In This Issue
· ELTO, do you know what it is? Does your broker?
· Solvency II update. More delays?
· April 1 renewals for Asia seeing big price increases.
· Believe it or not more flooding in Australia.
· AAMGA technology conference in Atlanta
· Lloyd’s 2011 insured losses
Links for Additional Information
To see a 10 minute video,
or to learn more, contact:
Phone: 44 (0)20-7663-5656
ELTO: Do you know what it is?
Here’s some news from London that may be of interest to you. The Employers Liability Tracing Office, or ELTO, is an independent, not-for-profit company funded by a levy on insurers. It’s been set up to provide claimants with quick and easy access to a database of Employers' Liability (EL) policies through an online enquiry facility. ELTO is designed to help claimants find the insurer of their former employer if the claimant is suffering from a disease/injury caused at work.
It would be hard to dispute that anything that helps a claimant more quickly learn information about which insurer might be the insurer responsible for a claim if the employee has been injured at work, or has contracted an illness as a result of work, would be a negative. It certainly seems like a good idea.
Before ELTO there had been a voluntary Employers’ Liability Code of Practice that had been started in 1999. As you might think from the “voluntary” nature of the 1999 effort compliance with the new ELTO standard will be mandatory.
ELTO requires compliance by both brokers, insurers and specifically mentions “delegated authority” business. Read this from the ELTO website:
“Intermediaries, such as brokers, managing general agents (MGAs) and delegated authorities (DAs), are a vital connection between the insurer and the insured and therefore play an important role in the success of the Employers' Liability Tracing Office (ELTO). in February 2011, the Financial Services Authority (FSA) published new regulations that change the way that insurers and intermediaries record EL policy data”.
Here is the ELTO website: http://www.elto.org.uk/ . You may want to be sure that you, your market and or binder broker are in compliance because as of right now ELTO was set to be mandatory on April 1, 2012. The deadline, as of this writing, may be extended another 12 months until 2013 but if the data is currently missing brokers should collect it at the next renewal data or else they will need to chase that data with clients mid-term.
Solvency II role reversal: Now the insurers are pushing it
Poor Solvency II. It truly seems as if it doesn’t get any respect as Rodney Dangerfield might have said. At its inception several years ago the EU financial oversight directive was aimed at ensuring that European financial institutions were adequately reserved to avoid any of the financial meltdowns we saw in the US and Europe in 2008.
Solvency II has rules for insurers too and considers them to be “financial institutions” as well. Because large European insurers were heavily diversified in both lines and levels of coverage ; geographic spread and had the election to purchase reinsurance coverage if needed, they argued that they need not be held to the same standard as banks. S2 painted with a broad brush and only a few exceptions were made for the insurance and reinsurance sectors.
After several years of trying to educate EU policymakers about the differences, and earning a few concessions, eventually European insurers began to ready themselves for the same oversight that would be applied to their banking brethren.
If you think that the United States has faced difficulty in trying to impose the Dodd-Frank Financial Regulatory Reform law on American banks and insurers just take a stab at estimating the problems facing Brussels (where the EU headquarters is located) when trying to impose regulation on banks and insurers of 27 different EU member countries!
It has been a long and difficult process and the official implementation date has been delayed several times from 2012 to officially 2014. Unofficially, regulators in Europe are beginning to be quoted in the press as expecting further delays or, worse yet, going back to the drawing board and revising the whole of S2.
Any business person will tell you that business can adapt to just about any government policy given enough time and an adequate rationale for doing so. Business people will tell you though that the biggest problem they can face from government though is inconsistency. Laws are applied uniformly and consistently and regulations are meant to be applied the same way. If a business can’t rely on consistency of response from a regulator things become difficult.
With the delays of S2 many large insurers and reinsurers are facing the specter of having already spent hundreds of millions of dollars to come into compliance with S2 believing that they would be facing legal penalties had they not. While it’s consoling to think that the increased modeling and solvency requirements mandated by S2 could only benefit an insurer not all insurers have complied with the as of yet unenforceable rule.
This means that those who have not complied (they are as of yet under no legal obligation to be in compliance) have typically not sustained expensive compliance study/audits and have not added expensive financial controls. Translation; they have not sustained the compliance expenses that other, perhaps more well-intentioned companies have already incurred.
So now, we see the unusual scenario where the same industry that had questions about S2 and its excesses , is now in a position where, seeking some certainty and predictability in the matter, it is asking Brussels to get on with it and just implement the rule.
Ah, but this S2 debate has now lingered a bit too long and has now attracted the attention of elected officials. British Prime Minister David Cameron said the other day in the House of Commons that “Solvency II rules are a good example of ill thought-out EU legislation”.
What will happen next is anyone’s guess but our guess is that business leaders seeking certainty and predictability of response from government on financial regulatory issues will be disappointed.
Our friends at the American Association of Managing General Agents (AAMGA) held their annual Automation & Technology Conference from March 3 through March 6 in Atlanta. The CATEX Bordereau/Program Management & Reporting System was demonstrated to a number of participants……Estimates are that the early March flooding in New South Wales, Australia have already costs over $1.5 billion in economic damage. The latest flooding is at least the third serious inundation in the area over the last 24 months….As predicted by many observers the cost of Japanese reinsurance for P&C risks has jumped in advance of the traditional April 1 renewals. Reports in the news indicate that in some instances premium increases of 60% are being conveyed to brokers by reinsurers…. Lloyd’s offered indications that it will report 2011 insured losses exceeding the 2010 total of $12.7 billion US. In a speech in Australia, the Head of Lloyd’s Asia, Kent Chaplin revealed that Lloyd’s will report $6.4 billion in insured losses relating to the Japanese and New Zealand earthquakes and Thailand and Australia flooding….Two of the world’s biggest CAT modelers, Risk Management Solutions (RMS) and AIR Worldwide (AIR) have entered into an agreement to share exposure data schemas making it easier for clients of both to move and translate exposure data between the two models…
(A Quick “Byte”!)