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Bordereau Reporting

April, 2012

Issue 12

In This Issue

· Granular data: not just for delegated authority anymore.

· Was Insurance once the Facebook and Twitter of “globalization”?

· In for a penny, in for a pound…more on Solvency II.

· Intelligent Insurer article on software opportunities at Lloyd’s

Prior Newsletters

2012

· March

· February

· January

2011

· December

· November

· October

· September

· July

· June

· May

· April

Links for Additional Information

· New Bordereau System Ad

· Bordereau System Brochure

· CATEX TV Broadcasts

· Bordereau System Demo

To see a 10 minute video,

or to learn more, contact:

US

Stephanie Fucetola

sfucetola@catex.com

Phone: 609-683-0888

UK

Shane Hustwayte

shustwayte@catex.com

Phone: 44 (0)20-7663-5656

www.catex.com

 

Granular Data Sought by Reinsurers

 

As Yogi Berra says “it’s déjà vu all over again”. A front page article in the April 2 edition of Insurance Day says that the “quest for increased granularity of data has been one of the main themes of the April 1st renewals” in Japan. The article, written by Scott Vincent, goes on to observe that this “trend is set to continue for other major international reinsurance renewals in light of the record breaking cat losses of 2011”.

 

None other than Geoff Bromley, the president of Aon Benfield International, told Insurance Day that even buyers of reinsurance were now more understanding of the need of reinsurers for better, more granular data in light of major losses like the floods in Thailand last year.

 

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Just to refresh your memory on those floods, which caused $12 billion in insured losses, when they first began to attract international attention the disaster was perceived as mainly a human tragedy and a threat to the newly elected government of Thai Prime Minister Yingluck Shinawatra who had been criticized over what some alleged to be “selective” closing and opening of flood barriers in and around Bangkok.

 

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Prime Minister Shinawatra

 

Soon enough it emerged that there was a significant amount of industry related to the global electronics supply chain which affected the computer, auto, cell phone and personal device markets. Many Japanese domiciled producers of such products maintained either ownership of or supply contacts with thousands of small Thai electronic manufacturers. The inundation knocked out many of these small manufacturers and eventually led to business interruption at companies such as Honda, Toyota, Apple, Dell to name a few.

 

Bromley notes that the “big message is on granularity of data. We will see that continue for other countries of the world where interests abroad are insured. People want to know what they are underwriting”.

 

If you are in the Delegated Authority business Mr. Bromley’s words are a warning you have heard before. New standards from Lloyd’s and picked up by US program carriers are demanding just such granularity of data for their binder and program books. Now it seems that the international reinsurance community wants the same –and why not?

 

If markets are being asked to provide coverage for what may be hundreds of small manufacturers it would seem that they should have the exact addresses, flood elevations, mitigation procedures and disaster recovery plans of each and every single one of them. Absent that information it would seem that underwriting the risk(s) is sort of a gamble.

 

The Pivot Point Insurance and Reinsurance Transaction System does manage the exact characteristics of individual risks for delegated authority business and for treaty and XOL reinsurance. That same view of the contents of a delegated authority binder afforded to program underwriters can be had by treaty underwriters combing through hundreds or thousands of individual locations or risk. Our sophisticated Mosaic Reporting Suite allows the information call-ups to be easy and seamless.

 

 

Data storage is inexpensive. We have the tools to collect and manage the data. And we have the tools to find the data you need. Next time there is a disaster like the Thai floods the industry –which as Bromley noted –paid the Thai claims with speed – will be better prepared.

 

­­­­­­­­­­

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If you are beginning to realize that all the new social media channels are enabling people to have more interactions with each other, more frequently, and with people more geographically distant, you’ve just formulated a plausible definition of “globalization”. And you are correct in your realization too –we seem to be craving more and more contact with each other (although at times I’m sure we each wonder “why”?).

 

Interestingly enough it could be argued that insurance and reinsurance were among the very first industries to understand and profit from globalization many centuries before anyone ever thought of the Internet no less the telephone. Athenian merchants understood the risks of piracy in the Black Sea in 350 B.C. as well as the early ancestors of underwriters understood the risks of Atlantic storms at John Lloyd’s coffee house in the late 1600s.

 

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The associations that came into existence to sell protection to merchants and ship owners had to understand and weigh risks far outside of their day to day environments. If they misunderstood those risks they stood to lose significant portions of their personal wealth put up as security to provide merchants with the confidence they needed to trade. Knowledge was priceless and incoming ship captains would be quizzed incessantly by voyage underwriters about sea conditions, port qualities, pirate sightings, etc.

 

We had an interesting discussion about the globalization aspects of insurance with Dr. Brian Spooner, a professor of Anthropology at the University of Pennsylvania, who is engaged in a number of research and publication activities related to the causes and consequences of globalization and the current rapid global increase in urbanization.

You might be interested in watching it, as Professor Spooner observes that insurance was in fact a prime mover in globalization that in many ways has facilitated the spread of both commerce and social networking.

The video is at this link: https://www.youtube.com/watch?v=pw1zJ52hHMc

 

 

 

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Maybe we should let Yogi Berra (“déjà vu all over again”) actually write this article but, yes, you guessed it. Uncertainty continues to loom over when, and for some extreme critics, if, Solvency II is going to be implemented in Europe.

 

Some insurers have temporarily abandoned S2 and have gone ahead and filed standard reserving plans with regulators rather than wait for a requirement of a specialized dynamic risk based capital analysis mandated by S2. Years of preparation and cost have gone into preparing for the new standard yet the new standard it seems cannot quite be officially implemented yet.

 

Some insurers have decided to go the other route and have gone ahead and utilized the anticipated S2 standards in their own annual filings with insurance regulators. In short, what was a commendable effort to raise all 27 Eurozone countries to a new, risk-based capital plan has instead become a scene of no small confusion.

 

Last month European regulators said they were confident the new capital regime is still on schedule with a ‘soft launch’ planned for January 2013 with implementation by insurance companies happening later that year.

 

 

Lloyd’s opens the door to new software systems

 

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CATEX contributed an article to the Spring edition of Intelligent Insurer. The article’s title, “New Software Opportunities at Lloyd’s” was the result of some extraordinary creative thinking here –it means exactly what it says! If you have an interest in how companies like CATEX are working with a new policy at Lloyd’s to improve overall market efficiency and bring new solutions to the London market it may be of interest to you.

 

The article may be found at http://content.yudu.com/A1w97v/IISpring2012/resources/56.htm

 

 

 

Quick Bytes

 

The tornadoes that touched down in Texas in late March have caused in excess of $1.1 billion in insured losses. Total economic losses are estimated at $2 billion….The 2012 US tornado season has really only now just begun in earnest with the advent of springtime…..The two big earthquakes off Sumatra, Indonesia on April 10th were so called “strike slip” quakes which rarely are so strong. Researchers are puzzled. The bad news is that the San Andreas is a strike/slip fault line too…

 

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(A Quick “Byte”!)