Energy Review 07-2017
27 July 2017
Across the world politicians will probably be pleased that so much sport has pushed a lot of squabbling into smaller headlines. With rugby, cricket, tennis and cycling enjoying enthralling tournaments, it makes the recent G20 summit look like an uninspiring garden party.
The world is now getting to understand Donald Trump’s Presidency goals; by losing its majority in the House of Commons, the Conservative party is facing major challenges as they try to re-establish control; President Macron of France still has not bared his teeth; the upcoming elections in Germany are looking more like a foregone conclusion; even President Erdogan seems to be moving towards a more open ruling style in Turkey. These issues do not conjure up the emotions one would have expected a few months ago.
Amidst all of this exciting and not so exciting news, the world of energy keeps ticking away nicely. The prices of oil and gas are fairly stable; major oil discoveries have been announced; more gas is coming onto the market; production in the North Sea is picking up; the latest revival of oil production in Libya seems to have an air of permanence about it (touch wood!); Rosneft and its partners are planning to invest over US$8 billion in the Russian offshore energy sector; there are plans for developing offshore Israel gas fields; the Liza oil field offshore Guyana is to be developed; BP and Reliance have similar plans for offshore gas fields in India; Saudi Aramco is ordering even more platforms to service some of its major oil fields and is planning to invest US$300 billion over the next decade; and South Sudan will almost double crude output by December. There is a lot of dynamism in the energy world. Experts are questioning the bleak outlooks for the industry.
There are two areas where conflicts look like hotting up: a new militant group has threatened those operating in the Niger Delta of another oil war, and Qatar is becoming increasingly isolated in the confrontation with the other Middle Eastern states. In both of these cases, the seething undertones have been ignored for years and the chances of violence escalating looks ominous.
As the Brexit clock continues to tick, more carriers are selecting venues for their EU hubs, although Lloyd’s has recently questioned its own decision to set up on the Continent. Time will tell. The Brexit negotiations have not really moved out of first gear; one of the reasons could be that no-one has dared declare what would be the most satisfactory compromise.
The movement of people in the marketplace has been dominated by XL Catlin who has been mentioned several times. The move by AXIS to take over Novae could, alas, result in job losses. Liberty, Nexus, Trust Re, Everest and CNA Hardy are amongst others who are mentioned as quality staff exploit the market’s needs for excellence.
Price Forbes Holdings Limited has also announced this month its strategic entry to the Chilean market with the acquisition of equity interest in a leading reinsurance broker which has been trading for over 12 years, serving large Chilean corporate clients and the reinsurance markets.
We hope that this news is useful and look forward to hearing how we can help you with your energy-related insurance and risk management needs around the world.
Energy Casualties
Total says Martin Linge oil field start-up delayed until 2019
Total said on the 6th July that the start of production at the Martin Linge oil and gas field, located in the North Sea off the coast of Norway, has been delayed following a previously-reported accident.
Total said the start of production had now been pushed back from later this year to the first half of 2019.
Total holds a 51% stake in the field; Petoro owns 30% while Statoil holds 19%.
The delay follows an accident in May, when six people died and more than 20 were injured after a crane collapsed onto a section of the platform under construction at a Samsung Heavy Industries shipyard in Geoje, South Korea.
That accident had affected delivery of the platform.
Oil thefts cost Pemex nearly US$2 billion a year
Thieves are tapping into the gasoline pipelines of Mexico’s state-owned oil and gas giant, Pemex, with such frequency and in such quantities that the business is losing nearly US$2 billion a year, leaving some US companies with second thoughts about entering Mexico’s recently-opened energy market, according to recent research at Rice University.
The number of separate incidents has increased from about 200 in 2006 to nearly 7,000 last year – almost 20 break-ins a day – according to an analysis of Pemex figures by Adrian Duhalt, a Rice postdoctoral fellow. Losses have jumped from under US$1 billion in 2009 to US$1.7 billion last year.
The rising thefts could deter international investment and quash the budding revival of the Mexican oil and gas industry, Mr Duhalt said. “It’s huge; Mexico is trying to attract investors in the commercialization of gasoline.”
Mexico deregulated its oil and gas market and broke Pemex’s monopoly in 2014, inviting foreign companies to take part, with hopes of spurring exploration and production and boosting the country’s sagging energy profits.
Petróleos Mexicanos, known as Pemex, pumped more than three million barrels per day of crude a decade ago and was responsible for one-third of Mexico’s tax revenues. But the company has since been hobbled by overspending, heavy pension liabilities, and declining oil and gas production. The recent crash in oil prices only made things worse.
Crude output has dropped by more than one-third over the last decade and government contributions sunk to less than one-fifth of the country’s revenues.
Pemex’s new Chief Executive, José Antonio González Anaya, has vowed to turn the company around, slashing spending and working to attract international investment to Mexico.
Pemex reported a first-quarter profit of US$4.7 billion this year as crude prices rose, its first quarterly profit since 2012. A year earlier, the company posted more than US$3 billion in losses.
In March, BP announced it would build 1,500 new service stations in the country over the next five years, with 200 opening this year. The investment should cost “several hundreds of millions of dollars,” in stations, terminals and pipelines, an executive said.
But Mr Duhalt worries fuel thieves will deter future investment. Mexican authorities have long taken a “hands-off approach” to the theft, he wrote in his paper, “Looting Fuel Pipelines in Mexico”. And the problem has become in worse in recent years.
Azerbaijan: Seismic vessel crashes into offshore platform
Five offshore workers have reportedly been injured after a seismic vessel crashed into an offshore platform in the Caspian Sea.
ABC.az, citing SOCAR, Azerbaijan’s national oil company, said the incident happened on the afternoon of Wednesday 28th June, with a vessel named Arya 141 involved.
According to the company, the vessel, owned by Caspian Shipping Company, was conducting a seismic survey in the Narimanov area when it lost control and crashed into offshore platform #34.
Five of seven crew members were injured and one person was hospitalised. SOCAR is investigating the case.
Rebel bomb attack halts Colombia’s Cano Limon crude pipeline
A bomb attack by the Marxist ELN rebels has halted the flow of crude along Colombia’s second largest oil pipeline, the Cano Limon-Covenas, sources from the military and state-run oil company Ecopetrol said on the 27th June.
The explosion took place on the 24th June in a rural area of Saravena municipality, in the province of Arauca. Though the 485-mile (780-kilometre) pipeline was stopped, operations at the Cano Limon field, operated by US-based Occidental Petroleum Corporation, and exports were unaffected.
Attacks on oil infrastructure by the National Liberation Army, or ELN, have been frequent during the group’s five-decade war with the government. There have been 32 bombings so far this year, according to Ecopetrol, which frequently cause environmental damage.
The ELN has about 2,000 combatants and opposes the presence of multinational companies in the mining and oil sector, claiming that they seize natural resources without leaving benefits for the country’s population or economy.
In February President Juan Manuel Santos and the ELN launched formal peace negotiations in Ecuador, but the group has stepped up its attacks.
Engie shuts down Gjøa production after gas leak
A gas leak occurred on the 21st June at the Engie E&P-operated Gjøa field located in the North Sea, prompting the company to stop production.
The Gjøa gas field is situated 60 kilometres west of Florø, on the west coast of Norway.
According to Engie’s statement following the gas leak at 08:01 p.m., the situation quickly came under control and no injuries are reported. The gas leak has been stopped and the situation on board the Gjøa platform is under normalisation. Production is currently shut down.
The installation had 49 people on board when the incident occurred and 19 people were demobilised by helicopter and brought to a support centre in Florø, Engie said.
The company’s emergency response organisation was mobilised to coordinate all support required and was in dialogue with the relevant authorities.
Engie has a 30% interest in the field and is the operator. Its partners are Shell with 12%, DEA Norge with 8%, Petoro with 30% and Wintershall Norge with the remaining 20% interest.
The semi-submersible production unit Gjøa has full processing and export capabilities. Oil is exported to the Mongstad crude oil terminal. Export of gas ends up at the St Fergus gas terminal in Scotland.
Oil tanker sinks off Malaysian coast after explosion on board
An oil tanker sank in Johor waters after an explosion on board and six of its Indonesian crew members are missing.
The Malaysian Maritime Enforcement Agency (MMEA) said it received information on the incident from the Singapore Police Coast Guard (SPCG) at about 05:00 a.m. on Thursday 15th June that the MT Putri Sea, which is registered in Equatorial Guinea, could not be contacted by the tanker’s agent.
It said the incident had happened 4.6 nautical miles south-west of Tanjung Pengelih in Johor.
New militant group threatens Niger Delta oil war
Striking self-assurance, a penchant for hyperbole and a working knowledge of Latin – these are the hallmarks of the latest group of militants to emerge in Nigeria’s oil-rich Niger Delta.
The New Delta Avengers are named in a nod to the Niger Delta Avengers who last year crippled Nigeria’s oil production in a fight for a greater share of the proceeds for the region, impoverished, like much of the country, by endemic corruption.
The new group’s inaugural statement was signed by a Corporal Oleum Bellum, a Latin phrase that loosely means “oil war”.
It and others, like the Niger Delta Marine Force led by one General Benikeme Hitler, have formed even as the government holds peace talks with Niger Delta communities to try to end the violence which has brought the economy to its knees.
“By this declaration, we are resurrecting the spirit of insurgency to demand for a better deal for our people,” the New Delta Avengers’ statement said.
“We are going to do this through bloody attacks and destruction of oil assets in the creeks and upland areas so as to disrupt and eventually cripple oil prospecting and production operations in the state.”
Many groups issue similar statements and never act on their words. But some, like the original Niger Delta Avengers and the Movement for the Emancipation of the Niger Delta (MEND), did so to devastating effect.
At the height of violence last year, Niger Delta militants’ attacks cut Nigeria’s oil production by as much as a third.
That set the economy reeling, as lower crude exports meant less money in government coffers, especially the US dollars Nigeria needs to import essential products and keep businesses running.
Saudi Aramco’s Manifa oilfield production hit by technical issue
Output from Saudi Aramco’s massive Manifa oilfield has been hit by a technical problem, the International Oil Daily reported on Tuesday 11th July 2017, citing unnamed sources.
Manifa is one of state-run Aramco’s biggest oilfields and latest expansions, with a production capacity of 900,000 barrels per day. Aramco brought the field online in two phases.
The industry publication reported that it was unclear how much production was removed as a result of corrosion of the water injection system used to maintain pressure in the reservoir.
It added, quoting sources, that the losses were likely to be in the “millions of dollars”.
Saudi Aramco did not immediately respond to an emailed request for comment.
The offshore oilfield – made of rigs on manmade islands linked by 41km (25 miles) of causeways and bridges over the Gulf – was discovered in the 1950s.
“Corrosion control in the water injection system is not a technical challenge but it can be expensive to repair the water injection lines. They will probably have to shut down the field for maintenance,” said Sadad Al-Husseini, a former executive vice president at Saudi Aramco.
“It may have an impact on maximum sustainable capacity but will not affect Aramco’s share of exports,” said Al-Husseini, now an energy consultant.
Insurance News
Price Forbes opens Chile office through acquisition
Price Forbes Holdings Limited (Price Forbes) has announced its strategic entry to the Chilean market.
Price Forbes has acquired an equity interest in a leading reinsurance broker which has been trading for over 12 years serving large Chilean corporate clients and the reinsurance markets. The operation is led by Luc Van Eyghen, who with the support of Price Forbes will continue to grow the business and expand the specialist services it offers. Greg Ferguson of Price Forbes will join the board of the company which has already initiated process to file the new name Price Forbes Chile.
Quote from Luc Van Eyghen: “We are delighted that Price Forbes has taken an investment in our business. We have been working closely together for some time and this cements that relationship. Their involvement will provide access to expertise in specialist classes of business which will help us to support our clients and develop new business. We look forward to a successful partnership together.”
Quote from Michael Donegan, CEO Price Forbes: “We were attracted to the quality of the leadership, the reputation of the people and its business and the value which Price Forbes as a group can bring to help local clients gain independent expertise and international market access. We are looking forward to working with Luc and his team to help develop our combined presence in Chile.”
Quote from Greg Ferguson, Managing Director – International: “This is an exciting international investment outside of our core business platforms and is a clear message of our ambition to enter into strategic markets. The robust platform gives us a spring board in to a market place where we see great opportunity to jointly grow our brand and the current portfolio with innovative solutions combining Price Forbes’s capabilities”.
Swiss Re and XL Catlin partner with new Lloyd’s MGA Ensurance UK
Ensurance’s newly-created managing general agency has entered into a partnership agreement with Swiss Re Corporate Solutions and XL Catlin, and received Lloyd’s coverholder status for its UK operations.
Ensurance UK has been formed initially to specialise in construction and engineering insurance.
The company has partnered with Swiss Re Corporate Solutions to offer a range of construction and engineering insurance products across the UK and parts of the EU, targeting to insure contracts up to £100 million.
As part of its partnership with XL Catlin, Ensurance UK will initially provide a bespoke construction insurance product to high net worth UK domestic clients. Australian Ensurance Underwriting already partners with XL Catlin for a range of domestic home insurance products, including landlord insurance products, in Australia.
Ensurance has gained the Lloyd’s coverholder status allowing it to issue insurance documents on behalf of Lloyd’s syndicates. It now has two Lloyd’s coverholder companies, in the UK and Australia.
Ensurance is the holding company which owns three distinct businesses in the insurance industry; it operates a brokerage, an underwriting agency and an IT company.
Lloyd’s to introduce satellite imagery and intelligence service
The Lloyd’s Market Association (LMA) said on the 6th July that it has received backing and funding support for a satellite imagery and intelligence service for all Lloyd’s managing agents.
The new service aims to enable improvements to claims processes and exposure management both pre and post a natural catastrophe across multiple classes of business. It will help Lloyd’s carriers to assess the extent of the damage/loss at an early stage by providing ‘ground truth’ intelligence such as satellite imagery and any available all-source data, according to the statement.
The data and analytics will allow Lloyd’s claims professionals to manage and adjust claims remotely, in some instances making early part-payment or full settlement to policyholders. The service will be delivered to each managing agent via MIS’s custom-built portal, the LMA said.
“Data and analytics are driving rapid change in our industry and I am pleased that we are supporting such an important and growing field,” said Ruth Cameron-Errington, Senior Claims Executive at the LMA. “This service and the technology it brings will undoubtedly further improve the way in which claims professionals and the wider market manage and respond to claims post a significant natural catastrophe.”
Pakistani oil and gas regulator fines Shell over tanker fire
A spokesman for Pakistan’s oil and gas regulatory body has said that the agency has ordered a local subsidiary of Royal Dutch Shell to pay about 250 million rupees (US$2.4 million) in compensation and damages for last month’s fuel truck fire which killed 215 people.
Imran Ghaznavi said on the 7th July that the state-run Oil and Gas Regulatory Authority’s probe has held Shell Pakistan Limited responsible for the accident on the 25th June when an oil tanker lost control and crashed in Punjab province.
The fuel ignited when villagers rushed to the scene to collect the spilled oil, ignoring warnings from police.
Mr Ghaznavi said police response after the accident was also slow.
He said the tanker involved in the accident was not properly maintained and the driver’s licence was invalid.
A subsidiary of Royal Dutch Shell said on the 13th July that it will pay compensation to the victims. The company said they were in discussions with Pakistani authorities over the “means by which this financial assistance can appropriately reach the injured and the families who have lost their loved ones”. It did not specify the amount it planned to pay.
Court orders Shell to pay nearly US$400 million for oil spill damage
On the 12th June it was reported that Nigeria’s Court of Appeal has ordered oil and gas firm Shell Petroleum Development Company of Nigeria Ltd. to pay 122 billon Nigerian naira (US$384 million) as compensation to the local Ejama-Ebubu community in Rivers State for damage caused by a crude oil spill.
Shell had challenged a judgment by Nigeria’s Federal High Court, which awarded more than NGN15 billion to the Ejama-Ebubu community as special and general damages.
AXIS to buy London rival Novae for over US$600 million
Bermuda-based insurer and reinsurer AXIS Capital Holdings Ltd. will buy Lloyd’s insurer Novae Group plc for US$604 million, AXIS announced on the 5th July.
The combined business will have more than US$6 billion in gross written premium, AXIS said in a statement. Novae reported £901 million (US$1.17 billion) in gross written premium in 2016, a pre-tax profit of £23.7 million (US$30.7 million) and a 107% combined ratio.
According to a regulatory filing, Novae has a market capitalisation of about £374 million (US$483.8 million) and the offer represents about a 20% premium on its closing price on the 4th July.
Novae grew out of the Spreckley Villers Hunt & Company Ltd. managing agency, which was established in 1986. It operates Lloyd’s Syndicate 2007 and covers various property/casualty, marine, aviation and specialty risks.
AXIS, which has operations in North America, Europe, Singapore and Brazil, already operates Lloyd’s Syndicate 1686. The combined entity will have London market-related gross written premium of about US$2 billion.
“A key component of our growth strategy is to have leadership positions, relevance and scale in each of the specialty risk markets where we choose to compete,” said Albert Benchimol, President and CEO of AXIS, in the statement. “The acquisition of Novae is a great opportunity to accelerate the breadth and depth of talent, lines of business, and leadership positions that we are developing in the London market for specialty risks.”
As part of the deal, which is expected to close in the fourth quarter, Novae CEO Matthew Fosh will join AXIS as Executive Chair, Europe. Novae’s Chief Underwriting Officer, Robert Forster, will have a senior underwriting management role on the leadership team of AXIS’ international insurance division, which is led by CEO Mark Gregory, the statement said.
The cash deal comes about two years after AXIS lost out to Italy’s Exor S.p.A. in a bidding war over PartnerRe Ltd.
Stephen Catlin and regulator warn insurers over cyber risk exposure
Stephen Catlin, the founder of Catlin, and the UK’s Prudential Regulation Authority (PRA) have warned insurers over their cyber risk exposures.
“Cyber is the biggest systemic risk which the insurance industry has ever faced in my lifetime,” the insurance veteran said during the 2017 MGAA conference in London on the 4th July.
“I can’t think of any other risk which can affect the entire world in a nanosecond,” Mr Catlin explained. “There will never be enough insurance capital to take that risk,” he continued.
Cyber is seen as one of few opportunities to grow in an otherwise subdued re/insurance sector. Annual gross written premiums in cyber are set to increase from around US$2.5 billion in 2015 to reach US$7.5 billion by 2020, according to estimates.
But such growth may carry unforeseeable risks. Hackers may be able to ‘tip over’ the internet in less than three years, according to experts, Mr Catlin noted. If the internet was to tip over for 24 hours this would trigger a global economic crisis, he said. If it extended to a week, that would be a cataclysmic crisis of dimensions we can’t possibly imagine, he added.
“Coverage policy on cyber is absolute nonsense,” Mr Catlin said.
Following a cross-industry review, the PRA issued a new supervisory statement on cyber insurance underwriting risk on the 5th July focusing on the exposure of insurers to the accumulation of cyber risk through the insurance policies they write for their clients.
“The PRA expects insurers to get a better handle on their cyber risk management and should be seen as a clear sign that action needs to be taken by insurers and reinsurers to fully understand their cyber exposure,” said Marta Abramska, Associate Director in PwC’s cyber insurance practice.
“The difficulty of dealing with cyber threats is no longer an acceptable excuse for inaction and the regulator has today set out the steps insurers need to take to provide security and stability.”
A number of global ransomware attacks dubbed ‘WannaCry’ or ‘Petya’ have hit companies all over the world, shutting down computers and operating systems. The costs for insurers may have been limited due to the low spread of cyber insurance.
“Although we have not yet seen large insurance losses, recent near misses such as Cloud Hopper highlight the large systemic potential of malware in a connected world and should form the basis of robust portfolio stress tests that the PRA has asked firms to complete,” Ms Abramska said.
“One of the key issues the PRA wants insurers to manage is that, even if they do not underwrite specific cyber insurance policies, they may be at risk of having to pay out for cyber damage falling under existing policies such as General Liability or Property. The regulator expects insurers to fully understand their exposure. Non-executive directors (NEDs) in particular are expected to be held accountable for any failures to properly challenge management as they deal with this risk.”
In a recent pulse survey PwC carried out among 14 re/insurance companies in the UK and the London Market, only 14% of respondents said they have the data readily available to be able to assess their exposure to ‘non-affirmative cyber’.
The other 86% rely on manual or proxy methods. Over 70% of respondents believe that the losses from a cyber event could be comparable with the losses from extreme natural catastrophes.
“A lot of work is still required by insurers in order to measure and mitigate this risk,” Ms Abramska noted.
Swiss Re and Bradesco Seguros launch new Brazilian entity
Swiss Re Corporate Solutions and Bradesco Seguros have officially started their joint venture operation in Brazil.
The plan, which was first announced in October 2016, creates one of the largest commercial large-risk insurers in Brazil.
Bradesco Seguros’ commercial large-risk portfolio has been integrated into Swiss Re Corporate Solutions Brasil Seguros (SRCSB), making it one of the leading Brazilian players in this segment with a total of roughly BRL 820 million (US$250 million) in gross written premium and significant growth potential.
Swiss Re Corporate Solutions retains a 60% stake in SRCSB, while Bradesco Seguros holds a 40% equity stake.
The company announced that Luciano Calheiros, CEO of Swiss Re Corporate Solutions Brazil, will lead the joint venture operation.
As part of the transaction, approximately 120 of Bradesco Seguros’ large-risk specialists in São Paulo and Rio de Janeiro have joined SRCSB.
Maritime industry faces political instability, regulatory constraints and cyber risk
Shipping losses dropped by 16% overall in 2016, amounting to a 50% decrease in the last ten years, according to a new report. Despite the positive news, a “perfect storm” risk environment continues to plague the industry due to political instability, regulatory constraints and increasing cyber risk, the report says.
“We continue to see improvements in maritime safety, but the price of safe navigation is constant vigilance,” said Captain Andrew Kinsey, Senior Marine Risk Consultant at Allianz Global Corporate and Specialty (AGCS), which produced the report. “The maritime sector is entering a period of considerable change and unrest from economic pressures, technology and political factors,” he said in the report. “There is a perfect storm of increasing regulation and narrowing margins.”
The decline in losses is “driven by improved regulation and the development of a more robust safety culture,” the report says, but “disparities by region and vessel type remain. The recent downturn in the shipping economy could also be a factor in benign loss activity.”
Although the global number of losses is down, regional “hotspots”, such as South China, Indochina, Indonesia and the Philippines, continue to plague the industry. More than a quarter (23) of the total 85 ship losses in 2016 occurred in these four regions – almost double that of the next highest region (12), the East Mediterranean and the Black Sea. Meanwhile, losses are up year-on-year in maritime regions of Japan, Korea and North China; the East African Coast; the South Atlantic and East Coast South America; and the Canadian Arctic and Alaska.
Cargo vessels took the biggest hit in 2016, suffering 30 losses. Passenger ferries losses increased year-on-year to eight. Foundered (sunk/submerged) vessels were cited as the most common cause of loss, accounting for more than half. The report attributed those losses most often to bad weather; fire/explosion claimed another eight ships, up slightly over 2015.
“While the decline in the number of total losses and casualties is encouraging, there is no room for complacency, especially at a time of inherent economic challenges,” the report says, citing environmental scrutiny which is producing “record fines” for pollution and new ballast water management rules which are adding “a significant cost” and potentially new risks to shippers, as well as political risk in Yemen and the South China sea “posing increasing threats”.
Meanwhile, the piracy threat is evolving – although the number of ships hijacked is down, crew kidnappings are increasing. In 15 separate incidents last year, 62 people were kidnapped for ransom. Incidents of piracy (191) last year continued a downward trend, dropping by 22% compared with 2015 (246), representing the lowest total since 1998.
“The reduction reflects the success of measures to contain the threat of Somali pirates in the Gulf of Aden and Indian Ocean, including the introduction of armed guards on-board vessels and the presence of a multinational naval task force,” the report says. “There were just two recorded incidents off Somalia in 2016, compared with 160 in 2011.” However, in the first quarter of 2017, pirates attacked 43 ships and captured 58 crew members; more than 60% of kidnappings were in the Gulf of Guinea, with Nigeria a hotspot, according to the report.
The weakened economic state of global shipping emerged in full force with the collapse of Hanjin Shipping. “Bankruptcies are on the rise and economic strains have led to cost-cutting,” the report says.
The report warns of an over-reliance on technology as safety-enhancing technology is finding its way into shipping. “This could bring huge benefits, as it is estimated that 75% to 96% of marine accidents can be attributed to human error,” the report says.
“A number of incidents have occurred where crews have relied too much on technology, particularly involving electronic navigation tools.”
The ever-increasing reliance on technology is also elevating the risk of cyber-attacks. “To date, most attacks have been aimed at breaching corporate security, rather than taking control of the vessel but there are concerns that a major cyber-attack of this nature could occur in future,” the report says. “Cyber security should not be neglected at a time when crew, training and maintenance budgets are already under pressure. Standard practices, such as crew education and identifying measures to back up and restore systems, should be implemented to reduce cyber risk.”
The brunt of the shipping loss problem comes down to human error, which accounted for about 75% of more than US$1.6 billion in claims over the last five years. And while autonomous vessels might go a long way in eliminating the human element from the equation and revolutionising the industry, the report says, “on a scale not seen since containerisation,” safety considerations will be crucial to the development of autonomous shipping, along with the “challenges around regulation and liability issues,” the report says.
“A critical element will be whether there will be sufficient backup if things go wrong.”
Nexus buys marine cargo MGA from Aquila
Nexus Group has bought Vectura Underwriting, a Lloyd’s coverholder and specialist marine cargo MGA, from Aquila Underwriting for an undisclosed amount.
Established in 2007, Vectura Underwriting is led by Stephen Fletcher, who has worked in underwriting for over 40 years. He works together with underwriter Tim Hancox.
Both, as well as the business, have now moved to Nexus’ headquarters in London.
Vectura is now part of Nexus Underwriting Management.
Aquila, which supports new and specialist MGAs through investment and the provision of services, added that it had also appointed a new Non-Executive Chairman, Stuart Blakeborough.
This is the first investment deal the investment specialist has done since its inception ten years ago.
New evolutions in EU subsidiaries creation for the London and International Market Insurers
MS Amlin picks Brussels for post-Brexit EU unit
Specialist re/insurer MS Amlin said that it will re-domicile its European business, Amlin Insurance Societas Europaea (AISE), to Brussels, in response to Brexit.
Kim Hvirgel, CEO of AISE and Global Managing Director, Property & Casualty, said, “We chose Brussels as our European headquarters for AISE because of its business-friendly financial centre, high-quality regulatory framework and geographical position in Europe.
“This is a strategic move which ensures our European brokers and clients experience no disruption from the UK’s exit from the EU, whilst continuing to enjoy the same high-quality service they have come to associate with MS Amlin.”
After a majority in the UK voted in favour of leaving the EU the re/insurance sector in the UK has been particularly worried about the possibility of losing its passporting rights. The mechanism provides a company authorised in one member state with the ability to conduct cross-border business without being required to apply for any additional authorisation or hold assets locally.
MS Amlin will retain its global headquarters in London.
MS Amlin is already an established player in the Belgian insurance market, with a Brussels-based branch of AISE and offices in Antwerp.
Subject to regulatory approval from the National Bank of Belgium, the proposed change is expected to be completed well in time for 2019 renewals and to ensure a seamless transition for customers, brokers and business partners.
Liberty confirms Luxembourg as post-Brexit European hub
Liberty Specialty Markets (LSM) has officially announced that it intends to headquarter its post-Brexit EU operations in Luxembourg.
LSM will be seeking regulatory approvals to operate via an insurance company and insurance intermediary domiciled in Luxembourg, to continue to offer both Lloyd’s and Company paper from its offices throughout the EU and Switzerland.
The company stated that the move follows a detailed analysis of potential jurisdictions, with the aim of ensuring that LSM’s post-Brexit structure complements its European strategy.
According to the statement, LSM will maintain its London headquarters.
Chaucer creates Dublin subsidiary
Chaucer, an insurance group underwriting at Lloyd’s, has launched a Dublin-based subsidiary to write international specialty re/insurance business, after receiving approval from the Central Bank of Ireland.
The company has appointed Michelle Moore, former managing director and chief operating officer of Markel Europe, to lead Chaucer Dublin. Ms Moore has over 20 years of experience in the international insurance and reinsurance markets, including senior executive roles in Dublin, London and Bermuda.
Chaucer underwrites at Lloyd’s through Syndicate 1084, which operates across international marine and non-marine markets, and Syndicate 1176, an insurer of nuclear risk.
Lloyd’s new Brussels subsidiary may become obsolete, CEO Inga Beale suggests
Lloyd’s CEO Inga Beale suggested in an interview that the plan to create a subsidiary in Brussels may be reversed.
In March Lloyd’s said that it will be setting up a new European insurance company to be located in Brussels to secure access to the EU market after Brexit.
As the UK is leaving the EU, London, as an important re/insurance hub, is worrying that it might lose EU passporting rights. The mechanism provides a company authorised in one member state the ability to conduct cross-border business without being required to apply for any additional authorisation or hold assets locally.
Ms Beale now says that if Britain were to retain access to the EU’s single market, the Brussels hub would probably not be needed.
“Fundamentally, if something does change, we can of course pull all that back,” Ms Beale said. However, she also said that speculation of a soft Brexit would not affect Lloyd’s’ plans because it was not clear what that would entail.
“We just don’t know what this definition of soft would mean,” she said
EU insurance policies need to remain in place post Brexit
Existing EU insurance policies should stay in place after Britain leaves the bloc because the process of dividing them into British and EU contracts would be too complex, Lloyd’s CEO Inga Beale has said.
Life insurance contracts such as pensions can last for decades, and transferring contracts to a different part of an insurance business or a different insurer would be time-consuming and unwieldy, Ms Beale reportedly said.
“There’s no way we could get it done by the time of Brexit, even if we started now,” Ms Beale said. “I don’t think there would be enough lawyers to do it all, and certainly not enough capacity in the courts.”
Britain and the EU started Brexit talks on the 19th June, with Britain due to leave the bloc in March 2019.
British Finance Minister Philip Hammond called for transitional arrangements to ease the Brexit process after that date. But Ms Beale said transitional arrangements alone would not be enough for insurance contracts, where policyholders can also pursue claims years after a policy is taken out.
“It’s a big ask but we would like that all of these existing liabilities and contracts don’t have to be transferred … they can be grandfathered.”
Grandfathering would mean that after Brexit, the rights and obligations afforded under financial contracts which were agreed before departure would not automatically expire.
Hurricane season 2017: Keeping an eye on emerging storms
Recent announcement by Lloyd’s
The Atlantic hurricane season can bring disruption and destruction to people, property and infrastructure in the Caribbean and heavily populated coastal states in the US. It is critically important for communities, business and governments in natural catastrophe-prone areas to be prepared.
The National Oceanic and Atmospheric Administration (NOAA) suggests that even areas well away from the coastline can be threatened by the effects of powerful storms.
To put it into perspective, three major hurricanes struck the US in 2005. Within the span of just three months, hurricanes Katrina, Rita and Wilma resulted in US$170 billion worth of damages.
Hurricane season runs from the 1st June to the 30th November. As the forecasts for the 2017 season prove to be more severe than normal, it is important to evaluate potential risks and to establish secure risk transfer solutions.
Lloyd’s Syndicate ICAT emphasises that “over 30% of small businesses that are affected by a natural disaster never recover. It’s important to have adequate protection in place.”
Looking ahead to the storms expected this year, NOAA forecasters predict a 70% likelihood of 11 to 17 named storms, of which five to nine could become hurricanes. An average year typically yields 12 named storms with six resulting in hurricanes.
What’s the distinction between a named storm and a hurricane? Named storms produce winds of 39mph or higher, while hurricanes generate winds over 74mph.
In light of a potentially active hurricane season, it is important for businesses and communities to make sure they are taking the necessary steps to mitigate the impact of potentially dangerous storms.
CII launches new London Market qualification
The Chartered Insurance Institute (CII) is launching a new level three Certificate in London Market Insurance for those working in or conducting business through the London Market.
It stated that the new qualification is for people who want to build on the existing Award in London Market Insurance.
The certificate is aimed at employees of brokers, insurers and reinsurers placing business in the London Market, as well as Lloyd’s Syndicates, brokers, managing agents or members’ agents.
Challenges
The CII detailed that the certificate includes the addition of a compulsory unit on London Market underwriting principles and focuses on exploring opportunities and challenges posed by using different distribution channels.
According to the CII, the launch follows a consultation with the London Market Education Group (LMEG).
People on the Move
Everest makes senior hire to expand casualty offering in energy
Everest Insurance has hired Andreas Graham to join its excess casualty team and lead the expansion of energy portfolio and capabilities.
Mr Graham will report directly to Head of Everest Specialty Casualty Connie Germano. In his new role, Mr Graham will support both the existing energy team, led by Tom Morelli with supported excess layers, while also pursuing standalone excess opportunities for insureds within the energy segment.
Based in Boston, Mr Graham joins Everest from ProSight Specialty Insurance where he was responsible for marine and energy.
Everest Re Group, Ltd., Hamilton, Bermuda, also said on the 13th June that it has named former American International Group, Inc. executive Jeff Engelbrecht to the newly-created role of Vice President of Energy Casualty within its Everest Insurance unit.
Mr Engelbrecht will work on national account relationships and contribute energy underwriting expertise to the Everest energy team, Everest Re said in the statement. He will be based in the company’s US headquarters in Liberty Corner, New Jersey.
He was most recently executive vice president, excess casualty, energy and construction leader at the insurer.
XL Catlin poaches AIG executive to head global programmes
XL Catlin has appointed Sonja Ochsenkuehn as Head of Global Insurance Programmes. She will be based in New York.
Ms Ochsenkuehn joins XL Catlin from AIG where she most recently held the position of head of knowledge strategy and network guidance.
XL Catlin noted that global insurance programmes has been a strategic growth area for the company in recent years, doubling the number of programmes it manages since 2011.
In the new role, Ms Ochsenkuehn will have direct responsibility over XL Catlin’s global programme platform, with teams in New York, London, Zurich, Mexico City, Hong Kong, New Delhi and Vienna.
She will report to Philippe Gouraud, XL Catlin’s Global Head of Strategic Client and Broker Management.
Pool Re announces head of distribution
Howard Cheetham has taken on the role as Head of Distribution at Pool Re.
Mr Cheetham brings more than three decades of (re)insurance experience to Pool Re.
Mr Cheetham most recently worked for Flagstone Re as CEO UK and Global Business.
In addition to his new position at Pool Re, Cheetham also serves as Chairman of EC3 Insurance Brokers.
Skuld makes appointments in Oslo
Marine insurance provider Skuld has appointed Kristoffer Kohmann as the new head of its Oslo business unit, Skuld Oslo 2.
Mr Kohmann succeeds Ketil Urdal, who is retiring after 16 years with Skuld. Mr Kohmann will take up his role in August 2017. Mr Urdal will remain Senior Vice President Underwriter at Oslo 2 until he enters retirement in September 2018.
Oslo 2 covers the Baltic countries, Eastern Europe, Finland, Norway (except Western Norway), Russia, Sweden and the Middle East.
Skuld has also appointed Simone Ingeberg as the new head of Skuld Oslo 1, the larger of its two Oslo business units. Oslo 1 covers Belgium, Canada, France, Italy, Luxembourg, Malta, Monaco, Netherlands, Portugal, Spain, Switzerland, United Kingdom, United States, Central and South America.
North P&I Club appoints deputy director of underwriting
Mutual marine liability insurer North P&I Club has appointed Andrew Hearne as Deputy Director of Underwriting based in its head office in Newcastle upon Tyne. He will initially work with North’s European team.
According to the company, the appointment is part of the Club’s strategy to strengthen service delivery for members and expand its underwriting team as the Club moves from a period of consolidation to controlled growth over the next few years.
Mr Hearne has several years of underwriting experience at Britannia P&I Club and, more recently, in the fixed premium market through his role at British Marine.
CNA Hardy taps Neon executive as head of cargo at Lloyd’s
Specialist commercial insurer CNA Hardy has appointed Alistair Marriott as Head of Cargo for its Lloyd’s platforms.
Reporting to Carl Day, Head of Energy and Marine, Mr Marriott will be responsible for developing the Lloyd’s cargo book of business, driving profitable growth and raising awareness of CNA Hardy’s proposition in the London, Chinese and Far Eastern markets.
Mr Marriott joins CNA Hardy from Neon where he was joint deputy head of marine and cargo class underwriter responsible for overall portfolio management, and the development and implementation of the firm’s strategic business plan.
Trust Re hires Endurance exec to lead Labuan branch
Bahrein-based re/insurer Trust Re has appointed Kevin Quek as General Manager for its Labuan, Malaysia-licensed branch office.
Prior to joining Trust Re, Mr Quek was head of Asia Pacific specialty at Endurance for eight years, preceded by a similar length term at XL Catlin in the capacity of senior underwriter.
He began his career in underwriting with Munich Re in 1992.
Patria Re boosts Lloyd’s Syndicate with Berkley Re hire
Latin American reinsurer Patria Re has hired Nick Benardout to manage its Syndicate 6125.
Mr Benardout joins Patria Re from Berkley Re UK, where he served as the head of property treaty business for nearly six years. He left Berkley Re in April this year.
Prior to joining Berkley Re in 2011, Mr Benardout was the international property treaty underwriter at Chaucer Syndicates.
In his new role Mr Benardout will manage the reinsurer’s London office, taking responsibility for strengthening its corporate structure and consolidating business underwritten from the Lloyd’s vehicle.
XL Catlin’s O’Malley moves to StarStone to lead cargo unit in London
Global specialty insurer StarStone has appointed Rod O’Malley as Head of Cargo in London.
Mr O’Malley is joining StarStone from XL Catlin, where he most recently served as head of the UK cargo team and senior class underwriter. He has 35 years’ experience as a marine cargo underwriter, having worked in both the Lloyd’s and company markets in London.
StarStone’s current London cargo underwriter Henry Wood has been promoted to Senior Underwriter and will work with Mr O’Malley to expand StarStone’s cargo book.
Mr O’Malley will report to Simon Schnorr, Global Head of Marine.