Insurance industry: Climate change could make insurance too expensive for most people

Insurers have warned that climate change could make cover for ordinary people unaffordable after the world’s largest reinsurance firm blamed global warming for $24bn (£18bn) of losses in the Californian wildfires.

Ernst Rauch, Munich Re’s chief climatologist, told the Guardian that the costs could soon be widely felt, with premium rises already under discussion with clients holding asset concentrations in vulnerable parts of the state.

Read more at: Climate change could make insurance too expensive for most people – report | Climate change | The Guardian

Insurance: Europe’s Insurers Expect Robust M&A Activity and Strong Earnings in 2021: Moody’s

Europe’s insurance industry is emerging from the coronavirus crisis with a stronger appetite for mergers and acquisitions (M&A), along with expectations for strong earnings growth in 2021, according to Moody’s annual survey of chief financial officers (CFOs) from 21 leading European insurers.

Read more at: Europe’s Insurers Expect Robust M&A Activity and Strong Earnings in 2021: Moody’s

Natural Disasters - Chart: Natural Disasters on the Rise Around the Globe - by Katharina Buchholz

MunichRe registered 820 natural disasters causing insured losses in 2019 - three times as many as thirty years ago. Some – but not all – of that rise can be chalked up to more people carrying insurance.

MunichRe estimates that the share of natural disaster losses which are insured only doubled since 1980.

Read more at:
• Chart: Natural Disasters on the Rise Around the Globe | Statista

Coronavirus May Change Insurance Industry Forever

Insurance companies are creating products for a world where health emergencies could become the new normal after manybusinesses struggled during the COVID-19 crisis. 

New insurance policies designed to guard against events like thecoronavirus health crisis might cost a lot. But they offer businesses -- from restaurants to film production
companies -- ways of protecting against work stoppages and losses if another virus strikes.

Read more at: Coronavirus May Change Insurance Industry Forever

EU Insurance Industry: Capco launches Insurance practice in France and Switzerland

Globally, Capco specialises in consulting and technology services mainly to the financial services industry. 

The firm helps among others banks, insurance companies, wealth & asset  managers, capital market players and fintechs with transformation and  delivery services to drive growth and increase efficiency.

In two of the European markets the firm serves, Capco has now extended its service portfolio to include insurance services.  Commenting on the expansion, Marc Pfeifer, a Managing Principal at Capco in Switzerland, said, “The insurance industry faces unprecedented  challenges and changes. By bringing Capco's capabilities to market, we will help our customers shape a successful future.”

In a recent study of executives in the insurance industry, it was found that digitisation and regulation are the two main top topics on the agenda of leaders. Other areas sparking major change include the growing impact of InsurTechs, market openness, the threat ofthe BigTechs and the evolving demands of customers expecting more  user-friendly and personal offerings.

Read more at:
Capco launches Insurance practice in France and Switzerland

The Netherlands: Insurance premiums to go up next year says Government

Read more at: 

https://nltimes.nl/2019/09/05/health-insurance-premiums-expected-increase-eu3-per-month-next-year-report

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Insurance Industry: China hits insurance industry with nearly $10m fines - By: Gary Robinson |

Chinese insurance regulators has issued more almost $10m in fines a gainst intermediaries and insurance firms in the first four months of 2018.

China’s promise of getting tough on financial services companies that do not follow guidelines in 2018 has seen around 60 insurance companies – a mix of intermediaries and companies –  hit with more than 63 million yuan (about $9.8m) in penalties in the January-April period, according a report in specialist local news outlet Securities Daily.

Insurance firms and intermediary agencies were fined for irregularities, including misguiding sales pitches and fake materials, according to the report.

Read more: China hits insurance industry with nearly $10m fines - International Investment

Insurance Industry: Top insurance industry issues in 2017

Ongoing changes in technology, demography, and consumer needs and expectations continue to disrupt the insurance industry. Combined with recent regulatory and financial reporting developments, these changes are putting severe strain on traditional business models.

Many insurers are responding by reimagining their internal operations and business strategies, but the pace of change outside the industry has been relentless and even proactive companies are struggling to remain on the cutting edge.

Top Insurance Industry Issues in 2017 focuses on changing business and operating models and the key developments that are causing and being influenced by this change.

Read more: Top insurance industry issues in 2017: PwC

Insurance Industry: Autonomous cars could drive auto insurance to extinction - by Scott Mclaren

Autonomous cars on future roads 
could end the need for insurance

In a 2015 interview, Elon Musk pointed out that recent advances in auto technology could lead to human-operated vehicles becoming illegal someday.

While this may seem ludicrous to some, it could play out sooner than you think. By 2025 — just a few short years away — the auto industry’s autonomous segment is projected to reach a worth of $26 billion, according to insights from Bain & Company. Some estimates even project as many as 10 million self-driving cars will be on the road by 2020.

Musk’s prediction that human-controlled vehicles could be outlawed comes from not only an increase in autonomous options, but also for one simple reason: safety. It’s hard to imagine tech operation being safer than human operation, but vehicle safety statistics point to driver error as one of the top causes of auto accidents. In fact, more than 3,000 people were killed and 431,000 injured from distracted driving in 2014 alone, with contributing factors including cell phone usage, fatigue, aggressive driving, and running red lights. Although it’s far too early for statistical comparison, it’s fair to say that autonomous vehicles will face far fewer variables and will have greater predictability in certain driving situations.

Without driver error, will we need insurance at all?

In theory, removing human error from the roads means fewer accidents — which would also remove the need for private insurance that covers damage caused by drivers. In tandem, these two changes would lower accident liabilities and, theoretically, cause a huge drop in personal auto insurance premiums.

As it stands, auto insurers offer rates based on individual driving histories, and can even optimize each policy’s pricing via driver-approved telematics. As the insurance industry adapts to new technology saturating the market — turning drivers into mere passengers — the liability for accidents caused by autonomous vehicles could be handed off to the manufacturer, software designer, or even the government through the Department of Transportation. “

At least the current thinking is that the manufacturers will be ultimately responsible for a lot of these future accidents when an automated vehicle is involved,” said Rick Gorvett of the Casualty Actuarial Society.

But the Insurance Information Institute’s Michael Barry doesn’t think these changes will wipe out owner responsibility in total. Barry pointed out that driver error isn’t the only danger to vehicles, and owners and insurance companies will still have to factor in off-road damages that may occur. “Cars can still get flooded, damaged, or stolen,” he said, “but this technology will have a dramatic impact on underwriting. A lot of traditional underwriting criteria will beupended.

Read more: Autonomous cars could drive auto insurance to extinction | VentureBeat

Insurance Industry: U.S. and EU Sign Covered Agreement on Insurance Regulation

The United States and European Union have scheduled a ceremony for today for the signing of a bilateral agreement on prudential insurance and reinsurance measures.

Both sides announced in July their intention to sign the agreement, also known as a covered agreement in the U.S.

The parties believe the agreement represents a step forward in U.S. – EU cooperation on insurance and reinsurance. In a joint statement, they said it conveys “benefits to EU and U.S. insurers and reinsurers operating across the Atlantic by offering them regulatory certainty, while maintaining consumer protections.”

The agreement was negotiated by the Obama Administration in talks that began in 2015. It was announced on January 13, 2017 in the final days of the previous administration.

The agreement – which is a “covered agreement” in the meaning of the Dodd-Frank Act and an agreement under Article 218 of the Treaty on the Functioning of the European Union – addresses three areas of insurance oversight: reinsurance; group supervision; and the exchange of insurance information between supervisors.

With regard to reinsurance, it will “eliminate collateral and local presence requirements for EU and U.S. reinsurers operating in each other’s markets.”

Regarding group supervision, U.S. and EU insurers operating in the other’s markets “will only be subject to worldwide insurance group oversight by supervisors in their home jurisdiction.”

The agreement also encourages insurance supervisory authorities in the U.S. and the EU to continue to exchange supervisory information on insurers and reinsurers that operate in the U.S. and EU markets and it includes model information sharing memorandum of understanding provisions.

In their joint statement, the parties said they will now move forward to provisional application. The European Union will take the necessary steps, involving the Council and the European Parliament pursuant to the Treaty on the Functioning of the European Union, to formally conclude the agreement.

In January, the U.S. Treasury Department released a fact sheet on the agreement and said the final legal text of the agreement had been given to Congress as required by the Dodd-Frank Act.

Read more: U.S. and EU Sign Covered Agreement on Insurance Regulation

USA: Flood Insurance: Most Florida flood zone property not insured

As Hurricane Irma bears down on Florida, an Associated Press analysis shows a steep drop in flood insurance across the state, including the areas most endangered by what could be a devastating storm surge.

In just five years, the state's total number of federal flood insurance policies has fallen by 15 percent, according to Federal Emergency Management Agency data.

Florida's property owners still buy far more federal flood insurance than any other state - 1.7 million policies, covering about $42 billion in assets - but most residents in hazard zones are badly exposed.

With 1,350 miles of coastline, the most in the continental United States, Florida has roughly 2.5 million homes in hazard zones, more than three times that of any other state, FEMA estimates. And yet, across Florida's 38 coastal counties, just 42 percent of these homes are covered.

In the counties being under at least partial evacuation orders Wednesday (Collier, Broward, Monroe and Miami-Dade), where 1.3 million houses are estimated to be in flood hazard zones, the percentage is an even lower 34.3 percent.

Florida's overall flood insurance rate for hazard-zone homes is just 41 percent. Fannie Mae ostensibly requires mortgage lenders to make sure property owners buy this insurance to qualify for federally backed loans, and yet in 59 percent of the cases, that insurance isn't being paid for.

Nationwide, only half the 10 million properties that need flood insurance have it, said Roy Wright, who runs the National Flood Insurance Program. He told the AP last week that he wants to double the number of policies sold nationally in the near future.

Read more: Most Florida flood zone property not insured

Insurance Industry: Is your insurance business an ‘omnichannel’ business?

Omnichannel: It’s a buzzword that’s thrown around a lot in business circles, but what does it really mean, and is your business an omnichannel business?

While at its essence, omnichannel simply means to offer multiple channels, in the modern business landscape a true omnichannel business is considered one that offers a seamless customer experience across various platforms – and it’s increasingly important for insurers to get right.

Earlier this month, the insurance industry was warned to do more to stop creating problems for its customers, as ratings for the sector slipped compared to last year. In a competitive market, insurance companiesmneed to differentiate themselves by more than just price, we were told by The Institute of Customer Service.

But alongside providing customers with a problem-free experience, insurance firms need to focus on becoming genuine omnichannel businesses which offer consumers a smooth journey, according to The Institute’s CEO.

“We talk a lot about omnichannel and the need to have lots of different channels, but often organizations we force people to use a particular channel,” Jo Causon told Insurance Business. Today, it’s no longer enough to simply be present on a range of platforms – consumers want to be able to carry out the service that they require on the channel of their choosing.

Recent evidence suggests the industry hasn’t quite got to grips with that idea yet: a survey ranking UK general insurers on their digital offerings found that just 4% offered full digital claims services, forcing customers to pick up the phone.

Read more: Is your insurance business an ‘omnichannel’ business? | Insurance Business

US Healthcare: 2,000 US Doctors Call for Universal Healthcare- by Olga Oksman

group of more than 2,000 physicians is calling for the establishment of a universal government-run health system in the US, in a paper in the American Journal of Public Health.
According to the proposal released Thursday, the Affordable Care Act did not go far enough in removing barriers to healthcare access. The physicians’ bold plan calls for implementing a single-payer system similar to Canada’s, called the National Health Program, that would guarantee all residents healthcare.
The new single-payer system would be funded mostly by existing US government funding. The physicians point out that the US government already pays for two-thirds of all healthcare spending in the US, and a single-payer system would cut down on administrative costs, so a transition to a single-payer system would not require significant additional spending.
“Our patients can’t afford care and don’t have access to the care they need, while the system is ever more wasteful, throwing away money on bureaucratic expenses and absurd prices from the drug companies,” said David Himmelstein, a professor in the CUNY School of Public Health at Hunter College and lecturer on medicine at Harvard Medical School.
Himmelstein, one of the authors of the plan, said the proposal is meant as a rallying cry for physicians and other healthcare professionals around the cause of a single-payer model. According to the paper, even with the passage of the Affordable Care Act many patients “face rising co-payments and deductibles that compromise access to care and leave them vulnerable to ruinous medical bills”. Despite the current high healthcare spending levels in the US, healthcare outcomes are worse than in comparable well-funded countries.
- See more at: http://www.occupy.com/article/us-doctors-call-universal-healthcare-abolish-insurance-companies#sthash.i2UiFMWw.2VUdz3RY.dpuf

group of more than 2,000 physicians is calling for the establishment of a universal government-run health system in the US, in a paper in the American Journal of Public Health.
According to the proposal released Thursday, the Affordable Care Act did not go far enough in removing barriers to healthcare access. The physicians’ bold plan calls for implementing a single-payer system similar to Canada’s, called the National Health Program, that would guarantee all residents healthcare.
The new single-payer system would be funded mostly by existing US government funding. The physicians point out that the US government already pays for two-thirds of all healthcare spending in the US, and a single-payer system would cut down on administrative costs, so a transition to a single-payer system would not require significant additional spending.
“Our patients can’t afford care and don’t have access to the care they need, while the system is ever more wasteful, throwing away money on bureaucratic expenses and absurd prices from the drug companies,” said David Himmelstein, a professor in the CUNY School of Public Health at Hunter College and lecturer on medicine at Harvard Medical School.
Himmelstein, one of the authors of the plan, said the proposal is meant as a rallying cry for physicians and other healthcare professionals around the cause of a single-payer model. According to the paper, even with the passage of the Affordable Care Act many patients “face rising co-payments and deductibles that compromise access to care and leave them vulnerable to ruinous medical bills”. Despite the current high healthcare spending levels in the US, healthcare outcomes are worse than in comparable well-funded countries.
- See more at: http://www.occupy.com/article/us-doctors-call-universal-healthcare-abolish-insurance-companies#sthash.i2UiFMWw.2VUdz3RY.dpuf

group of more than 2,000 physicians is calling for the establishment of a universal government-run health system in the US, in a paper in the American Journal of Public Health.
According to the proposal released Thursday, the Affordable Care Act did not go far enough in removing barriers to healthcare access. The physicians’ bold plan calls for implementing a single-payer system similar to Canada’s, called the National Health Program, that would guarantee all residents healthcare.
The new single-payer system would be funded mostly by existing US government funding. The physicians point out that the US government already pays for two-thirds of all healthcare spending in the US, and a single-payer system would cut down on administrative costs, so a transition to a single-payer system would not require significant additional spending.
“Our patients can’t afford care and don’t have access to the care they need, while the system is ever more wasteful, throwing away money on bureaucratic expenses and absurd prices from the drug companies,” said David Himmelstein, a professor in the CUNY School of Public Health at Hunter College and lecturer on medicine at Harvard Medical School.
Himmelstein, one of the authors of the plan, said the proposal is meant as a rallying cry for physicians and other healthcare professionals around the cause of a single-payer model. According to the paper, even with the passage of the Affordable Care Act many patients “face rising co-payments and deductibles that compromise access to care and leave them vulnerable to ruinous medical bills”. Despite the current high healthcare spending levels in the US, healthcare outcomes are worse than in comparable well-funded countries.
- See more at: http://www.occupy.com/article/us-doctors-call-universal-healthcare-abolish-insurance-companies#sthash.i2UiFMWw.2VUdz3RY.dpuf

A group of more than 2,000 physicians is calling for the establishment of a universal government-run health system in the US, in a paper in the American Journal of Public Health.

According to the proposal released Thursday, the Affordable Care Act did not go far enough in removing barriers to healthcare access. The physicians’ bold plan calls for implementing a single-payer system similar to Canada’s, called the National Health Program, that would guarantee all residents healthcare.

The new single-payer system would be funded mostly by existing US government funding. The physicians point out that the US government already pays for two-thirds of all healthcare spending in the US, and a single-payer system would cut down on administrative costs, so a transition to a single-payer system would not require significant additional spending.

“Our patients can’t afford care and don’t have access to the care they need, while the system is ever more wasteful, throwing away money on bureaucratic expenses and absurd prices from the drug companies,” said David Himmelstein, a professor in the CUNY School of Public Health at Hunter College and lecturer on medicine at Harvard Medical School.

Himmelstein, one of the authors of the plan, said the proposal is meant as a rallying cry for physicians and other healthcare professionals around the cause of a single-payer model. According to the paper, even with the passage of the Affordable Care Act many patients “face rising co-payments and deductibles that compromise access to care and leave them vulnerable to ruinous medical bills”. Despite the current high healthcare spending levels in the US, healthcare outcomes are worse than in comparable well-funded countries.

group of more than 2,000 physicians is calling for the establishment of a universal government-run health system in the US, in a paper in the American Journal of Public Health.
According to the proposal released Thursday, the Affordable Care Act did not go far enough in removing barriers to healthcare access. The physicians’ bold plan calls for implementing a single-payer system similar to Canada’s, called the National Health Program, that would guarantee all residents healthcare.
The new single-payer system would be funded mostly by existing US government funding. The physicians point out that the US government already pays for two-thirds of all healthcare spending in the US, and a single-payer system would cut down on administrative costs, so a transition to a single-payer system would not require significant additional spending.
“Our patients can’t afford care and don’t have access to the care they need, while the system is ever more wasteful, throwing away money on bureaucratic expenses and absurd prices from the drug companies,” said David Himmelstein, a professor in the CUNY School of Public Health at Hunter College and lecturer on medicine at Harvard Medical School.
Himmelstein, one of the authors of the plan, said the proposal is meant as a rallying cry for physicians and other healthcare professionals around the cause of a single-payer model. According to the paper, even with the passage of the Affordable Care Act many patients “face rising co-payments and deductibles that compromise access to care and leave them vulnerable to ruinous medical bills”. Despite the current high healthcare spending levels in the US, healthcare outcomes are worse than in comparable well-funded countries.
- See more at: http://www.occupy.com/article/us-doctors-call-universal-healthcare-abolish-insurance-companies#sthash.i2UiFMWw.2VUdz3RY.dpuf

Read more: 2,000 US Doctors Call for Universal Healthcare

The Netherlands: Insurance Industry: You are probably paying too much for your car insurance - compare rates offered

Recent studies indicate that most drivers in the Netherlands are paying too much for car insurance.

For a long time, there was no easy way to compare quotes from all these different car insurance companie there, now there is..

Before you had to check one site, then jump to another and enter all of your information all over again. Drivers were stuck doing all the work to save money.

Now, all that has changed, also in the Netherlands Thanks to a company called Geld.nl, providing the information you need to help you save can be found all in one place. Customers who want to buy car insurance are now finding what they are looking for - lower quotes.

What exactly do you need to do? Here is one easy rule to follow.,You have to compare quotes. Don’t even consider buying car insurance without doing this first.

After all the results we came across, we just couldn’t believe how many drivers have been overpaying in th Netherlands. And that should not happen,  with free services like Geld.nl, who can help you compare quotes today, so that you aren’t accidentally paying too much money.

Drivers don’t always realize that car insurance agents make money from your premiums. So, the higher your rate, the more money the agent receives.

This system may also make it difficult to determine if you are getting a fair price. Fortunately, a lot of smart drivers out there have figured out just how to cut down their insurance bill by using free internet tools to get honest and fair quotes.

So next time you are interested in bying car insurance, compare the rates - the Internet makes it easy for you and if someone asks you why, tell them you read it in Insure-Digest.

Insure-Digest

Netherlands Insurance Industry: NN Group Offers $2.7 Billion for Delta Lloyd - by Maarten van Tartwijk and Rory Gallivan

Dutch insurer and asset manager NN Group NV has made an offer to buy local rival Delta Lloyd NV for €2.4 billion ($2.7 billion), a move that could spur long-awaited consolidation in the Netherlands’ insurance market.

NN said Wednesday it is offering €5.30 a share for Delta Lloyd, a 29% premium to Delta Lloyd’s closing price on Tuesday. A combination would create a well-diversified financial services company, increase scale and reduce costs, it said.

“We believe there is a clear and compelling logic to bring consolidation to the Dutch insurance market through a combination,” said NN Chief Executive Lard Friese.

Read more: NN Group Offers $2.7 Billion for Delta Lloyd - WSJ

Health Care: Solving surprise medical bills

Imagine you walk into a hospital for a planned procedure, for example a knee operation to be performed by an orthopedic surgeon. Before you scheduled the surgery, you did your due diligence and confirmed that the surgeon performing the procedure participated in your insurance plan, and that the hospital where you were having the surgery was also in-network.

You know that you will still owe hundreds or perhaps thousands of dollars (depending on the details of your insurance coverage or any deductible you need to meet), but you’re certain the costs are manageable and you’re prepared to pay the final amount.

The surgery goes well, and you begin your recovery. Then, several weeks later, you get a bill for the surgery that’s much, much more than you expected to pay—maybe even ten or twenty times what you expected to pay. How did this happen?

A new paper, Solving Surprise Medical Bills from the Schaeffer Initiative at the Brookings Center on Health Policy, takes a closer look at surprise medical bills in America—and how policymakers can protect patients from them.

You might be shocked to receive the bill, but you wouldn’t be alone. Over the past several years, an increasing number of Americans have been hit with surprise bills for medical care. Surprise medical bills result from providers (physicians, hospitals, out-patient facilities, laboratories, etc.) that patients reasonably assumed would be in-network, but actually are out-of-network, or when patients have no real choice over the network status of their provider.

These bills are sometimes the result of emergency situations. None of us, in an emergency, place a call our insurance company to make sure the ambulance we need or the hospital we’re brought to is in-network. Yet you can still be liable for the astronomical bills that result.

Other times, patients are billed by out-of-network providers, such as an anesthesiologist, even though patients did everything they reasonably could to remain in-network for a planned medical procedure. As a result, patients incur much higher charges, which often exceed what insurance reimburses, sometimes are exorbitant, and can lead to financial distress.

There is bipartisan agreement that this problem exists, is increasing, and needs to be addressed. Important differences exist, however, on how the problem should be solved. Over a dozen states have enacted important protections and federal and state officials have proposed additional remedies, but these efforts are incomplete, and they pursue a variety of different strategies.

Read more: Solving surprise medical bills | Brookings Institution

Insurance Industry: Technology influencing profitability of Insurance Industry

THE INSURTECH REPORT: How financial technology firms are helping — and disrupting — the nearly $5 trillion insurance industry http://flip.it/2vyCNi

Insurance Industry: Is Travel Insurance Worth It - by Ed Perkins

Travel insurance is a virtual necessity for some trips, yet worthless for others. So before you buy, assess your risks.

Risk 1: Loss of deposits or prepayments.You often have to pay in full or provide a stiff deposit months in advance for a cruise, a tour, or a vacation rental. And if you have to cancel, you may lose a big chunk of those payments in cancellation penalties and non-refundables. Trip cancellation insurance (TCI) reimburses you for non-recoverable deposits and penalties if you have to cancel before you start.

Risk 2: Extra expenses of returning home before your trip ends. If you have to abort a trip because something happens to you, your traveling companion, or a family member at home, getting home quickly may be expensive. Trip interruption insurance (TII) reimburses the non-recoverable extra costs of returning home early or of continuing as a single traveler if your companion has to return early.

Risk 3: Medical expenses. If you get sick or suffer an accident when you're away from home, you may face some stiff immediate medical bills. The main risk occurs when you're outside the U.S. Your own medical plan may cover you anywhere in the world; but some don't. Medicare doesn't cover you outside the U.S., but many Medicare supplements do. In any event, you typically have to shell out big payments on the spot and argue about reimbursement when you return home. Primary travel medical insurance (TMI) pays up front.

Risk 4: Emergency transport home. On your trip, if you're so sick you can't fly home, or if you fall and break your butt in some remote area, getting you to a hospital in a helicopter or back home on a private jet could cost a fortune. Medical evacuation (ME) insurance pays for any such requirement.

What to buy: You can easily determine the risk of lost prepayments or cancellation penalties. Consider TCI any time you have more advance payments at risk--the net of what you can recover in refunds--than you can comfortably absorb if you have to cancel a trip. The corollary is obvious: Don't pay to "insure" recoverable payments. TCI is "named peril" insurance that pays for only the contingencies specified in the policy-- typically related to sickness and accident, and excluding work-related reasons. That's why we recommend "cancel for any reason" insurance: It is more expensive but you get to decide whether to cancel, not some insurance company bean counter. TCI policies generally exclude payment for pre-existing medical conditions, but most insurers waive that exclusion if you buy the insurance as soon as you start paying for your trip.

TM and ME are available separately by the trip or in six-month or yearly policies for frequent travelers. We recommend primary TM, so you don't have to max out your checking account or credit card on the spot. Prices for bundled policies and separate TM and ME policies depend on destination, duration of trip, and age. They range from 5 percent to 15 percent of your total trip cost--sometimes even more for very senior travelers.

What to avoid: Don't rely on a tour operator's or cruise line's cancellation waiver. It isn't true insurance; instead, the cruise line or operator agrees to waive its own cancellation penalty. Waivers cover fewer risks, and many limit reimbursement to a credit toward a future booking rather than a cash refund. Similarly, don't blindly accept a travel supplier's "opt in" insurance, which may be more expensive than an independent policy or offer insufficient coverage.

How to buy: We recommend buying through one of the several independent online agencies that specialize in travel insurance that provides comprehensive search and comparison systems.

For additional information contact your local Insurance Agent.

Insure-Digest

EU Insurance Regulations: Solvency II: the EU regulatory regime for insurers

The EU's Solvency II Directive came into force on 1 January 2016. The directive consolidates and harmonises existing EU insurance directives including life and non-life directives, the reinsurance directive and various others.

The directive is hugely important as it provides a framework for a new, harmonised solvency and supervisory regime for the insurance sector. The EU's intention is that this new regime will provide higher and more uniform levels of consumer protection, as well as promote competitive equality.

Scope

Solvency II applies to all EU insurers and reinsurers, including firms in run-off, with some exceptions.

It will apply to more than 400 retail and wholesale insurance firms and to the Lloyd's insurance market in the UK alone.

Some smaller insurance firms will fall outside the scope of the directive, but may still apply for authorisation under Solvency II. These firms, which mainly consist of friendly societies, are referred to as Non-Directive firms, non-Solvency II firms or out-of-scope firms. In general, these are:

    *firms with gross premium income below €5 million and 'gross technical provisions' of less than €25m. This refers to the economic value of insurers' liabilities;
    *where the firm belongs to a group, the total of the technical provisions of the group does not exceed €25m;
   *the firm does not include insurance or reinsurance activities covering liability, credit and suretyship insurance risks, unless they constitute ancillary risks; and
   *the business of the firm does not include reinsurance operations exceeding either of: €500,000 of its gross written premium income or €2.5m of its technical provisions; or more than 10% of its gross written premium income or more than 10% of its technical provisions.

New regulation

Aspects of Solvency II that are completely new include:

   *economic risk-based solvency requirements: introduced for the first time by moving away from the 'one model fits all' way of estimating capital requirements to more entity-specific requirements;
   *a new 'total balance sheet' type regime and more comprehensive solvency requirements for insurers. Previously, insurers did not have to hold capital against market risk (i.e. decreases in investment values); credit risk (i.e. third party debt issues); or operational risk (i.e. systemic breakdown, malpractice etc.). This has changed under the new regime. The rationale is that these other risk types can also pose a material threat to insurers' solvency.
   *a focus on identification, measurement and proactive management of risks as well as a more prospective focus for the first time. Where the old solvency rules for insurers focused on historical data, the new rules require insurers to take future developments into account including new business plans or the possibility of catastrophic events which might affect their financial standing. The Own Risk and Solvency Assessment (ORSA) is a new tool designed to assist with this;
   *greater transparency and increased requirements to disclose certain information publicly, which is expected to enhance both supervision and competition;
    *better management of insurance groups as single economic entities by strengthening the role of group supervisor.

The three 'pillars'

Solvency II is divided into three thematic areas known as 'pillars', much like the three-pillar approach to banking regulation introduced by the Basel II regime. Although each pillar sets out provisions relating to distinct areas, there is a strong interconnectedness between all three so Solvency II should be approached comprehensively.

Pillar I addresses adequacy of assets, technical provisions and capital of a firm. There are two sets of capital requirements: the more risk-sensitive Solvency Capital Requirement (SCR); and the lower and more formulaic Minimum Capital Requirement (MCR). The SCR may be calculated using a standard formula, or using an 'internal model' with regulatory approval.

Pillar II covers qualitative requirements: higher standards of risk management and governance. It gives supervisors greater powers to challenge firms on risk management issues. Firms are required to prepare and submit an ORSA to their supervisors, identifying the risks in their business and the capital needed to manage that risk.

Pillar III covers greater levels of transparency for supervisors and the public, through private annual reports to supervisors and public solvency and financial condition reports. Firms must provide more detailed information about their affairs on a quarterly and annual basis.

New governance requirements

Pillar II sets out new governance and risk management requirements for firms. The general requirements are that:

   *a firm's governing body is responsible for the firm's compliance under Solvency II; and
    firms must have an effective governance in place appropriate to their business.

There are also a number of specific new requirements relating to internal control, internal audit, risk management, actuarial functions and outsourcing. Firms must ensure that written policies and effective risk management in relation to these are implemented.

Outsourcing implications

Although the UK's Prudential Regulation Authority (PRA) acknowledges the merits of outsourcing, the Solvency II rules have been designed to ensure due diligence of the supplier and appropriate contractual terms are in place so that the insurer retains control over any "critical or important operations, functions or activities". This is important because the insurer remains fully responsible for discharging all of its obligations under Solvency II and cannot delegate these to its suppliers.

Calculating capital

Under Solvency II there are two required capital measures: the Solvency Capital Requirement (SCR) and the Minimum Capital Requirement (MCR).

The MCR represents the minimum level of capital that firms are required to maintain and is set at a one in 85 'confidence level': that is, an 85% probability that the firm will be able to meet its obligations over the next 12 months. This is the level below which a firm becomes insolvent for regulatory purposes.

The SCR is a risk-responsive capital measure calibrated to ensure that each individual insurer will be able to meet its obligations over the next 12 months with a probability of 99.5%. If this level of capital is not held, it is likely to result in regulatory intervention and require remedial action.

Implications for corporate groups

Insurance and reinsurance firms are sometimes part of complex group structures which can make it difficult for regulators to establish how group capital van be made available to individual entities within that group, or to assess the influence exerted by group members over insurance entities or activities. For this reason, Solvency II requires groups to be supervised on a holistic basis to enable the regulators to gain a coherent understanding of the risks that exist at group level.

The main group level requirements under the directive include the following:

  * solvency calculations required at group and solo level;
   *insurance holding companies and their insurance or reinsurance subsidiaries are jointly responsible for monitoring the group SCR;
   *insurance holding companies must put in place systems and reporting procedures including appropriate systems of governance and written policies in relation to risk management, internal control, internal audit and, where relevant, outsourcing;
   *significant risk concentrations at group level and significant intra-group transactions must be regularly reported to the group supervisor;
   *all persons who effectively run insurance holding companies or have key functions required to satisfy the 'fit and proper' criteria;
    *nsurance holding companies must carry out an ORSA at group level; publish a solvency and financial condition report (SFCR); and provide a group regulatory supervisory report (RSR) to the group supervisor.

Impact on Part VII transfer process

Solvency II has had a number of effects on insurance business transfers under Part VII of the UK's Financial Services and Markets Act (FSMA). Some that we have observed include:

  *an increased number of transfers taking place as insurers reorganise their businesses to achieve better capital efficiency to meet Solvency II capital requirements;
   *the removal of some of the concepts which have traditionally been fundamental to and very common in the Part VII space including 'actuarial function holder' and 'long term insurance fund', in order to better align the terminology with the definitions and concepts in the Solvency II framework;
   *judges referring to transferees holding sufficient capital under the Pillar I and Pillar II tests of Solvency II;
   *the independent expert's report containing a section on whether the transferee's preparations for Solvency II are sufficient;
   *the need for an additional certificate from the PRA regarding its consultation with EEA states confirming that the supervising authority in each EEA state other than the UK in which insurance contracts have been concluded by the firm has been notified of the proposed transfer.

Next steps

There were various developments in 2015 in relation to Solvency II not sufficiently accounting for insurers' investment in infrastructure projects. This led to the European Commission proposing a 'delegated regulation' amending the way in which infrastructure investments are treated under the Solvency II Delegated Regulations. If the European Parliament does not object, the delegated regulation will be published in the Official Journal and will come into effect later in 2016.

Insure-Digest

The Netherlands: New CEO for European pensions giant APG

Gerard van Olphen is to join the APG Groep in the middle of March, the firm announced on January 28. He will be responsible for all the company’s business activities, including the administration and investment of Dutch pension schemes with assets totalling more than €400 billion.

Bart Le Blanc, chairman of APG’s supervisory board, said in the statement: “Together with his colleagues on the executive board, Gerard will need to steer APG through the coming years, when potentially far-reaching changes in the Dutch pension system will occur.”

He added: “These changes might trigger new requirements in the nature and the quality of APG’s services.”

ABP is the largest pension fund in Europe and makes up the bulk of APG’s assets. However, it also works with several smaller pensions which means it is responsible for the retirement income for one in five households in the Netherlands – equivalent to 4.5 million participants – and has 30,000 sponsoring employers.

“With his extensive experience in the financial world, Gerard will be of great value to APG, our customers and their participants,” said Le Blanc.

Van Olphen’s career in finance spans more than 25 years. In 2013, he became CEO of the newly-nationalised bank and insurer SNS Reaal in 2013, on request of the minister of finance, and successfully completed its restructuring. His most recent position was CEO of VIVAT Insurance, which ended in September 2015.

APG said his gross salary would be €500,000 with pension contributions of €66,000 a year. This would represent a 10% decrease in salary level compared with Sluimers.

Read more: New CEO for European pensions giant APG