New York 19.01.2017Overnight Reuters exclusively reported that Aon Plc is in advanced talks to sell its employee benefits outsourcing unit to buyout firm Clayton Dubilier & Rice LLC for nearly $4.5 billion, people familiar with the matter said on Thursday.

The divestiture would undo much of Aon’s 2010 acquisition of human resources services provider Hewitt Associates for $4.9 billion, signaling that the company now wants to focus more on its insurance and risk management businesses.

After submitting an offer earlier this month, CD&R has

London 20.01.2017A.M. Best does not anticipate taking any rating actions as a direct result of plans for the United Kingdom to exit the EU although the cost implications of continuing to access EU business and any resultant downturn in the U.K. economy are likely to weigh on insurers.

In a new Best’s Special Report, titled “Brexit Uncertainties Weigh on U.K. Insurers but Rated Entities Able to Withstand Pressure,” A.M. Best states its opinion that there are three key issues that could impact the U.K. insurance industry in the wake of Brexit – the ability to continue to access EU business following a loss of passporting rights, the economic fall-out and regulatory developments.

Reuters report Aon close to sale of Hewitt

Rating changes due to Brexit unlikely

prevailed over private equity firm Blackstone Group in an auction for the unit, the sources said. The sources cautioned that negotiations were ongoing and that the outcome could still change.

CD&R operating partner and former SunGard Data Systems CEO Russell Fradin, who was Aon Hewitt’s CEO from 2006 to 2011, is playing a key role in drafting a plan on how the unit can be separated from Aon, the sources said.

Aon hopes to announce a deal by the 10th of February when it plans to report fourth-quarter earnings, the sources said. >

We are delighted to provide you with your new and improved weekly e-newsletter.

Reinsurance Week delivers all the usual short news and video coverage of the (re)insurance market but now with features, interviews and statistics.

This week we focus on DAVOS 2017, Aon Benfield’s Annual Global Climate and Catastrophe Report and we interview Darag Group CEO Arndt Gossmann.

John Nelson, talks about post-Brexit subsidiary plans and how the insurance industry is keeping up with technology. >

WEF video: John Nelson on London’s post-Brexit plans video: cnbc.com

Welcome to Reinsurance Week

REINSURANCE MAGAZINE ’S WEEKLY N E W S R E V I E W 20.01 . 2017

reinsuranceweekQUOTE OF THE WEEK:‘‘AI will be man and machine, not man vs. machine.’’GINNI ROMETTY,IBM

WEF 2017 Davos

As Prime Minister Theresa May’s speech on 17 January 2017 was a broader political statement, there was unsurprisingly no mention of the “passporting” rights, which have significant implications for the financial sector. Catherine Thomas, senior director, analytics, said: “The ability to continue to conduct cross-border business throughout the EU is principally a concern for Lloyd’s, the London market and other commercial insurers. To continue to underwrite EU business, these companies are likely to need to establish an EU-domiciled subsidiary, if they do not already have one. This would have associated costs, operational requirements and resourcing implications.” >

Moody’s upgrades SCOR from A1 to Aa3Rating changes due to Brexit unlikely

WEF video: John Nelson on London’s post-Brexit plans video: cnbc.com

Lloyd’s announces India branch plans

weekreinsurance20.01 . 2017 3

Inga Beale, Lloyd’s CEO, spoke with Yahoo Finance at the World Economic Forum in Davos, Switzerland on topics including inclusiveness in the workplace, and the companys’s response to Brexit.

WEF video: Lloyd’s CEO Inga Beale at the WEF video:yahoofinance.com

Soft market conditions replace regulation as main factor affecting MGA growth

London 19.01.2017Lloyd’s, has announced plans to open a reinsurance branch in India, in time for the April major reinsurance renewals, following final regulatory (R3) approval from the Insurance Regulatory Development Authority of India (IRDAI).

This will enable Lloyd’s syndicates to offer specialist reinsurance in a variety of classes from a Lloyd’s India branch in Mumbai.

Lloyd’s Chairman John Nelson said: “This is a watershed moment in Lloyd’s international strategy. We have now cemented our access to the world’s largest, fast-growth economies, those most in need of the specialist insurance to protect their expanding asset base.

“Lloyd’s will bring expertise and specialist

capacity to India’s insurance market and work in partnership with local insurance businesses to develop innovative solutions that meet the unique needs of the growing economy.

“Lloyd’s will help to share and develop expertise across the industry to position India as an international centre for insurance and reinsurance. A strong and diverse reinsurance market will de-risk the economy and enable its entrepreneurs and businesses to take risks and thrive.

“A local presence in India will bring Lloyd’s closer to clients and risks enhancing understanding and the ability to develop new solutions for the needs of the Indian market with a particular focus on agriculture, infrastructure and disaster management.” >

London 19.01.2017Soft market conditions have replaced regulation and compliance as the main factor affecting growth in the MGA (managing general agents) sector in 2017, according to the latest MGAA Matters, the research-based partnership between the Managing General Agents’ Association and MGA start-up specialists Castel Underwriting Agencies Ltd.

The survey of MGAA members, conducted in December 2016, also looked at the sector’s main strategic priorities and how these have changed over the last three years.

More than 65% of survey respondents placed soft market conditions at the top of the list of factors affecting growth, compared to 46% in 2014. Regulation and compliance, which topped the list in 2014 with 69%, dropped a place with 57% in the latest survey.

New factors appearing included mergers and acquisitions (M&A) and consolidation in the sector which was cited by nearly 19%. Just over 17% of respondents said uncertainty about Brexit wo uld impact growth. >

CL ICK HERE FORMORE INFORMATION

Fears that artificial intelligence will steal jobs are largely unfounded, and the technology will instead work cohesively with most professions, IBM CEO Ginni Rometty said at the World Economic Forum on Tuesday.

WEF video: IBM CEO on ‘new collar’ jobs of the future video: cnbc.com

WEF 2017 Davos

WEF 2017 Davos

in negotiations with respect to alternative acquisition.

During the “go-shop” period, Allied World and its representatives actively solicited 31 potentially interested parties. During this time none of these parties executed a confidentiality agreement or expressed interest in pursuing a transaction, and no other party proposed an alternative transaction.

The acquisition is anticipated to be completed in the second quarter of 2017 following the satisfaction of customary closing conditions. >

Louisiana floods losses could reach $11 billion O

on the move Jonathan Turner announced as new Chief Executive for Pen Underwriting Pen Underwriting has announced the appointment of Jonathan Turner (Right) to the role of Chief Executive, subject to regulatory approvals, taking over the leadership from current Managing Director, Mark Armitage.The move will see Mr Turner, who joined Pen as Executive Chairman in September 2015, assume full day-to-day management for Pen and its c.400-team, as Mr Armitage joins Arthur J. Gallagher’s UK Retail operations to assume the role of Managing Director, Broking & Placement.

Flood Re appoints Andy Bord as interim Chief ExecutiveAndy Bord, formerly CEO at Capita Insurance Services, has been appointed as interim CEO of Flood Re. Mr Bord will join Flood Re on Monday 23 January and have a full handover from Brendan McCafferty, the current CEO, prior to taking over from Brendan on 10 February. Andy’s appointment is subject to regulatory approval.

IGI adds to its London market expertise Simon Mepham has been appointed Senior Underwriter - Directors & Officers (D&O), Ben Cubitt joins IGI’s Financial Institutions team as an Underwriter and Joanna Cousins has been appointed Political Violence Underwriter.Andreas Loucaides, Chief Executive Officer of IGI UK, said: “These appointments broaden our underwriting offering and strengthen our team in London. IGI is focused on prudent, well-managed growth, and Simon, Ben and Joanna will further enhance our market standing.”

Scor announces group level appointmentsPaul Christoff is appointed MD of the Americas Hub while Eric Pooi, currently COO of the Life division for Asia-Pacific, becomes MD of the Asia-Pacific Hub,

weekreinsurance20.01 . 2017 5

Allied World has announced that the expiration of the 30-day “go-shop” period included in the terms of the definitive merger agreement announced on December 18, 2016 under which Allied World will be acquired by Fairfax Financial Holdings. Under the agreement, Allied World and its representatives were permitted to solicit and engage

Allied World “go-shop” period expires

reporting to Romain Launay. Eric Pooi replaces Ben Ho, who has been appointed Advisor to the Managing Director of the Asia-Pacific Hub. Marc Philippe, currently Deputy CIO, becomes SCOR’s CIO, reporting to Romain Launay, replacing Régis Delayat, who has been appointed Digital Advisor to the Chairman. Romain Portelli, in charge of information systems at SCOR Global P&C, is appointed Deputy CIO, in charge of the functional scope of the Group’s information technology. Guillaume Ominetti, currently Head of Capital Shield Strategy in Group Risk Management, is appointed Advisor to the Chairman and Head of Public Affairs.

XL Catlin Appoints New Global Head of Placements, Ceded ReinsuranceXL Catlin’s P&C Underwriting Capital Management operation has appointed Anne Middleton (pic above) to manage its ceded reinsurance placements globally.Ms Middleton, who is based in London, will be responsible for overseeing and negotiating the terms, structure and pricing of XL Catlin’s reinsurance programs. She reports to Mark van Zanden, Chief Executive of XL Catlin’s P&C Underwriting Capital Management team.

Novae appoints CFONovae has announced the appointment of Reeken Patel (pic below) as Executive Director and Group Chief Financial Officer, subject to regulatory approval.Matthew Fosh, Group Chief Executive commented:“Reeken has an outstanding track record as a member of the executive team and we are delighted to be appointing him to the position of Chief Financial Officer and as an Executive Director of Novae Group plc.”>

Generali CEO, Philippe Donnet speaking at the World Economic Forum on Wednesday says it’s strange yet positive that China supports globalization.

WEF video: China wants to strengthen its global position: Generali CEO video:yahoofinance.com

WEF 2017 Davos

weekreinsurance20.01 . 2017 6

Too many cooks

ARTEMIS

In a reinsurance market that has been under increasing pressure, with pricing declining steadily, terms still expanding and, as a result, reinsurers returns almost halving, it is surely time to have a discussion about the number of participants in the value-chain.

To have that discussion though we need to go back to basics.

What is the promise of reinsurance? Is it still solely a back-stop for the insurance industry? Or is the business model moving to become one more about risk transfer, with varying layers of seniority?

For risk is the name of the game, in insurance, reinsurance and indeed the insurance-linked securities (ILS) market. Sourcing risk, analysing risk, measuring & pricing risk, assuming risk, retaining risk, transferring risk, this is what the market aims to achieve.

But for reinsurers and retrocessionaires, sitting at the rear of an increasingly inefficient value-chain, the desire to become more direct providers of more senior risk transfer layers is both understandable, given the market environment, and also strategically sensible.

When margins are at a minimum the only way to increase them is to take out unnecessary costs.

If there are too many cooks; rather than assuming spoiled broth wouldn’t it be more palatable to only ingest the finest, grass-fed, organic risks?

Change is coming at an ever-faster rate. >

FOR FURTHER INFO CONTACTSteve Evans at http://www.artemis.bm @artemisbm

‘‘ When margins are at a minimum the only way to increase them is to take out unnecessary costs.”

Bermuda 19.01.2017OneBeacon Insurance Group controlled by White Mountains Insurance Group, is exploring a sale, people familiar with the matter said.

According to Bloomberg the Bermuda-based company recently began working with Credit Suisse Group AG to solicit offers from rival insurers, said the people, who asked not to be identified because the process is private. Representatives for OneBeacon and Credit Suisse declined to comment. A representative for White Mountains didn’t immediately respond to a request for comment.

With the possibility of lower tax rates under

President-elect Donald Trump, the pool of potential buyers in insurance-industry deals could expand to include more U.S.-based companies, Gary Ransom, an analyst at Dowling & Partners, said at a conference Tuesday in New York. In prior years, the buyers in large insurance deals were often from lower-tax jurisdictions, like Switzerland or Bermuda.

“The U.S. can be back in the game,” Ransom said at an event held by the Insurance Information Institute, citing the deal last month by Boston-based Liberty Mutual Holding Co. to acquire Bermuda’s Ironshore Inc. “Suddenly, U.S. companies, if you assume a lower tax rate, they can buy Bermuda companies.>

Mike Van Slooten, Head of Market Analytics, Aon Benfield, in the second part of an interview with re360.co looks at the trends behind and the main factors on the increased demand for reinsurance at the January 1 renewals. >

re360video: Mike Van Slooten on increased demand for reinsurance

Reports suggest OneBeacon exploring sale

Coming soon for

CLICKHERE

2017

re on tap

2017Coming soon for

weekreinsurance20.01 . 2017 8

Run-off market continues to grow

RUN-OFF Q&A

Q3 saw the run-off market heading for a great 2016. How did 2016 end up for run-off insurers?So far, this year has been the best for run-off insurers. For 2016 we had estimated a total volume of 4 bn euros in legacy books being transferred in the European non-life sector alone. According to our estimations, from the announced and published run-off deals, this transaction volume reached close to 4.5bn euro without including the deals whose value was not disclosed. The average transaction size has jumped from 20 million euro in 2014 to 200 million euro in 2016 while some single deals amount up to 1 billion euro. This level of run-off activity is unprecedented and we believe that we have not seen the peak yet.

Can we expect the same for 2017 and if so where will the growth come from?Definitely, yes. We believe this is just the start. We are seeing a significant increase in run-off opportunities and transactions coming from the Continent. More and more (re)insurers are classifying business as run-off, mid-sized players are discovering the capital management/run-off appeal and legacy management is increasingly being viewed as an ongoing strategic initiative rather than an ad hoc, emergency measure. In the USA, the new Rhode Island Regulation 68 provides a range of options and tools for carriers when managing legacy business, including the potential transfer of run-off portfolios to third parties. Yet, growth will not come all at once. I think we will see the potential of the run-off / legacy market unfold gradually in the next 2 to 4 years.

Could 2017 be the year for consolidation in the run-off market?While the number of players in the market is more or less stable, the market potential is undeniably growing. This is no typical environment for market consolidation. In the past, many international players have brought large portfolios to the market. In the future, we expect

Our business model is less susceptible to the Brexit uncertainty than the rest of (re)insurance industry. From a run-off perspective, the most crucial question is how the new EU passporting framework will be organized. This will affect insurers’ decisions to maintain or exit certain LoBs or regions by means of run-off, which could spur legacy transactions in the UK. We believe that the Brexit will cause some restructuring in the setup of international insurers, but the scale of strategic realignment will heavily depend on how the negotiations will unfold and the future partnership of the UK and the EU countries will be shaped.

What do the next 12 months hold for DARAG?Balanced growth. DARAG was the first to pioneer run-off and capital management solutions in Continental Europe. So far we have concluded 22 run-off transactions in 12 countries. No other (re)insurance company can point to a comparable track record. Yet this is not where we stop, quite the contrary. Our Group is now domiciled in Germany, Italy and Malta with operations across Europe. In 2015 we launched a second risk carrier offering Protected Cell solutions (the R-pad) enabling insurers to efficiently structure large and complex portfolios and investors to participate directly in run-off opportunities without having operational concerns. The run-off potential in the Continent is still untapped and undeniable. So is the development of new, innovative capital management solutions that will respond to today’s challenging environment and the industry’s disparate needs. We intend to be in the front line of finding new ways and tools to create and deliver value, deriving from legacy business, to our clients. re

Arndt Gossmann Group CEO of DARAG on the prospects for therun-off market in the year ahead after good results in 2016.

Our business model is less susceptible to the Brexit uncertainty than the rest of (re)insurance industry. From a run-off perspective, the most crucial question is how the new EU passporting frame-work will be organized.’’ARNDT GOSSMANN, DARAG ‘‘

Global Catastrophe losses rise to highest levels seen in four years

weekreinsurance20.01 . 2017 9

It reported that global natural disasters in 2016 combined to cause

economic losses of US$210 billion, an amount 21% above the 16-year average of US$174 billion.

The economic losses were attributed to 315 separate events, compared to an average of 271. The disasters caused insured losses of US$54 billion, or 7% above the 16-year mean of US$50 billion and 37% higher than the average 0f US$39 billion.

This is the highest insured loss total since 2012, and

put an end to a four-year downward trend since the record year in 2011. Notable events during the year included major earthquakes in Japan; Hurricane Matthew in the United States and Caribbean; catastrophic summer flooding in China, Europe, and the United States; several extensive severe weather outbreaks in the United States; major wildfires in Canada and the United States; and drought across parts of Southeast Asia and Africa.

RESEARCH & ANALYSIS

Aon Benfield this week released its highly insightful Annual Global Climate and Catastrophe Report for 2016.

The top three perils—flooding, earthquake and severe weather—combined for 70% of all economic losses in 2016. While at least 72% of catastrophe losses occurred outside of the United States, it

still accounted for 56% of global insured losses. This highlights the continued protection gap in many areas around the world and is reflected in the followings charts provided by Aon Benfield. re

TOTAL NATURAL DISASTER EVENTS BY REGION

GLOBAL ECONOMIC LOSSES BY PERIL

Source: Aon Benfield

Source: Aon Benfield

There were 34 individual billion-dollar natural disaster events in 2016, well above the average of 26 dating to 2000. It was three

higher than the total registered in 2015. The United States led with 14 individual billion-dollar events, while APAC was second with

13, EMEA was third with 4 and the Americas was fourth with 3. Please note that Hurricane Matthew was bucketed as a billion-dollar

event in the US since the majority of losses occurred there. For weather-only events, there were 30 billion-dollar disasters, which was

also above the 16-year average of 24. The tally was one higher than the total in 2015. The United States led with 14, followed by APAC

(11), EMEA (3), and the Americas (2).

0

10

20

30

40

50

60

70

OtherDroughtEU WindstormWildfireWinter WeatherEarthquakeFloodingSevere WeatherTropical Cyclone

USD

Billio

ns (2

016)

10 Year Average2016

3034

32

26

62

50 4953

4.6

10

1.34.4

7.0 5.8

21

15

0.1 1.5

n For the fourth consecutive year, the costliest peril was flood. It was 24% above its short-term average and driven by catastrophic events in China and the United States. Other perils that saw aggregated costs top US$25 billion during the year were earthquake, severe weather, and tropical cyclone. All major perils were above their recent 10-year averages with the exception of tropical cyclone, European windstorm, and winter weather. The earthquake peril had its costliest year since 2011 following major events in Japan, Italy, New Zealand, and Ecuador.

0

30

60

90

120

150

AmericasAPACEMEAUnited States

10 Year Average2016

6660 63

55

144

107

4237

Even

ts

CLICK HERE FOR THE FULL REPORT