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Global Insurance Blog

International Insurance and Reinsurance News, Trends, and Cases

Posted in Asia, European Union, France, Germany, Hungary, Italy, Latin America, Market developments, Poland, Regulatory and legislative updates, Singapore, South Africa, Spain, The Netherlands, UK, USA

Brexit – You snooze, you lose

It is 90 days since the UK’s electorate voted to leave the EU.

With so many unknowns, how can you look beyond the uncertainty and decide what to do right now?

The Brexit toolkit  is a seven step practical guide to help you assess real impacts and implement a practical response. It also contains critical analysis of the Brexit process and possible outcomes, the impact of Brexit on EU and UK law and the way to deal with contract “Brexit clauses”.

Click here for the full report.

 

Posted in Regulatory and legislative updates, UK

UK: Corporate Insurance Newsletter – August 2016

The Hogan Lovells’ Corporate Insurance Newsletter for August has been published.  This provides a round-up of UK, EU and international regulatory developments relevant to UK based insurance market participants.  In this issue, amongst other items, we cover:

  • FCA/PRA developments
  • HM Treasury consultation on the Mutuals’ Deferred Shares Regulations
  • IAIS paper on cyber risks
Posted in Regulatory and legislative updates, UK

UK: Parliament opens an inquiry into the Government’s work on driverless cars

The Government consultation on changes to liability and insurance cover to accommodate automated car technologies closed recently. Barely a week later, the House of Lords has launched its own inquiry into driverless vehicles.

The Science and Technology Committee of the House of Lords proposes to examine what the Government is doing to support the development of driverless vehicles in the UK. The Lords has called for written evidence “from as wide an audience as possible” by 26 October, with oral evidence to follow at a later date. Continue Reading

Posted in Market developments, Regulatory and legislative updates, UK

On your marks, get set, GO! Why has Lloyd’s brought forward the Coming-into-Line date for letters of credit this year?

Lloyd’s of London recently published a market bulletin informing the market that assets and/or documents must be submitted to Market Services by close of business (5pm) on the Coming-into-Line date, Thursday 1st December 2016.  However, if the asset is a letter of credit or bank guarantee, this must be received together with the supporting documentation by Friday 11th November 2016.  This is earlier than the usual end of November deadline.  Why the change? Continue Reading

Posted in Market developments, UK

UK: Insurance disruption from the 17th century?

The Great Fire of London was finally extinguished 350 years ago today. New insurance structures emerged in the aftermath of the Great Fire – which bear striking resemblance to some of the contenders disrupting the insurance market right now.

A number of InsurTech startups are seeking to do for insurance what peer-to-peer (P2P) arrangements did for retail banking – fundamentally change the business model of an industry by removing slow and costly middlemen. These startups have proposed a new solution to the age-old problem of mitigating risk: P2P insurance pools.

P2P insurance pools can be structured in a number of different ways. Here is one example: a group of people with a need for the same type of insurance is brought together (using an online service).  They form a pool into which they each contribute an amount of money.  Some of this money is used to buy a conventional group insurance policy providing cover for them all.  The rest is maintained in the pool.  Any claims which arise are paid using the pooled cash first.  If this runs out, the insurance covers all subsequent claims.  If the pooled monies do not run out, the pool members benefit, either by receiving a cashback payment or having to pay less into the pool for future years’ cover. Continue Reading

Posted in Regulatory and legislative updates, Singapore

Singapore: First usage-based insurance for private-hire car drivers

Over the past few years the taxi industry has undergone a complete transformation. This has, in part, been fuelled by the growth in popularity of apps such as Uber and GrabTaxi, both mobile apps which allow customers to hail a third party privately owned vehicle for use as a taxi. The growth of Uber and GrabTaxi has led to an increase in individuals utilising their vehicles as private hire vehicles (“PHV“), often on a part-time basis to supplement their normal income. These PHVs are similar to traditional taxis but are privately owned by individuals and can only be hailed using the smartphone app.

In Singapore, like in many other countries, car owners need to have insurance in order to drive. Any driver must be covered at least for personal injury to others. In addition, GrabTaxi and Uber both require their drivers to have commercial insurance, which is much more expensive, especially after Singapore’s General Insurance Association expressed concerns last October that a lot of drivers operate commercially without having a proper policy in place.

These changes in the taxi industry have created an opportunity for insurance companies to develop a new product aimed at the PHVs using peer-to-peer mobile technology. The first company to respond has been AXA who, in partnership with GrabTaxi, have created a first-of-its-kind Pay-As-You-Go policy (“AXA PAYG“), specifically designed for this market. The AXA PAYG policy allows drivers to pay per kilometre driven, saving drivers up to 30 per cent off commercial auto insurance base premiums. Launching first in Singapore, the regional partnership between GrabTaxi and AXA aims to roll out the AXA PAYG model to five other countries with GrabTaxi services in the near future. This is the second collaboration between GrabTaxi and AXA after the launch in November 2015 of a personal accident insurance scheme that covers GrabTaxi passengers for personal injury at no cost to the driver.

Traditionally, PHV drivers have been charged a fixed annual premium payable upfront at the start of the policy period, regardless of whether vehicles are driven for personal or GrabTaxi use. AXA PAYG drivers on the other hand pay a flat rate of 70 per cent of the base premium, and an additional S$0.06 per km driven on GrabTaxi rides, capping off at 100 per cent of their equivalent base premium. This means they will never pay more than their traditional commercial auto insurance premiums – drivers essentially only pay as they earn.

Singapore blog post

Estimated cost savings for a 40 year-old PHV driver who drives less than 10 hours weekly.

AXA PAYG will provide coverage for third party liability (including passengers) such as injury or death of a third party and also third party property damage.

Mr. Lim Kell Jay, Head of GrabTaxi Singapore said that “AXA PAYG will reduce cost barriers to entry for new PHV drivers and help to grow the supply pool to meet Singaporean commuters’ demand.”

The PAYG system is unlikely to benefit full-time drivers, who would likely end up paying the same as their normal premium. Rather, PAYG is expected to be favoured by part-time drivers, who are unlikely to cover sufficient distance to reach 100 per cent of the cost of the full premium, and will therefore make a saving.  The PAYG model may also incentivise recruitment of new part-time drivers on this basis.

The impact of the AXA PAYG scheme is yet to be comprehensively assessed, having only recently been launched, but take-up amongst drivers has so far been strong. Innovations like this could have a profound impact on the insurance market as consumer habits evolve from the traditional customer-provider model to a hybrid market including more peer-to-peer services. Insurers would be well-advised to consider further peer-to-peer market tie-ups in order to obtain a commercial advantage with customers looking to supplement their income.

 

Posted in China and Hong Kong, Regulatory and legislative updates

China Proposes Requirements for Collateral in Cross-border Reinsurance Transactions

On 9 August 2016, the China Insurance Regulatory Commission (“CIRC“) issued the Notice on Matters Relating to Collateral Provided by Offshore Reinsurers (Draft) (the “Draft Notice“) for public consultation until 19 August 2016. According to CIRC’s corresponding explanatory note, since the China Risk Oriented Solvency System (“C-ROSS“), formally effective from 1 January 2016, differentiates between risk factors in the calculation formula for a PRC ceding company’s minimum capital for counterparty risk based on whether or not its counterparty, the foreign reinsurer, has provided eligible collateral, the CIRC has formulated the Draft Notice to state detailed requirements for collateral provided by foreign reinsurers to be eligible under C-ROSS.

Scope of the Draft Notice

The Draft Notice applies to reinsurance (and retrocession) transactions between a Chinese insurance company (the “Chinese Ceding Company“) and a foreign reinsurance company (the “Foreign Reinsurer“). The definition of Chinese Ceding Company includes insurance companies, reinsurance companies, branches of foreign insurance companies and branches of foreign reinsurance companies which are established in China upon CIRC’s approval. “Foreign Reinsurer” refers to a reinsurer established outside China, including (re)insurance companies, captive insurance companies, mutual insurance organizations, reinsurance pools, Lloyd’s as well as other types of insurance institutions recognized by the CIRC.

Collateral Not Mandatorily Required

The Draft Notice provides that a Chinese Ceding Company can require its counterparty, the Foreign Reinsurer, to provide collateral for the relevant risk exposure arising from their reinsurance transaction. However, collateral is not a compulsory requirement imposed by the CIRC on every cross-border reinsurance transaction or Foreign Reinsurer.  Rather, whether or not collateral is provided will have an effect on the Chinese Ceding Company’s capital requirements arising from the relevant reinsurance transaction. Continue Reading

Posted in Latin America, Regulatory and legislative updates

Mexico: New minimum insurance requirements for companies engaging in upstream activities

The Ministry of Environment and Natural Resources recently issued administrative guidelines setting out the minimum insurance requirements for companies undertaking oil and natural gas exploration and production, processing and refining. All regulated entities engaged in such activities must secure civil liability, environmental damage and – if applicable – well control insurance.

Click here to read the full article.

Posted in Regulatory and legislative updates, UK

UK: 12 August 2016 – the most significant development in insurance law for over a century

The Insurance Act 2015 (the “Act“) comes into force tomorrow.  It represents a fundamental departure from existing insurance law.   The changes impact on a number of key areas which are summarised in the following document: click here.

The Act will impact on insurers, insureds, brokers and reinsurers. Whatever your involvement in the insurance market, it will be necessary to be aware of its terms.

The terms of the Act will apply automatically but it is possible to “contract out” of the regime.

It is essential, therefore for insurers, insureds and reinsurers to consider the Act and to decide whether they are happy for it to apply to their relationship. If not, then it will be necessary to consider contracting out.

Whichever option is selected, it will be necessary to make changes to standard form documentation and business processes.

Our Insurance Policy Wording Unit can provide advice on all aspects of the Act and its implications for your business.  To find out more: please contact a member of the Insurance Policy Wording Unit: Helen Chapman on ext.2588 or Clare Douglas on ext.5954.

Posted in Case reports, UK

UK: What level of dishonesty counts as fraud? An analysis of recent Supreme Court judgments

The Supreme Court published two judgments on how dishonesty affects insurance claims before the end of the most recent Trinity term:

Hayward (Respondent) v Zurich Insurance Company plc (Appellant) [2016] UKSC 48 and Versloot Dredging BV and another (Appellants) v HDI Gerling Industrie Versicherung AG and others (Respondents) UKSC 2014/0252 (The Merwestone).

The factual background in Hayward:

Hayward concerned a claim which had already been settled. Mr Hayward had suffered a workplace injury in 1998. He brought proceedings and the employer admitted liability. However, he exaggerated the extent of his injuries (to the tune of £419,000) in order to achieve a higher settlement figure from his employer’s insurer, Zurich. Five years later, Zurich had gathered sufficient undercover surveillance evidence to show that Mr Hayward had grossly and dishonestly exaggerated his injuries. A settlement for just under £135,000 was reached in 2003.

However, a further five and a half years after the settlement, Zurich had gathered even more evidence – enough to show that Mr Hayward had not just slightly exaggerated his injuries, but that he had fully recovered from his injuries by the time of the settlement. The tip-off came from Mr Hayward’s neighbours, who had observed him in his daily life.

Zurich sought to set aside the settlement agreement on the ground that Mr Hayward’s statements of case and accounts to medical experts were fraudulent misrepresentations. At issue was whether Mr Hayward’s lies had caused the settlement, whether Zurich needed to have believed in the lies and whether Zurich should have fought the case on the basis of their suspicions rather than settling. Continue Reading