel growth and the basin is currently running colder than normal.
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An average to above-average season means there is a greater chance the US coastline and Caribbean islands are at risk, Mr Bell said.
“When you have a more active season you have more storms forming in the tropical Atlantic and those storms track further westward,” he said. “Certain areas have been compromised from last year’s storms that makes hurricane preparedness ever more important this year.”
Endeavour and SSL to merge under JC Flowers
Lloyd’s broker and delegated authority specialist Endeavour Insurance Services Limited is to merge with fellow Lloyd’s and independent specialist marine broker SSL Insurance Group.
This deal will conclude with both companies being acquired by a fund advised by private investment firm J C Flowers & Company LLC.
The transaction is subject to FCA approval and is expected to complete in the second quarter of 2018.
Founded in 1999, Endeavour Insurance Services specialises in the placement of business produced by North American and European agents handled under delegated authorities. Now employing 44 people in its London headquarters, Endeavour has three divisions supporting business from Canada; the USA, Europe and the Rest of the World; and Cyber.
Established in 2003, SSL is a leading marine broker, supporting clients in more than 80 countries and servicing a substantial book of fleets. As well as its marine expertise, SSL has expertise in many other insurance classes including Cash in Transit, Financial Institution and Political Risk. Employing 42 people, the company is headquartered in London.
The combined business will trade as SSL Endeavour and the leadership team at both companies will remain in place with Roger Spicer continuing as CEO of SSL, and David Lawrence retaining his role as CEO of Endeavour. SSL Endeavour will be co-chaired by Andrew Sturdy, founder of SSL and Chris Giles, Endeavour chairman.”
Lloyd’s Brussels subsidiary granted regulatory approval
Lloyd’s, the world’s specialist insurance and reinsurance market, announced on the 23rd May that it has received licence approval from the National Bank of Belgium for Lloyd’s Insurance Company SA (Lloyd’s Brussels).
The licence means that Lloyd’s Brussels will be able to write non-life risks from the European Economic Area (EEA), ensuring that Lloyd’s customers can continue to access the market’s specialist underwriting.
Inga Beale, Lloyd’s CEO, said: “Since the UK referendum on EU membership Lloyd’s has been working hard to ensure that whatever the outcome of the Brexit negotiations our partners across the EEA will continue to enjoy access to Lloyd’s unique offering.
“I am delighted that Lloyd’s has received regulatory approval for its new Brussels subsidiary. This will deliver certainty for all our customers, reassuring them they can continue benefitting from Lloyd’s specialist expertise, innovative policies and financial security post-Brexit.”
Vincent Vandendael will take up the post of Chief Executive Officer of Lloyd’s Brussels in addition to his role as Lloyd’s Chief Commercial Officer.
He said: “Today marks an exciting next step in the setting up of our operations in Brussels. The new subsidiary will mean that our customers within the EEA continue to have access to Lloyd’s specialist policies, and it will also provide us with opportunities to continue to grow our business on the continent.
“Lloyd’s Brussels will be at the forefront of our modernisation drive, with a platform in one of our most important markets that harnesses all the benefits of Lloyd’s whilst utilising the latest technology, expertise and talent available.”
Minister of Finance, Johan Van Overtveldt, said: “I am very happy to announce that the National Bank of Belgium has today officially granted a licence to Lloyd’s after a thorough due diligence process. By establishing an insurance company in Brussels, Lloyd’s will significantly strengthen Brussels as a financial centre and build a bridge to London for specialised insurance and re-insurance. We are looking forward to welcoming more London-based insurance companies and brokers to Brussels, which lies at the heart of Europe and is home to the main European decision-making centres.”
Regulated by the National Bank of Belgium and fully Solvency II compliant, Lloyd’s Brussels will start writing business from the 1st January 2019.
Aspen applies to Irish regulator to set up Dublin subsidiary
Aspen has put in an application with the Central Bank of Ireland (CBI) to set up a Dublin subsidiary ahead of Brexit.
The company said the move was to ensure that it could “continue serving partners and clients in the European Economic Area (EEA) following the United Kingdom’s exit from the European Union”.
UK, France, Germany Huddle on Iran Oil Tanker Insurance
If European powers are to succeed in holding together a nuclear deal with Iran which the US has abandoned, then one issue they will need to consider is the insurance of oil tankers hauling the Persian Gulf country’s crude.
From early November, US sanctions will likely prevent members of the International Group of P&I members from covering the global tanker fleet against risks including spills if they are moving oil to or from Iran, Mike Salthouse, the chair of a sanctions committee for the IG Group, said on the 15th May.
International Group-backed cover is considered standard in the vast majority of charter contracts for oil shipments because it means everybody in the supply chain knows that many billions of dollars backstop the insurers and reinsurers who would pay out in the event of a claim. As things stand, it is likely such coverage will be curtailed “or stopped altogether” for Iranian cargoes in November, Mr Salthouse said.
Foreign ministers from the UK, France and Germany were due to sit down with their Iranian counterpart, Javad Zarif, in Brussels to discuss how to move forward. European Union leaders would then take up Iran at an informal dinner in Sofia.
If Salthouse’s analysis is how it plays out, then expect to see governments — both Iran’s and its client states — seeking creative solutions. Last time around, those in Asia set up sovereign insurance entities while Iran provided more cover too.
The International Group is communicating with the US Treasury’s Office of Foreign Assets Control and the European External Action Service, and “will be using those to obtain more clarity for ourselves and our members,” Mr Salthouse said.
He is also the deputy global director of claims at North P&I Club, one of 13 members of the International Group, and an insurer of about one in every eight of the world’s ships.