The continent has been hit by a range of natural catastrophes over the past few months, from heatwaves and wildfires to storms and flooding, causing devastation for thousands of people.

But while prices for cover in the US have risen sharply over the past year to cover growing weather risks, the European market has been more subdued.

The prices that individuals and businesses pay are often driven by the cost of reinsurance — the cover that insurers buy to protect themselves. According to Lloyd’s chief executive John Neal, prices for US reinsurance have risen by between 20 per cent and 40 per cent over the past year or so, while prices in Japan have also increased sharply. In Europe, prices have risen by just 10-12 per cent.

“I think you’re going to see a much stronger movement in price for European reinsurance business,” he said in an interview on Thursday, adding that reinsurance price increases would feed through to primary insurance costs, particularly in areas such as property cover.

Neal said that the extreme weather was changing the way insurers thought about climate risks. “When we look at weather-related losses, the reality is it’s changing and we’ve got to be much smarter in the way in which we assume and measure risk.”

He added: “The pattern of weather, which is a function of climate change, is changing. I don’t think you can simply rely on past data and say ‘that’s what happened in the past so that’s what will happen in the future.’ I think there’s a lot more on us to understand what changing weather patterns mean.”

His comments came as Lloyd’s reported results for the first half of the year, swinging to a pre-tax profit of £3.9bn from a £1.8bn loss in the same period last year as it benefited from both rising insurance prices and better investment returns.

Underwriting profits more than doubled from £1.2bn to £2.5bn as insurance and reinsurance prices rose by 9 per cent across the market and customers bought more cover.

“There’s a realisation that we are living in more challenging and riskier times,” said Neal. “You’ve got society — either individuals, corporates or governments — more inclined to think about how they manage the financial implications of risk by transferring the liability.”

The combined ratio — a measure of claims and costs as a proportion of premiums — improved from 91.4 per cent to 85.2 per cent. “We’ve not been close to that [level] for a couple of decades,” said Neal.

Lloyd’s also benefited from better returns on its £100bn investment book, generating a yield of 3 per cent as interest rates rose, up from less than 1 per cent a few years ago. Neal predicted that the yield would rise to nearer 4 per cent.

This story originally appeared on: Financial Times - Author:Oliver Ralph

Under rules introduced by regulators last year, insurers have to charge existing customers the same at renewal as they would charge new customers.

Direct Line on Friday said it had not done that in some cases because of “an error in our implementation of these rules”. As a result, it said some customers had paid a higher renewal price than they should have.

The company said it would refund anyone who had been overcharged. That will cost it £30mn, of which half was provided for in the 2022 results.

The news is a fresh blow to the insurer, whose chief executive left this year after a string of profit warnings and a dividend cut. This week, it appointed Aviva’s Adam Winslow as its new chief executive, though he will not start until next year.

In June, the Financial Conduct Authority ordered Direct Line to carry out a review of claims paid out between 2017 and 2022 after it underpaid some car and van insurance customers.

The company’s share price has almost halved over the past two years. It fell a further 1.8 per cent in early trading on Friday.

The FCA’s pricing rules were introduced last year in a bid to stamp out the so-called loyalty penalty — the practice of insurers charging existing customers far more for their policies than they would charge new customers for the same policy.

This is the first time that the FCA has taken action against an insurer for breaching the new rules. “Customers do not need to do anything themselves at this stage. Direct Line Group will be contacting affected customers directly,” the regulator said in a statement on Friday.

The FCA said Direct Line had agreed to a “voluntary requirement” to look into the overcharging issue. A voluntary requirement is an agreement between a company and the regulator to look into an issue but stops short of formal enforcement action.

Car insurance prices have been increasing for all customers in the past year, reaching an all-time high as rising costs for replacement cars, labour and parts push up the amount that insurers are paying out in claims.

Motorists were quoted an average of £776 for motor policies in the second quarter, up a record 40 per cent on the previous year, according to an index from comparison site Confused.com and insurance broker Willis Towers Watson.

This story originally appeared on: Financial Times - Author:Oliver Ralph

French reinsurer Scor, where Kessler had spent two decades as chair, paid tribute to him on Friday, saying he had “devoted his entire life to business”.

This story originally appeared on: Financial Times - Author:Oliver Ralph

Confusing, opaque and expensive. Buying and claiming on insurance policies can be a frustrating. It turns out, though, that insurance companies often feel the same way about their customers — a group of people whose inner secrets hold the key to their success or failure.

The reasons behind the mutual incomprehension lie at the heart of why many insurance markets either work badly, or do not work at all.

Where the book hits its stride is with some of the thornier problems insurance companies and their customers are beginning to face. Going back to health insurance, for example, the growing availability of genetic data leads to a new set of challenges as that information can be used to identify who is at higher risk of certain illnesses. Should governments allow insurers to use this information to price policies? If so, some people risk being excluded from the market because they lost the genetic lottery. But if insurers cannot use this information while their customers can, the market will be twisted in the other direction.

There are no easy answers here, and the authors do not try to offer any. There are, they say, only trade-offs. “Whatever balance between efficiency and fairness the government chooses, there will be winners and there will be losers,” they argue. “The losers will often have genuinely tragic stories to tell.”

These types of questions will become more common as insurers gather an ever wider range of data about their customers. The data may tell them, for example, that people with fair hair are more likely to drive too fast. Or that journalists who write book reviews are statistically more likely to have their house flooded. The information advantage could shift from the customer to the insurer, and the authors are a little too dismissive of the potential for big data to disrupt the market. But that potential is there. And it will not necessarily make insurance a less confusing, opaque or expensive place.

This story originally appeared on: Financial Times - Author:Oliver Ralph

The insurance and asset management group said on Monday that it would start a search for Wilson’s successor.

Wilson, who joined the group in 2009 as chief financial officer and became chief executive in 2012, has spearheaded the group’s push into investment in infrastructure and other long-term assets across the UK. He was knighted last year.

This story originally appeared on: Financial Times - Author:Oliver Ralph

The insurance group said on Friday that Penny James would leave immediately and that Jon Greenwood, the chief commercial officer, would become acting chief executive.

“It has been a privilege to lead Direct Line Group for nearly four years,” said James. “While the business was impacted by significant headwinds at the end of 2022, the group has continued to make strategic progress.”

This story originally appeared on: Financial Times - Author:Oliver Ralph

It’s easy to see why they have been casting envious glances towards insurance — it is big, can generate decent profits, and has been doing business in broadly the same way for decades. By sprinkling in some AI, some big data and some user-friendly apps, went the argument, it should be possible to win a decent slice of the market.

Plenty of people bought into the idea. According to data from insurer Gallagher Re, more than $40bn has been invested in so-called insurtech start-ups globally over the past five years.

This story originally appeared on: Financial Times - Author:Oliver Ralph

In a filing on Wednesday, the US insurer said it had put AIG Financial Products into bankruptcy. The unit’s risky bets on credit default swaps were at the heart of the US government’s $182bn bailout of AIG in 2008 during the financial crisis.

Since then, AIG has been battling a group of former AIG FP executives in the US and UK, who claim they are owed millions of dollars in bonuses by the business.

This story originally appeared on: Financial Times - Author:Oliver Ralph

Earlier this year a number of insurers flagged the rising costs of parts, labour and replacement cars. Car insurance prices have increased in response — according to comparison site confused.com, they are going up at an annual rate of 14 per cent.

But on Wednesday Aviva, one of the UK’s largest motor insurers, said that these pressures were easing. “Inflation peaked in the second quarter at 12 per cent and is coming back to the 8-10 per cent range,” Aviva chief executive Amanda Blanc told the Financial Times.

This story originally appeared on: Financial Times - Author:Oliver Ralph

But, even if there had been an attack, Lloyd’s would have been covered — its management has cyber insurance in place to deal with the costs.

It is a form of cover that seems an obvious purchase for an organisation running a global market. However, for other companies, a decision on whether, or how much, cover to buy is a much tougher one — despite the rising profile and costs of ransomware attacks.

“It’s a very unique, stressful situation to have a cyber event, particularly ransomware,” says Paul Bantick, head of global cyber and technology at insurer Beazley. “You want to have people by your side that have done that a lot of times, who know the drill, who can advise you and help you think through your options. If you don’t have someone who can help you with that, it’s a real challenge.”

This story originally appeared on: Financial Times - Author:Oliver Ralph

The company said on Tuesday that it was on track to deliver earnings in line with the guidance it provided with its half-year results in August. “Our businesses are resilient, and we are on track to deliver good growth in key financial metrics for full-year 2022,” said chief executive Nigel Wilson.

Legal & General’s shares closed at 221.9p on Monday, 13 per cent below the level before Kwarteng’s fiscal plan was unveiled on September 23.

On LDI, it noted that the recent increases in interest rates had caused “challenges for the pension fund clients and counterparties of LGIM’s UK LDI (liability driven investment) business” but added that “LGIM acts as an agent between our LDI clients and market counterparties and therefore has no balance sheet exposure”.

L&G said that its solvency ratio — a measure of capital available as a proportion of the minimum required — had improved from 212 per cent at the half-year stage to between 235 and 240 per cent at the end of September.

This story originally appeared on: Financial Times - Author:Oliver Ralph