Bermuda Captive – 30 June
The 2008 Bermuda Captive Conference took place this month in Bermuda, drawing together regulators and senior figures from the captive insurance community for a three-day event.
Director of insurance at the BMA, Shelby Wheldon, told delegates that the key challenges facing the market at present comprise the evolution of regulatory standards, turbulent capital markets and a softening insurance market.
He also outlined the changes currently taking place at the authority regarding Class 3 recategorisation and new solvency regulations.
The legislation is due to be passed by the House of Assembly in July.
Willis has opened a new captive management operation in Malta. It claims this expansion is in response to growing captive insurer and third-party writer opportunities, as Malta establishes itself as a leading financial centre.
The operation is headed up by Mark Bromell, managing director, and reports its first client is Biffa, an integrated waste management business based in the UK.
Biffa, it is claimed, fast-tracked its decision to establish operations in Malta. Following a review that identified both cost savings and the strategic benefit of access to reinsurance markets, Biffa gained board approval for its move in January 2008. Willis presented Biffa with a fully operational captive by its renewal date of April 1.
Malcolm Cutts-Watson, chairman of Willis’ International Captive Practice, said: “We are very pleased to add Malta to our portfolio of EU captive offerings. Malta is a fast-growing domicile and we intend to be part of its success. We are delighted that Biffa has chosen Willis Management (Malta) Limited to manage its captive and be our inaugural client.”
A.M. Best Co. has affirmed the financial strength rating of ‘B++’ (Good) and issuer credit rating (ICR) of ‘bbb’ of Tugu Insurance Company Limited (Tugu) (Hong Kong). The outlook for both ratings is stable.
The ratings reflect Tugu's supportive level of risk-adjusted capitalisation, diversified underwriting portfolio and conservative investment strategy.
The company was adequately capitalised with a conservative net premium leverage of 0.27 times in 2007, an average of 0.35 times during 2003-2007. Best's Capital Adequacy Ratio (BCAR), which measures capitalisation on a risk-adjusted basis, reflects that the company has maintained an adequate risk-adjusted surplus level for its insurance and investment risks. Tugu's financial flexibility is further enhanced by a comprehensive reinsurance programme that limits its net exposure to catastrophe losses. A.M. Best anticipates that Tugu will be able to sustain a stable level of risk-adjusted capitalisation in 2008-2009 with its expected business growth and conservative investment strategy.
Tugu has maintained a conservative investment portfolio, providing a stable stream of investment income to generate an overall profit over the years. Approximately 71 percent of its total invested assets was held in cash and short-term bank deposits, while 19 percent was held in fixed income securities at year end 2007. The company has favourable liquidity to support its insurance liabilities. Additionally, most of the investments are denominated in US dollars, minimising the currency exposure.
Tugu underwrites an insurance portfolio with product and geographic diversifications in Hong Kong, Indonesia and other Asian regions. Property damage accounted for 30 percent of total gross premiums written (GPW) for 2007. Other major lines of business include general liability (27 percent), marine (25 percent) and motor (8 percent). The company reduced its reliance upon Indonesia-based Pertamina (its parent company) business and maintained a low retention of higher-risk lines of business over the recent two years.
A.M. Best Co. has affirmed the financial strength rating of ‘B++’ (Good) and issuer credit rating (ICR) of ‘bbb’ of Elwood Insurance Limited (Hamilton, Bermuda). The outlook for both ratings is stable.
Elwood's ratings recognise its excellent capitalisation level, history of positive operating performance, conservative reserve practices, and effective management of exposures. Over the past five years, return on surplus has averaged 23.1 percent, while surplus levels have increased at a compound annual growth rate of 24.2 percent through the accumulation of net profits.
Partially offsetting these positive rating factors is A.M. Best's concern with the high balance sheet leverage of Elwood's ultimate parent, Celanese Corporation (NYSE: CE), which could negatively impact the operations of its captive. Additional offsetting rating factors are Elwood's exposure to some low-frequency, high-severity hazards in its risk profile, coupled with high gross limits and high net retentions.
Celanese's risk management team takes an enterprise-wide approach to managing its risks and utilising the captive as an integral tool in this process. Elwood has utilised its relationships and those of Celanese to develop a variety of unique and non-correlating accounts, which provide a favourable enhancement to its overall book of business. Nonetheless, Elwood's long-term growth opportunities primarily depend on Celanese's business success.
New York, June 24, 2008: Mr. Sharma, who was speaking in London at the 2008 S&P European Insurance Symposium, said: “We must focus on preserving a consistent approach to overseeing ratings firms—along the lines proposed by the European Union’s ECOFIN, the Financial Stability Forum and IOSCO—which would be in the best interests of international users of ratings.
“We welcome any initiative that works in the interests of the market as a whole, preserves the independence and global consistency of ratings opinions and rating methodologies, and avoids unintended disruption, costs and inefficiencies for investors, issuers and other users of ratings.”
To that end, he added, any regulatory initiative in Europe should therefore focus on the integrity and transparency of the rating process, not seek to determine the content of ratings and methodologies, or become involved in reviewing individual ratings, as that would risk limiting market innovation, call into question the independence of ratings, and potentially create moral hazard as overseers may be perceived to endorse ratings opinions.
Mr. Sharma said much good work has already been done, particularly by the EU’s ECOFIN, by the Financial Stability Forum on behalf of the G8 and by IOSCO representing global securities regulators, in developing a co-ordinated approach globally to restoring confidence in capital markets.
He added that it is critical that this effort continues and that we see a considered and consistent response by authorities around the world to recent events. Investments and capital flows are more global than ever—and this trend will only accelerate—so investors need common measures of assessing risk across the world’s various markets.
“The global market will be best served by a consistent international approach to enhancing transparency, including a common framework for addressing credit ratings. Consistency of approach is vital for cross-border investors and other global credit providers. It supports their ability to assess credit risk on a like-for-like basis across markets, sectors and asset classes. And it helps issuers in local markets raise capital and compete internationally on an even basis with their global peers. To accomplish this will require greater dialogue among all market participants, policymakers and regulators.
Bermuda Captive – 16 June
16 June 2008
US technology firm Maple Technologies has launched a joint initiative with Princeton-based Definitive Insurance Management Services to provide services to the captive and alternative risk transfer markets.
Definitive and its affiliated companies provide services that include capital, legal, legislative, regulatory, actuarial and other components to support the captive and alternative risk transfer landscape.
Maple Tech’s Aspire Information System, and soon to be released Aspire Captive Suite (captive manager system), will support integrated data responsibilities across all disciplines for Definitive’s clients, and act as the technological backbone to support all transactional operations.
Nicholas Teetelli, Maple Technologies CEO, said: “The Definitive approach just speaks to the very core disciplines that develop captive and alternative risk transfer opportunities, driven by highly sophisticated technologies; a perfect compliment when considering our long term initiatives and focus toward the captive sector.”
16 June 2008
With the launch of the bank’s Scotia Private Client Group in September 2007, and now with the recent opening of its new offices on the third floor of Scotia Centre, Scotiabank has expanded its trust group and investment team by hiring David Mullen and Carlo Ylagan.
Ylagan brings 12 years of experience in the investment industry to Scotiabank, most recently with a competing investment dealer in Cayman for the last five years. He has helped clients such as individuals, corporations, captive insurers, trusts, and family units with a wide range of investments including equities, fixed income, mutual funds and managed accounts.
According to Bruce John, the Scotia Centre Director, “Both David and Carlo bring considerable experience and depth to our existing team of private bankers, investment advisors and trustees.
Clients can now have access to their own private banker to look after all their banking needs, investment advisors for their investment needs and trustees to look after estate planning and asset protection, all under one Group.”
16 June 2008
Standard & Poor’s has lowered its financial strength rating on Channel Reinsurance Ltd. to 'AA' from 'AAA', removed the rating from CreditWatch with negative implications and assigned a negative outlook.
The ratingsd agency has also lowered its insurer financial strength ratings and long-term counterparty credit rating on Norway-based nonlife insurer Bluewater Insurance ASA to 'BB+' from 'BBB-' with a stable outlook.
AM Best has affirmed the financial strength ratings of 'A-' (Excellent) and issuer credit ratings of "a-" of Bermuda-based Flagstone Reinsurance Limited and Flagstone Reassurance Suisse SA. Best also affirmed the ICR of "bbb-" of Flagstone's parent, Flagstone Reinsurance Holdings Limited. The outlook for all ratings is stable.
AM Best has also affirmed the financial strength rating of 'A-' (Excellent) and the issuer credit rating of "a-" of Luxembourg-based Casiopea Re S.A., the reinsurance captive of Spain's Telefónica S.A., with a stable outlook. "The ratings reflect Casiopea Re's excellent current and prospective risk-adjusted capitalisation, strong operating performance and improving business diversification," said the bulletin. Best also indicated that it "believes that Casiopea Re's business portfolio is better diversified with the integration of the O2 handsets portfolio, which accounted for a significant proportion of total gross written premiums in 2007, although the material damage and business interruption book was still dominant. Geographically, the business spread also improved and the main markets are now the United Kingdom, Spain and Central and South America."
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