Six arrested in alleged insurance fraud dawn raids Three charged with conspiracy to steal from insurance companies  The arrests are a culmination of a two year joint investigation between the Lancashire Police and the Insurance Fraud Bureau, code named Flash. The operation involved individuals allegedly submitting false household claims and, as a part of the investigation, property believed to be have been fraudulently obtained has been retained by the police. The IFB contacted detectives at Lancashire Police after its members identified in excess of 100 potentially suspect claims. Individually these claims were designed to appear independent, but upon investigation, the insurance industry discovered they were in fact linked in a number of ways. John Beadle, chairman of the IFB said: "This shows the positive results that can be achieved by the insurance industry and law enforcement working in unison. "This latest operation and arrests highlight how the IFB is currently working with members to expand its remit beyond crash for cash scams. "The cost of fraud adds on average £44 to every policyholder's insurance premium annually." Lancashire Police Det Insp Dave Groombridge, who is leading the investigation, added: "We are aware that those who flaunt the trappings of wealth where there is no discernable source of income cause the good, honest and hardworking residents of the area to feel angry and disheartened. "In an effort to reverse this negative trend and bring to justice those who feel they are untouchable in their criminal activities a protracted investigation over a two year period involving local detectives and the Insurance Fraud Bureau has resulted in this policing operation. "The disruption activity will continue over the next few days and further arrests are anticipated." To keep up with all the latest developments in combating fraud check out Post's Fraud Management Briefing on 1 October in London.
SECP withdraws its proposed amendments to Insurance Ordinance |
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ISLAMABAD: Securities and Exchange Commission of Pakistan here on Tuesday withdrew its proposed amendments in Insurance ordinance, 2001 by arguing that the proposed amendments were moved in haste and without taking all stakeholders in to confidence. Salman Ali Sheikh, Chairman Securities and Exchange Commission of Pakistan along with Salman Ghani, Federal Secretary Commerce placed joint request before the National Assembly Standing Committee on Commerce for withdrawal of proposed amendments. The Committee met in the chairmanship of the Khurram Dastgir Khan, MNA in the parliament house. SECP Chairman, Salman Ali Sheikh informed the committee that Insurance (Amendment) Bill was initially moved through Finance Bill 2008 in haste. The bill under consideration was moved without formal consultation with stakeholders and proper research on the issue involved in the subject since before their formal approval, this bill along with few other bills was excluded from the Finance Bill at last minute due to the reservations expressed by the stakeholders. The Insurance (Amendment) Bill was aiming to increase the capital limit from 1 million to Rs 500 million for life insurance business and from Rs 1.5 million to Rs 300 million for starting non-life insurance business in the country. SECP was of the view that existing legal framework does not provide for any requirement for those who wish to engage in reinsurance broking. Whereas only those companies who wish to engage in reinsurance broking of direct insurance business are required to obtain license under Insurance Ordinance 2000. Over Rs 10 billion re-insurance premiums is being remitted abroad from Pakistan by insurers for reinsurance protection. Bulk of this business is being placed through brokers, who do not have offices in Pakistan. Concerns regarding the above have been registered by the licensed direct insurance brokers with the commission as well as with Ministry of Finance and Commerce. Proposed amendments will bring reinsurance broking business within the limit of Insurance Ordinance, 2000. This amendment would optimize outflow of foreign exchange with regard to reinsurance protection, bring in investment and provide employment. The main contentious amendment was the proposed registration of foreign re-insurance brokers or agents in Pakistan. However, the representative from Insurance Association of Pakistan strongly opposed this amendment and asked the SECP to not to register them and allow them to come to Pakistan otherwise the country would be left with only two registered re-insurance agents and this would lead to monopoly in the country. Executive Director Insurance SECP told the Committee that failure of financial capitalism and resultant global melt down has dramatically changed the economic scenario in the world. The collapse of insurance giant like AIG has sent a shockwave in major financial centers. Therefore, the commission intends to proceed further, keeping in view the international developments taking place in the relevant fields. Additionally, collapse of Pakistani stock market, economic dependence on IMF, coupled with the war on terror has further aggravated the situation in the country. As domestic market dynamics have undergone a major change, it is in the national interest of SECP to undertake further research on the amendments proposed through the Insurance ()Amendments Bill which was moved in early 2008 when economic climate in the country was altogether different, the committee was further informed. The proposed amendments are to be further reviewed in consultation with the stakeholders. It is SECP's vision to increase insurance penetration and density in the country by creating enabling environment for local industry. By faizan ali khan
Low investment income: Insurance firms’ earnings decline
Wednesday, September 09, 2009
KARACHI: Profits of major listed non-life insurance companies were hurt by low investment income in the first half of 2009 because of difficult equity market situation, although net claims declined sharply. Major listed non-life insurance companies have announced their 1H2009 results. These companies have posted an average growth of 50 percent in underwriting profits mainly at the back of lower claims. However, relatively weak equity market conditions pushed earnings into the red. An analysis of 20 out of 24 listed non-life insurance companies, representing more than 95 percent of the total listed sector gross premiums, showed that underwriting profits posted a handsome increase of 50 percent to Rs 1.4 billion despite a decline of 2 percent in net premiums to Rs 10.2 billion in 1H2009. This was mainly due to a fall in claim ratio as well as lower commission expense in 1H2009. Claim ratio fell to 58 percent in 1H2009 versus 65 percent in 1H2008, while commission expense was down 2 percent to Rs 786 million. Despite strong showing by the underwriting business, difficult equity market conditions kept investment income largely subdued at Rs 358 million down 91 percent from Rs 4.027 billion last year. Resultantly, the sector was unable to support the high administrative expenses as earnings fell into the red zone with a net loss of Rs 8 million in 1H2009. The analysis excludes one-timers such as share of profit from associate booked by IGI Insurance on account of gain on disposal of investments by Packages Limited and one off capital gain on disposal of MCB shares by Adamjee Insurance in 1H2008, including which earnings would have stood at Rs 1.4 billion. Net premiums to remain under stress: The slow economic growth is likely to squeeze earnings of the insurance sector amid sustained pressure on net premiums. Thanks to lower claim ratio, underwriting profits have remained strong in 1H2009, but there still remains a question mark on the sustainability of low claims trend. "Return from equity markets, a major source of income for insurance companies, is starting to show signs of recovery, with improved numbers expected in 2H2009," said an analyst at JS Research Farhan Rizvi. By faizan ali khan
ICICI Pru Life sees break even in 2-3 yrs Friday September 4, 02:59 PM MUMBAI (Reuters) - India's biggest private insurer, ICICI ) Prudential Life Insurance, expects to break even in the next 2-3 years despite a slowdown in industry-wide growth after stock prices tumbled, a senior official said on Thursday. After aggressive and capital-intensive growth across the sector during the bull market run that ended last year, the industry has entered a period of more rational growth, and ICICI Prudential has less demand for heavy capital investment, said Puneet Nanda, executive vice president of the life insurer, "There are still a few players indulging in practices like aggressive pricing, selling practices and product design. But the slowdown was a blessing as there is far more rationality in behaviour in the industry, with more focus on profitability and efficiency rather than aggressive growth," he said. ICICI Prudential Life, 74 percent owned by ICICI Bank, India's largest private-sector bank, and 26 percent owned by Britain's biggest insurer, Prudential Plc, began operations in 2001 as the sector was opened up to private firms. The firm brought down its expense ratio, calculated by dividing the amount of operational expenses by the amount of written premium, to 11.8 percent in 2008/09 from 14.9 percent a year earlier by focusing on efficiency, Nanda said in an interview at the firm's headquarters in Mumbai. "We projected to break even in 10-12 years of operation. We are pretty much on track," Nanda said. ICICI Prudential, with a paid-up capital of 47.8 billion rupees, has about 5,000 outlets to sell its products in India. Nanda said that footprint did not require aggressive expansion, and saw scope to improve penetration in smaller cities. EARLY YEAR SLUMP India's private-sector insurers, all of which are less than 10 years old and unlisted, are largely loss-making as they have invested in aggressive growth in recent years and also must set aside capital to meet solvency margins. A rapid growth spurt across the industry came to a halt last year when the plunge in stock markets in India and globally crimped demand for the equity-based life products that predominate in India's private sector life insurance industry. ICICI Prudential's new business income in the first four months of 2009/10 fell 45 per cent from the same period a year earlier to 12 billion rupees, data from India's Insurance Regulatory Development Authority (IRDA) showed. The number of life insurers in India has risen to 22 since the market was opened in 2000 to challenge state-owned Life Insurance Corp's monopoly, but existing regulations prevent insurers from selling stakes of more than 26 percent to foreign partners or from going public in their first 10 years. Insurance firms are also not permitted to raise debt, which means controlling shareholders, known in India as promoters, must foot the bill in order to fund further growth, which requires building costly distribution networks. Hopes that the limit on foreign stakes would be raised to 49 percent were dashed last year when parliament failed to vote on a measure. It is not clear when it might be reintroduced. Life insurance penetration in India has grown to about 4 percent of GDP, in terms of total premiums underwritten in a year, up from 1.77 percent in 2000 and compared with 2.4 percent in China and about 13.5 percent in the UK. ICICI Prudential manages assets worth 450 billion rupees, more than 60 percent of which is invested in equities. Nanda did not expect much change in ICICI Prudential's product mix, with unit-linked products bringing in about 90 percent of revenues in the current year. Unit-linked insurance policies are sold as units like mutual funds and the corpus is mainly invested in equity and debt markets. They are by far the dominant product sold by private sector life insurers in India. Moody's reduces global reinsurance outlook to negative
4 September, 2009 Report predicts credit support will weaken Moody's has changed its global reinsurance industry outlook to negative from stable. In a new report on the global reinsurance sector, Moody's Investors Service concludes that restrained demand, overcapacity and fragile market confidence point to a higher chance that credit support will weaken rather than improve over the next 12 to 18 months. By most standards the sector has weathered the crisis better than most financial institutions, which makes it all the more surprising that the sector on average is still trading below book value. For an industry that is renowned for raising capital after major catastrophes or downturns, uncertain reception from the capital markets is a credit negative, particularly when signs point to greater price competition in 2010, it said Willis: Insurance M&A to increase in 2010
4 September, 2009 CEO of Willis Capital Markets & Advisory offers industry outlook at London Conference The insurance industry will see a pick up in mergers & acquisitions (M&A) activity in 2010, according to Tony Ursano, chief executive officer of Willis Capital Markets & Advisory. Speaking at an industry event at The Willis Building in London, Ursano said that the soft market is fuelling the search for growth, diversification and specialisation that can be achieved through M&A. Citing the factors likely to drive future M&A activity, Ursano said that the size and scale of insurance companies was becoming increasingly important for rating agencies, investors and clients, and that M&A would satisfy the pent-up demand for liquidity from private equity owners. So far in 2009, insurance M&A volume has been light, with deals completed at an average price of 1.09 times book value. This is in contrast, he said, to specialty insurance M&A transactions that took place before the financial crisis in which the average price was 2.46 times book value. “As markets stabilize, valuations boost confidence and acquisition financing capacity and terms improve, we expect to see a significant increase in M&A activity in the insurance space,” Ursano said. “While the outlook is positive, we must bear in mind that more than 50 percent of insurance deals have failed to create shareholder value due to a number of factors, including difficulty assessing the profitability of the target, the cyclical nature of the insurance market and the volatility of the financing markets. “In order for an M&A deal to be successful, it needs to be financially and strategically compelling,” he said, citing Ace Limited’s successful M&A strategy as an example. “Insurance companies looking to acquire should first ensure that the deal is accretive to earnings, return on equity and book value per share. There should be clear, defensible strategic logic behind the acquisition, transparency of loss reserves and committed financing upfront. It’s also important that key management are given appropriate incentives to stay,” he said. Ursano added: “We are one event away from a hard market. Profitability and returns are under tremendous pressure and there have been major investment losses and reduced investment income in the insurance world, with valuations at all-time lows; more than 50 insurance and reinsurance companies are trading at below their stated book value. Under these circumstances, a significant investment or catastrophic loss would catapult the industry into a hard market.” Ursano also predicted an increase in sidecar and cat bond activity, and an increase in ILS fund formation in 2010 fuelled by the light catastrophe losses so far this year, which could drive strong investor returns in an attractive, uncorrelated asset class. This, coupled with financial market stability, could increase hedge fund participation, he said. |
