Lloyd's Granted Chinese Licence Insurance

Lloyd's gained a foothold in one of the world's fastest growing insurance markets yesterday after it was granted permission to establish a reinsurance company in China. The announcement was made by Hu Jintao, the Chinese premier, during his state visit to the UK. Lord Levene, chairman of Lloyd's, said the granting of the licence by the Chinese insurance regulator was "a vote of confidence in the strength and expertise of the Lloyd's market".

He did not put a figure on the amount of business that Lloyd's expected to win from China but said "the potential is huge". He admitted it would be several years before Lloyd's made money out of its Chinese investment, although Lloyd's would not invest large amounts initially. "I will be surprised if we make any significant money there for four or five years,'' he said. "But in 10, 15, 20 years, whoever will be running Lloyd's will talk about China as one of our biggest markets.''

Lloyd's will, over the next year, set up a reinsurance company in China, the first time that the market has established a company. This will be considered a local, domestic reinsurer and Chinese insurers will be able to acquire reinsurance cover from it in local currency. Chinese insurers are obliged to buy reinsurance from local companies in local currency. The Lloyd's-owned reinsurer will, in turn, acquire its own reinsurance from the Lloyd's market. Up until now, Chinese insurers have been able to acquire cover in the Lloyd's market but have been forced to do so using foreign currency.

Lloyd's, which has 12 months to set up the reinsurer, will also be able to take advantage of the ending next year of China Re's monopoly, whereby Chinese insurers must cede 20 per cent of all their business to China Re. Reinsurers Swiss Re and Munich Re already have a presence in the Chinese reinsurance market.

Lord Levene said that, although the initial licence was to write reinsurance, Lloyd's had not ruled out writing direct insurance at a later date. Geoff Miller, of Bridgewell Securities, said: "Over the long term, it (China) will probably be very important but on a one or two- year view, the impact on Lloyd's will be de minimis."

02.17 | 0 komentar | Read More

New Insurance Rules Will Hit the Smallest Firms Hardest

Caroline Goorney is a sole practitioner based in Newcastle-upon- Tyne, specialising in family law. For the past 20 years, she has practised law without facing a single claim. However, when she organised her professional indemnity cover this summer, she was confronted by a 35 per cent hike in her premiums. The rules affecting solicitors' indemnity insurance changed on October 1 2005. The minimum cover re-quired by all practices has now doubled to Pounds 2m, and is set at Pounds 3m for limited liability partnerships. This will be the first change in cover limits in 17 years.

Tim Readman, who sits on the Law Society's Insurance Indemnity Committee and is a former council member, says there were good reasons to increase the cover limit. "The number of claims were increasing, damages were increasing. Overall it's in the public interest," he says. However, the effects on certain segments of the legal profession could be severe. For many sole practitioners and small firms, their professional indemnity payment is their largest single overhead. Although the big commercial law firms will not be greatly affected by the new rules, the other 85 per cent of private practice law firms with partners of four or less will. Mr Readman says: "For sole practitioners who are already struggling, it could mean the difference between continuing and not continuing."

Some brokers say in-creased premiums are not necessarily the result of the changes. Geoffrey Pointon, chairman of PYV Group, a specialist financial services company, says: "Smaller law firms who looked around the market probably saved over 50 per cent on last year. Most were expecting to be charged extra for the Pounds 1m but we had more underwriters offering us cover this year than ever before." However, this will only be a temporary reprieve. Next year the impact of the changes is expected to hit the smaller practices in their pockets. Research from AON, the insurer, shows that smaller practices are most likely to require good negligence cover. Almost half the negligence claims in the UK (43 per cent) arise from residential conveyancing work undertaken by firms with 10 or fewer partners.

At the other end of the spectrum, the biggest UK law firms are unaffected by the changes as most of the top 1,000 carry cover well in excess of the Pounds 3m upper limit. However, the process of putting professional indemnity in place is still onerous and time consuming. Many firms since September 11 2001, and the subsequent capital scarcity, have had to go through what amount to "marketing exercises" where they display their risk-management processes to insurers to obtain cover economically. In addition, with commercial transactions now regularly ex-ceeding Pounds 1bn in value, the potential for a catastrophic claim - one that exceeds a law firm's insurance cover - grows. Mr Pointon says: "The big, big firms can't buy the cover they need because the insurance market is not big enough, so some major firms are uninsured effectively above a couple of hundred million."

Chris Perrin, executive partner and general counsel at the global law firm Clifford Chance, says this problem is not new for the big firms. "We have as much cover as we can reasonably get and this is materially more than Pounds 200m," he says. One of the ways in which Clifford Chance covers itself is to buy indemnity policies from as many as 40 different underwriters from around the world, with no individual underwriter having an exposure above Pounds 20m-25m. Similarly, Ian Dinwiddy, finance director at another global law firm, Allen & Overy, says it has been widening the group of insurers that are interested in underwriting law firms by going to New York and Bermuda.

But, as Mr Dinwiddy says, although most big firms have total cover that is a multiple of the largest claim that has ever been paid, "it's no guarantee that it's the largest claim that will ever be paid in future".

01.42 | 0 komentar | Read More

Aftermath of Hurricanes Prompts Look at Home Insurance

We have all seen the devastating pictures in the media of Hurricanes Katrina and Rita's destruction of homes and businesses. There is a growing home insurance question as to the source of damage in the areas hit hardest by Katrina and Rita: wind or flood? The cause of the damage is directly related to home insurance-policies-and-the-coverage they provide. If damage, is caused by wind, most standard home owners policies include coverage.

If flood conditions are determined the source of the loss, a separate federal flood insurance plan must have been obtained before the water damage. "It's really a sad, sad thing," said DeWaine Mattek Sr. of American Family Insurance in Rhinelander. "A lot of people down south did not have flood insurance. You would think most would have looked into it being below sea level. Unless flood insurance was required by a lender, unfortunately the cost of the extra policy made it unavailable to a lot of home owners in the affected region." Much of the inland flooding in the southern states was due to levees breaking, allowing water into other areas. Hurricanes and tornadoes are considered "wind" related disasters.

When is the best time to review your current home insurance policy? Frequently, according to Mattek. "Call your agent and make an appointment to sit down and review policies every couple years to make sure all of your needs are covered." In Oneida County, flood insurance is available, however, in Vilas County it is not. It is up to each county board to accept a proposal for federally regulated national flood insurance. Flood insurance actually only covers a house from the first floor up; not including basements, where most flood damage originates. A common problem in Wisconsin is basement flooding due to the spring thaw. Ice and snow can melt down walls and flood basements, not covered in your home insurance.

Home insurance policies are commonly categorized in a numbering system from one to five, with five being the most extensive coverage. The most popular policies are a three or five, with two used primarily for older cottages and four used for renter's policies. There are stipulations in home insurance policies, along with underwriting regulations determined by location. Your local fire department's rating and location establishes premium variances between cities and rural areas. For example, a more expensive home in Milwaukee may be less expensive to insure than a smaller home in the Northwoods due to fire department response times and fire hydrant locations. Recording a video tape of the contents of your home, including opened drawers, cabinets and closets is recommended.

06.25 | 0 komentar | Read More