Page 1

INMAG OCT 15_page layouts 2/10/2015 1:02 pm Page 1

INSPIRING LEADERS: Meet three women at the top

LIGHT ON THE HORIZON? Reinsurers see signs of an upturn

North Queenslanders don’t need a taxpayer-financed mutual insurer or reinsurance pool – they need help to make their homes cyclone-resistant. How the insurance affordability debate is turning around to a solution that’s far cheaper and more effective

October/November 2015

INMAG OCT 15_page layouts 2/10/2015 1:02 pm Page 2


Zurich Australian Insurance Limited ABN 13 000 296 640, AFS Licence No. 232507. 5 Blue Street North Sydney NSW 2060 ZU22713 - V1 LBAT-009540-2014

INMAG OCT 15_page layouts 2/10/2015 1:02 pm Page 3


You can now offer your clients a bundled ISR, Liability, Commercial Motor and Motor Fleet product, either over the phone, by mail, email or using our innovative Commercial platform. This first to market solution makes it easier for you to get your clients fully covered, in whichever way that suits you best. Call 1800 426 021 or visit


INMAG OCT 15_page layouts 2/10/2015 1:02 pm Page 4

Your insights

Our strengths and expertise

Top-class protection around the world

You know your business inside out. You know your markets, your customers, your competitors. Above all, you know the risks facing your business. At Swiss Re Corporate Solutions, we have the capabilities and the financial strength to meet the risk transfer needs of businesses worldwide. But that’s only half the story. Whether your risk is basic or complex, whether the solution is off-the-shelf or highly customised, we believe that there’s only one way to arrive at the right solution. And that’s to work together and combine your experience with our expertise and your strengths with our skills. Long-term relationships bring long-term benefits. We’re smarter together. Swiss Re Corporate Solutions offers the above products through carriers that are allowed to operate in the relevant type of insurance or reinsurance in individual jurisdictions. Availability of products varies by jurisdiction. This communication is not intended as a solicitation to purchase (re)insurance. © Swiss Re 2015. All rights reserved.

INMAG OCT 15_page layouts 2/10/2015 1:02 pm Page 7

Sydney is the Australian city with the most to lose in a catastrophe

Counting the cost of our risky cities Man-made and natural disasters could cost Australia’s six biggest cities $US81.06 billion in GDP over the next decade, according to Lloyd’s. The market’s City Risk Index 2015-25 – based on research by the UK’s Cambridge Centre for Risk Studies – analyses the GDPs of 301 cities against 18 potential threats. It says $US4.6 trillion of projected GDP is at risk worldwide from man-made and natural disasters. It shows man-made risks are a bigger threat to Australia’s economic security – more than 70% of total GDP exposure – than natural perils such as floods, storms, bushfires and drought. The five biggest risks in Australia are a stock market crash, calculated at $US43.5 billion, cyber attack at $US14.26 billion, human pandemic at $US9.24 billion, flood at $US7.63 billion and drought at $US2.5 billion. By city, Sydney has the most GDP at risk with $US27.78 billion, followed by Melbourne at $US22.98 billion, Brisbane at $US11.17 billion,

Perth at $US10 billion, Adelaide at $US6.3 billion and Canberra at $US2.8 billion. The projected risk of $US81.06 billion equates to 7.43% of the six cities’ combined GDP, which is $US1.09 trillion. A market crash accounts for more than half of Australia’s at-risk GDP. Sydney’s projected loss ranks 19th-highest worldwide in this category and 12th for cyber attack, which Lloyd’s says reflects its status as an Asian financial hub. Australia has significant exposure to natural threats. In the categories of heatwave and drought, Sydney ranks sixth and 12th respectively worldwide. Melbourne tops the national list for the economic impact of flood and Adelaide for earthquake. Lloyd’s General Representative in Australia Chris Mackinnon told the report seeks to “raise awareness of threats that are not necessarily front of mind”. Man-made perils pose biggest threat: Lloyd’s, 7 September

‘New normal’: a world of change Insurers must grasp new opportunities in a rapidly changing world, or risk ending up on the scrapheap, says Berkshire Hathaway Specialty Insurance Australasia President Chris Colahan (right). In a keynote speech at the Australian Professional Indemnity Group conference in Sydney on 3 September, he said the industry must adjust to a “new normal” of low growth and surplus capacity, and the huge disruption technology will bring. “There are whole new companies that need insurance, such as Uber and Airbnb,” he later told “We will have to adapt to robotics, artificial intelligence and 3D printing, and there will be new things such as driverless cars, smart homes and drones to insure.” New distribution methods will emerge, with potential for companies such as Amazon, Google and Facebook to permanently alter the insurance landscape. “These companies have huge access to customer data and the only thing stopping them from getting involved in general insurance is the fact they are making so much money doing other things,” Mr Colahan said. He believes a new focus on the customer is required, with complex business processes that do not add value discarded. Companies will need “brilliant people in an environment that enables them to be brilliant”, with old-fashioned performance management techniques scrapped. New world ‘will make winners and losers’, 7 September


October/November 2015

CGU has been named the 2015 General Insurer of the Year at the National Insurance Brokers Association’s (NIBA) convention in Melbourne this morning. NIBA says CGU was a narrow winner over QBE, with Allianz in third position. The highly coveted award was voted on by more than 1100 NIBA member brokers, who took part in the association’s annual broker market survey. The award is measured on insurers’ products and services in a range of categories. In other awards at the convention’s opening session this morning, Victorian broker Bunmi Ajayi of Megalines Insurance & Risk Advisers has been named the Broker of the Year. NIBA names award winners, 7 September

Report card General insurance intermediaries invoiced $8.71 billion in premium in the six months to June 30, with all but 17% placed with licensed insurers, according to latest statistics from the Australian Prudential Regulation Authority (APRA). This compares with $9.39 billion placed in the previous half-year. Market observers have told the fall is solely due to the dramatic softening of commercial insurance rates in the first six months of this year. Lloyd’s underwriters accounted for $848 million of the premium placed by brokers in the six months, compared with $905 million in the previous six months. While the trend was mostly downwards, premium directed to unauthorised foreign insurers (UFI) was stable, rising slightly to $591 million from $589 million. Most UFI business arranged by brokers was through underwriters in Singapore, where $308 million in premium was placed, easily leading London ($91 million) and Bermuda ($52 million). Fire and industrial special risks accounted for 62% of the total placed with UFIs. Of the 1607 licensed intermediaries registered with APRA, 845 placed business directly with authorised insurers, UFIs and Lloyd’s in the six months to June 30. Softer market reflected in brokers’ statistics, 7 September


INMAG OCT 15_page layouts 2/10/2015 1:02 pm Page 8

newsmakers at

Court convicts RGI founder A jury has found Rural & General Insurance founder Charles Pratten guilty of seven charges of obtaining a financial advantage by deception. Pratten (left) understated his taxable income by about $5 million in tax returns between 2003 and 2009. He was previously convicted in June 2012 but appealed and a retrial was ordered. The nine-week hearing took place in front of Justice Stephen Rothman at the New South Wales Supreme Court. Pratten remains on bail before sentencing submissions on October 27. Court finds Pratten guilty, 14 September

Cyber risk our top ‘banana skin’ Cyber risk, political interference and macro-economic volatility are among the main sources of anxiety for Australian insurers, a survey by PricewaterhouseCoopers (PWC) and the UK-based Centre for Financial Innovation shows. The biennial Banana Skins report’s Australia edition reveals concerns about cyber risk have jumped from 19th place in 2011 to 13th in 2013 and No.1 this year. PWC Australia Insurance Leader Scott Fergusson says the response reflects a sector that is simultaneously enabled and disrupted by technology. The increasingly digital nature of product delivery provides a “richness and volume of consumer data”, which makes insurers prime targets for cyber crime. “Insurers have a vast amount of information that is valuable to cyber criminals, including medical records, banking and credit card details and personal identity data,” Mr Fergusson said. One survey respondent told researchers their company is “repelling 20 serious attacks each day”. “The ongoing challenge will be ensuring defences keep pace with the threats as they evolve.” The Australian industry’s survey response is dominated by concerns about technology, with distribution channels, change management and product development among the top seven “banana skins”. Technology stokes insurers’ fears, 31 August

Sale boosts Assetinsure Assetinsure, the largest surety bond insurer in Australia, has been acquired by New Zealand-based specialty insurance and reinsurance group CBL Corporation. Assetinsure Chief Executive Gregor Pfitzer told he is delighted with the outcome. “The fundamental change is that we become part of a more international group,” he said. “There is more opportunity to apply

Publisher/editOr: TERRY McMULLAN McMullan Conway Communications Pty Ltd Tel: + 61 3 9499 5538 Fax: +61 3 9499 5535 Email: AdvertisiNg: NAOMI CONWAY McMullan Conway Communications Pty Ltd Tel: +61 3 9499 5538 Fax: +61 3 9499 5535 Email: ArtwOrk delivery tO: McMullan Conway Communications Pty Ltd PO Box 116, Ivanhoe VIC 3079 Australia or Level 1, 120 Upper Heidelberg Road, Ivanhoe VIC 3079 (COURIERS ONLY) Email:

our knowledge outside Australia, and we will become a more outward-looking entity.” The company also handles credit enhancement and specialised property, strata and motor insurance from its offices in Sydney, Brisbane and Perth. It will continue to operate under its own brand and there will be no staffing changes. CBL acquisition ‘opens doors’ for Assetinsure, 7 September

That word “resilience” has been ignored for decades by politicians and bureaucrats conditioned to replace buildings and infrastructure each time nature destroys them. Perhaps it is one of the last glimmers of Victorian-era fatalism – a stoicism that to some extent still dominates the culture of the sunburnt country’s more isolated communities. When a flood takes a bridge away the government will replace it with another, and with a bit of luck it’ll last until the next cyclone. Until Cyclone Tracy 41 years ago, buildings in the tropics were no stronger and in some instances more flimsy than those in the south of the country. Tougher building standards have given us tougher buildings more capable of withstanding cyclones. Faced with the prospect of having a mutual insurer or cyclone reinsurance pool introduced into the northern Australia market, the insurance industry is squaring up to the allegations of unaffordable premiums and market failure to promote resilience as the only logical way forward. New buildings in the tropical north are tough, and as each cyclone destroys older buildings, they are replaced with stronger structures. Now insurers want the Federal Government to help pay for a program to rebuild older homes to cycloneresistant standards. The cost will be a lot less than the hundreds of millions the Government seems prepared to risk losing through forays into insurance. If Australia can lower the risk of cyclone devastation through a controlled retrofit program, homes will be saved and human misery avoided. Resilience is too sensible a concept to be ignored. The insurance industry’s so-called “C-suites” are still dominated by men in suits, but there are some positive signs of change. In this issue we feature three women at the top end of the industry who got there by being smarter and more able than any competitor for the same position – and they wouldn’t have it any other way. But do companies need to do more to encourage women to join the scramble for the top jobs? Our article on how the insurance industry’s legendary glass ceiling is showing signs of crumbling makes for very interesting reading. Enjoy! Terry McMullan

subscriPtiON eNquiries: Email: cONtributiONs: We welcome all material that is relevant to the Australasian and regional risk insurance industry, including all aspects of risk management. Please contact the Editor, +61 3 9499 5538. PriNtiNg: Printgraphics, 14 Hardner Road, Mt Waverley VIC 3149, Australia

A McMullan Conway production

ISSN 1837-4972


From the


October/November 2015

Material in insuranceNEWS (the magazine) is protected under the Commonwealth Copyright Act 1968. No material may be reproduced in part or in whole without the consent of the copyright holders. The content of articles appearing in this magazine do not necessarily reflect the views of the Publisher. All statements made are based on information that is believed to be reliable and accurate, but no liability is accepted for any fault or omission. We also accept no responsibility or liability for any matter published in this magazine that reflects personal opinion. Printed on FSC ® paper stock using vegetable based inks by a printer with ISO14001 Environmental Management System Certification.

INMAG OCT 15_page layouts 2/10/2015 1:02 pm Page 9

57% 57 % of SMEs choose to work with a broker to save time... Are you meeting your clients clients’’ needs?


Download our new client satisfaction survey from Vero Central and find out!

How would you characterise our level of contact?

110 0

T oo Too frequent

Just J ust right

Not enough

Continue C o n t i n ue


Insurer is AAI Limited (ABN 48 005 0 05 297 807) trading as V Vero ero Insurance. Fir st consider the PDS to see if it’ s right for you. Go to for a copy First it’s copy..

voice messages





INMAG OCT 15_page layouts 2/10/2015 12:30 pm Page 10

Light on the horizon Hopes for a pricing upturn and the M&A surge were among hot topics at this year’s Reinsurance Rendezvous By Andy Swales



October/November 2015

INMAG OCT 15_page layouts 2/10/2015 1:29 pm Page 11

MONTE CARLO MAY BE SYNONYMOUS with blue skies and calm, crystalline seas, but when the reinsurance industry rolled into town in September, storm clouds were gathering. It rained on day one of the Reinsurance Rendezvous, the industry’s annual gettogether that precedes the January renewals. General Re Chairman and Chief

“I was told tradition holds that when it rains during the Monte Carlo meeting, the market will turn, so I’m hoping it rains all week.” – Gen Re’s Tad Montross Executive Tad Montross suggested it may be good omen. “I was told tradition holds that when it rains during the Monte Carlo meeting, the market will turn, so I’m hoping it rains all week,” he told ratings agency AM Best, tongue suitably in cheek. When executives turn to the skies for a sign from the market gods, you know you’re in trouble. But there were suggestions – based on more hard-headed analysis – that the current soft market, driven by excess capacity and a relatively benign catastrophe period, may be about to stabilise. Munich Re has noted “decreasing intensity” in the pressure on prices and conditions. And Scor Chairman and Chief Executive Denis Kessler said rates may even start to pick up next year. “We believe the price levels we’ve reached today we cannot go below, so many players in the industry, on the supply side... say now the time is ripe for the market to turn.” Speaking after the rendezvous, Swiss Re Chief Economist Kurt Karl told Insurance News there was “a very positive mood at Monte Carlo” this year. “There’s certainly hopefulness that prices are stabilising... particularly in the catasinsuranceNEWS

October/November 2015

trophe area, because there has been a lot push-back from the industry with regards to how low the prices are getting on that side.” Broker JLT Re’s Head of Analytics David Flandro said some delegates have described the past few years in Monte Carlo as “groundhog day”. “That’s no longer the case. This year we’re beginning to see a fragile change in some of the sector dynamics. “If you look at pricing at June 1 you see something very interesting, but you’ve got to look at it on a risk-adjusted basis... for the first time in a couple of years, the rate of change, while still negative, has turned less negative.” He describes it as a “faint wind of change”, or “green shoots”. JLT Re Global Chief Executive Mike Reynolds says pricing “remained under pressure across most lines of business at June 1 and July 1”. But he agrees “there were early signs of some stabilisation in certain segments, albeit at historically low levels. The flattening trajectory of reinsurance rates during these renewals indicates change is again under way as increasing demand for reinsurance, an easing in the rate of alternative capital entry and reinsurer consolidation are coalescing to create an eventual pricing trough.” Others doubt the market cycle has bottomed out yet. “People will say, ‘The pace of decreases is slowing’ – that’s true,” Aon Benfield Americas Chief Executive Bryon Ehrhart told AM Best. “Has it hit a bottom? That’s a different question.” Fitch Ratings also struck a note of caution. “Unlike reinsurers, Fitch remains unconvinced that a pricing floor will be reached during 2016 because a number of fundamental factors that influence pricing remain negative,” it said in a review of the rendezvous. “Reinsurance demand will continue to be subdued, while strong capitalisation will see fierce supply-side competition persist, because Fitch believes some reinsurers view defending market share by writing business below the technical price floor as being an acceptable risk.” The ratings agency’s “fundamental outlook for the reinsurance sector remains negative”. 11

INMAG OCT 15_page layouts 2/10/2015 1:29 pm Page 12

Suncorp Commercial Insurance Chief Executive Anthony Day also attended the rendezvous, and offers a perspective from the demand side. He told Insurance News there is room for prices to fall further. “There is a point where rates may hit the bottom, but it’s difficult to determine when.” Others at the rendezvous were debating

“We have definitely not seen the end of [consolidation], although the multiples being paid are high and this may restrain some reinsurers.” – Suncorp’s Anthony Day whether the pricing cycle as we know it even exists any more. In the run-up to the event, AM Best released a report summarising the great change the reinsurance industry has undergone in recent years. “Historically, changes within the sector had been cyclical in nature, but now many observers believe the current evolution to be structural,” the report says. “The market is operating in a ‘new reality’ of abundant capacity from traditional and alternative sources, low interest rates and thinner reinsurance margins driven by intense competition against shrinking demand for reinsurance cover.” It warns: “Not everyone will win in the end. The solid players will be the ones that have been conservative in underwriting and in reserving, have been able to develop a book of business that will remain relevant for today’s market and that allows for quick shifts in and out of lines of business depending on market conditions, as well as companies that have created expertise in managing third-party capital to their own advantage.” General Re’s Mr Montross told AM Best the “fundamental question is whether this is secular change we’re seeing or cyclical, and I 12


October/November 2015

would argue vehemently that it’s cyclical change”. He points to “the interest rate phenomena, the very positive prior-year adverse development that the industry continues to have, and on top of that the benign cat period”. “I think when those reverse themselves, which they will, you’re going to look back and say this is a normal cycle but with a lot more capital than in 2000/01 or 1985/86,” he said. The recent flood of alternative capital into the market has been driven by investors fleeing meagre returns in the low interest rate environment. There are signs it is now easing, but Dr Karl says this capital is here to stay. “We don’t think it will grow so rapidly over the next few years,” he told Insurance News. “There’ll be other investment opportunities as interest rates rise, and the pricing is quite challenging, so it’s not terribly profitable for some of these funds – hedge funds and pension funds. “What it will do... on the catastrophe side, which is quite a big chunk of alternative capital, is simply dampen the pricing cycle. We don’t think the pricing cycle will disappear, but it will be less volatile in the future. “That’s why we’re seeing so much resistance now on lowering prices further. If we go deep into a negative technical profitability pricing range, we’re not going to get back out of it.” Last year alternative capital accounted for about 18% of global dedicated reinsurance capital, up from about 8% in 2008, according to broker Guy Carpenter. Willis Re says global dedicated reinsurance capital from traditional and non-traditional sources was $US425 billion in the first half of this year, unchanged after rising to a record level at the end of last year. Aon says annual catastrophe bond issuance reached $US7 billion in the year to June 30 – down on the record-breaking previous year’s $US9.4 billion, yet still the third-highest annual issuance in the sector’s history. This enduring glut of reinsurance capacity has dominated discussions in Monte Carlo over recent years, and remains a hot topic.

INMAG OCT 15_page layouts 2/10/2015 12:30 pm Page 13










INMAG OCT 15_page layouts 2/10/2015 1:29 pm Page 14

But this September there was another buzzword: consolidation. The past year has seen a wave of major mergers and acquisitions (M&A) in the reinsurance industry, as companies seek growth and diversification in the challenging market. Major deals include the $US1.9 billion takeover of Platinum Re by fellow Bermuda reinsurer Renaissance Re.

“We need to do a better job at promoting insurance... particularly on personal lines and also life insurance. People don’t understand the value of insurance.” – Swiss Re’s Kurt Karl Specialty insurer Endurance bought fellow Bermudian Montpelier Re for $US1.8 billion in March. And in August Italian investment company Exor triumphed in a battle with Axis for Partner Re, announcing it would acquire the Bermuda-based reinsurer for $US6.9 billion. There were also huge deals in the primary market, including the $US28.3 billion Ace-Chubb merger in July and Tokio Marine’s purchase of US specialty insurer HCC for $US7.5 billion. Guy Carpenter President and Chief Executive Alex Moczarski told a briefing at the rendezvous: “The long-predicted consolidation of the market has now started, with inevitable consequences for rationalising reinsurance buying.” The broker’s Chief Executive of AsiaPacific Operations James Nash told delegates: “Asia-Pacific has been a net exporter of insurance and reinsurance capital through M&A, with Japan and China leading the charge into Europe, Lloyd’s and the US. In the year to September, outbound deals totalled $US20 billion compared with inbound deals of only $US849 million.” He expects the M&A trend to continue “as insurers, reinsurers and funds in the region pursue growth and diversification by 14


October/November 2015

going west, but we also anticipate a larger number of intra-region deals and also capital from the west coming east”. Suncorp’s Mr Day also expects further consolidation. “We have definitely not seen the end of it, although the multiples being paid are high and this may restrain some reinsurers.” Dr Karl says reinsurance M&A activity is part of a wider trend. “It’s been ongoing in the broker and intermediated area for the past several years, and it’s picking up on the reinsurance side and also the insurance side. “From our point of view, the alternative capital is driving some of the reinsurance consolidation. Medium to small players need to get larger and more diversified. Large players are well positioned in that we can offer a wide range of services and structured deals and lots of capital.” Another way of growing in a tough market is innovation. JLT urged reinsurers at the rendezvous to develop solutions for emerging risks. “Today’s environment of abundant capacity, coupled with a renewed focus on innovation, provides an opportunity for carriers to make genuine strides in creating new solutions for underinsured risks, including comprehensive flood and terrorism coverage, and the development of cover for relatively new risks such as cyber, reputation, supply chain, fourth-generation nuclear and autonomous vehicles, to name a few,” Mr Flandro said. Dr Karl says the insurance industry as a whole must drive up demand. “We need to do a better job at promoting insurance... particularly on personal lines and also life insurance. People don’t understand the value of insurance. “We think there’s a lot of growth opportunity for increasing mortality protection, increasing homeowners and property protection... the tools we need are new products, understanding the consumer better, better market segmentation that targets individual consumers with the product they are interested in through the channel they typically would use. This requires a great deal more sophistication than we’ve * been using as an industry.”

INMAG OCT 15_page layouts 2/10/2015 12:30 pm Page 15


Over the past year we’ve helped countless Australians see it through in times of need. Because of this, we’ve been awarded the Australian Insurance Industry Awards’ 2015 Large General Insurance Company of the Year. But none of this would’ve been possible without the help of advisers like Leo, so we’d like to dedicate this award to them. We strive to continue working hard with our advisers to help our customers see it through. CGU Insurance Limited ABN 27 004 478 371 AFSL 238291

INMAG OCT 15_page layouts 2/10/2015 12:30 pm Page 16

That’s the word insurers insist is the answer to north Queensland’s cyclone woes, as they resist government intervention in an insurance market that isn’t broken By Terry McMullan

LAST MAY THEN-PRIME MINISTER TONY ABBOTT FLEW INTO Cairns with a demand that his Northern Australia Insurance Premiums Taskforce get to work driving down insurance costs in the region. Railing against the “cruel disparity” between home, contents and strata premiums paid in the north compared with the more populous southern regions, he said people in northern Australia “are paying five times more in insurance premiums than those in Sydney and Melbourne. It’s not right, not fair, and it can’t continue.” Right from the start, this issue has been about the price and availability of insurance for strata units and houses. Political rhetoric aside, the message that insurers are seriously overcharging people in the cyclone-prone north of Queensland has been around for at least the past five years. As the Government considers its options to force down premiums, ostensibly as part of its new campaign to develop northern Australia, the industry has begun hitting back. There’s one word to describe what they see as the only viable option: resilience. Simply put, the industry wants the Government to invest a relatively small amount of money in “retrofitting” houses and strata units to make them more capable of resisting cyclone-force winds. The Insurance Council of Australia says its proposed Mitigation Assistance Scheme for strata and individual homes would take seven years and two months to complete and would cost the Federal Government $361.2 million – far less than the potential exposure it would face through a mutual insurer or reinsurance pool. The insurers say with older buildings retrofitted and newer buildings already being constructed to much higher standards for cyclone-resistance, community risks would be reduced over a relatively short period. This would encourage greater levels of competition and help premiums to fall further. The need for government intervention in the market would therefore no longer exist. Suncorp says cyclone resilience retrofits would save homeowners and the economy up to $13 for every dollar invested, and significantly reduce the amount of damage caused when a cyclone hits. Some options pay for themselves after one Yasi-like cyclone. Retrofitting homes would also create local jobs. While IAG has not made its submission to the taskforce available to Insurance News, it has also engaged in research for a retrofitting 16


scheme, and its submission is expected to follow the broad themes being espoused by the wider industry. The industry has also commissioned considerable research to tie down and expose the persuasive anecdotal evidence of a market failure in the region and stories of unaffordable premiums hundreds of per cent more expensive than population centres in the south of the country. Pushed with considerable passion and energy by the region’s hard-working federal MP Warren Entsch, the north Queensland insurance premiums issue became one of those things the Abbott administration aggressively pursued in a search for solutions. A number of programs have been canvassed by the Government, although only one has so far been implemented. These have included a controversial plan to allow foreign insurers who are not regulated or licensed in Australia to be given entry to the market in a bid to push premiums down. The plan was heavily opposed by the industry as well as the regulators, and was quietly dropped. A comparator website to provide “indicative premiums” for the region was launched by the Australian Securities and Investments Commission in March. It carries details of 11 policies offered by eight insurers. The cost of the website was not disclosed. The National Insurance Affordability Initiative, which was set up in 2013 to invest $50 million a year in targeted flood and other natural disaster mitigation measures, was dropped in the 2014 Federal Budget. Then-Treasurer Joe Hockey said the $72.2 million saving would be “redirected to addressing insurance costs in north Queensland, including $12.5 million over three years for engineering assessments of strata properties”. It’s understood none of this money has been allocated. Northern Australia is in the conservative heartland, and Mr Entsch, who is very popular in his electorate of Leichhardt, was one of the MPs who precipitated the first Liberal Party leadership spill in February that saw Mr Abbott come perilously close to losing his job. In the aftermath of that “near-death experience”, Mr Abbott promised to consult more closely with the backbench, and Mr Entsch told the Cairns Post at the time that he had secured the prime minister’s personal support for investigating insurance premiums and prioritising a white paper on developing northern Australia. October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:30 pm Page 17

The two issues have become linked in the mind of many, on the grounds that if insurance is unaffordable or unavailable, investors will not put their money into the development of Australia’s north. However, the real issue, the political one, is not focused on the half of Australia above the Tropic of Capricorn. It’s really about north Queensland, where the politics are tricky and the voters true blue. The taskforce formed in March by the Abbott government is headed by former Treasury executive Mike Callaghan, who is charged with investigating options to “reduce the cost of home, contents and strata insurance that stems from cyclone risk in these regions, including a mutual cyclone insurer and a cyclone reinsurance pool, as well as other options that are put forward during consultation”. A panel of stakeholders, including the chief executives of the Insurance Council of Australia and the National Insurance Brokers Association, is assisting the evaluation process, and advising how the government role could be “gradually reduced over time”. The final report with recommendations on the best way forward is due in November. When the taskforce’s interim report was issued in August, noted it “doesn’t say anything we didn’t already know or couldn’t figure out for ourselves”. While it notes the importance of defining “what risks may potentially be shifted from insurance and reinsurance companies to the Commonwealth balance sheet”, the interim report records little more than its wide consultations on the feasibility of a mutual insurer or a reinsurance pool, and acknowledges the insurance industry’s preference for investing in resilience.

Mr Abbott’s premature departure from the prime ministership and his replacement by Malcolm Turnbull will not delay the taskforce’s report, but sources in Canberra and the industry have told Insurance News the change at the top will assist the industry’s low-cost case for building in resilience. The sources say the insurers’ case is compelling, with the faltering national economy and the Coalition Government’s gradual move back towards the centre helping to focus Treasury’s mind on solutions that don’t come with potentially expensive long-term financial exposures attached. The Liberal Party’s historical aversion to interfering in commercial markets should also help – especially when insurers have evidence there is significant competition in the market, the premiums reflect the cyclone-related risk and the community understands what it’s all about. As Suncorp notes in its submission to the taskforce, the Government’s role is to protect communities, “not to intervene in functioning markets”. And it adds: “Government cannot commit to economic development in northern Australia while allowing cyclone risk to grow unchecked.” Insurance News has obtained copies of submissions to the Northern Australia Insurance Premiums Taskforce from various stakeholders, but the submissions deadline meant many were still being held under embargo when this issue went to press. However, the industry’s overall case is well covered by the submissions of Suncorp, RACQ Insurance and the Insurance Council of Australia.

“Government cannot commit to economic development in northern Australia while allowing cyclone risk to grow unchecked.”


October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:30 pm Page 18

Mythbusters in north Queensland Research destroys the stories of an unaffordable and uncompetitive insurance market in the tropics As one of the insuReRs with most to lose in noRtheRn Australia, Brisbane-based suncorp has been busy over the past few years examining the premium affordability issue and working to develop alternative resilience-based programs. the result is a submission to the taskforce that’s heavy on facts and solutions that contradict the anecdotal evidence and supposition that has fuelled the north Queensland insurance affordability debate to this point. together with the insurance Council of Australia and other insurers, suncorp has taken aim at urban legends that have framed much of the debate around north Queensland’s property insurance market. suncorp’s research shows 17 severe cyclones have made landfall in northern Australia in the past 10 years. its modelling has established the financial size of the problem, saying losses from cyclones average $632 million per year. “in any given year there is a one-in-10 risk that cyclones could cost $1.4 billion and a one-in-100 risk they could cost as much as $7 billion.” it also points out that cyclones cause significant social and economic losses beyond the insurance market. “insurance premiums reflect the high risk of financial loss, but they are only a symptom of a bigger problem. the real issue is why we allow cyclone losses, both economic and social, to continue growing.” it says the core of the problem is the fact homes in northern Australia “are simply not built to be cyclone-resilient”. “Building codes focus on saving lives rather than minimising damage, and older properties may not even meet this minimum standard. Continued development in high-risk areas also contributes to increasing damage bills.” suncorp says proposed market interventions such as a reinsurance pool or mutual insurer “do nothing to address risk or reduce the devastating impact of cyclones on northern communities”. the solution, it says, is increased resilience to reduce the risk of damage from cyclones. “Retrofitting existing buildings, strengthening standards for new buildings and better planning controls for developments in high-risk areas are all part of the solution.” suncorp is already acting to address risk and make insurance more affordable through a range of initiatives in a program called Protecting the north. they include: • A process to comprehensively capture and report selfmitigation work already undertaken on older homes, which could deliver premium savings of up to 20%; • working with experts to design a cost-effective retrofit program to strengthen older north Queensland homes against cyclone impacts; • A new direct strata insurance product delivering premium savings of about 20%. it also says there has been no insurance market failure in northern Australia, with several government reviews concluding premiums reflect the cyclone risk. it says that “right now, there are as many insurers operating in Cairns as there are in sydney”. And it says the experience of residents in the broader insurance market is different from “anecdotal accounts”, with 96%



of home building premiums in the region below $3000, renewal rates consistent with other locations and excesses not significantly more than elsewhere. the median premium for a $350,000 strata unit in north Queensland today is $1572, and only 1.8% of residents pay more than $3000. house policies for $350,000 have a median premium of $1697, with fewer than 2.2% of owners paying more than $3000. the belief that householders in the region carry massive excesses to lower their premiums is also exposed by suncorp’s independent research, which shows 93% of strata unit owners have an excess of $300 or less, while 94% of house owners have an excess of $1000 or less. Polling by Crosby textor shows 82% of north Queenslanders believe they have a high/medium chance of being affected by a cyclone, and 85% are aware higher premiums are due to the cyclone risk they face. the insuRAnCe CounCil of AustRAliA (iCA) wARns thAt if the mutual insurer being investigated as an option by the taskforce is formed on a discretionary basis, there would be a risk of nonpayment of claims to members in the event of a catastrophic loss. the solvency of the mutual may also become an issue after a catastrophe event unless it has an unlimited guarantee from the Government. And iCA warns that if the maximum amount payable under each policy is to have claims above an amount topped up by insurance sold in the private market, consumers may find themselves having to buy two insurance policies. the mutual would also be paid for either directly or indirectly by Australians living outside northern Australia, and there are other indirect economic and social costs. if the cost of the mutual’s premium is not enough to cover the losses of the scheme, “the Government may need to consider increasing the premium rather than absorb the loss on the Commonwealth balance sheet”. the mutual option is also likely to crowd out private sector insurance, making it difficult for the Government to exit the market in the future. And supporting the financial solvency of the mutual after a catastrophe could put strain on the Commonwealth’s AAA credit rating. looking at the reinsurance pool proposal, iCA says disputes may still arise between insurers that affect the consumer claims experience. for example, disputes over whether damage was caused by a cyclone (the pool’s responsibility) or by a storm (the insurer’s responsibility) would be likely. there is also a potential direct cross-subsidisation factor, with taxpayers in low-risk areas paying for high-risk taxpayers. segregation of cyclone risks from other natural perils could also reduce the scope of premium relief. flood is a significant singular risk, for example. Complexities of coverage, frictional and administrative costs are also likely to be introduced, iCA says. “there may be an adverse impact arising from multiple losses in any one year or across a number of years, without sufficient time to allow for a build-up of funds for a large event.” it warns that any intervention in the market will create a political responsibility for premiums, and could make an exit

October/November 2015

INMAG OCT 15_page layouts 6/10/2015 10:11 am Page 19

Room with a view: doubts about what a mutual insurer would cover strategy for the Government problematic. It may also be difficult to limit the government-supported facility to cyclone risk alone, should there be future calls to expand the facility to other hazards such as flood. ICA provides two graphic examples of the pitfalls of governmentsupported insurance pools, which can “create a moral hazard that encourages further risky development”, and expose governments and taxpayers to significant liabilities. They are the United States flood pool, which has grown from covering 1.4 million homes in 1978 to 5.5 million last year and currently holds $US23 billion of debt. Closer to home, the Christchurch earthquakes have exposed the New Zealand Government to $NZ16 billion of losses via the Earthquake Commission.

News Ltd

BRISBANE-BASEd mEmBER-owNEd RACQ INSURANCE SAyS THE concept of a mutual insurer is too complex and confusing at claim time for consumers, which may widen gaps in cover. Floods resulting from cyclones may not be covered by a mutual, and it may also exclude extra cover for such things as food spoilage, temporary accommodation of up to a year while a home is repaired, counselling and storage costs. RACQ Insurance also warns the costs of setting up and maintaining a mutual insurer “owned” by the community would be significant, and there are concerns over long-term funding and the ability to pay all claims in a catastrophe without going back to the Government for additional funding. A reinsurance pool would also have to offer a substantially better reinsurance premium than is currently available to insurers on the open market. In other markets such as New Zealand, similar schemes have not reached the level of self-sustainability.



October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:30 pm Page 20

Big Picture person IAG takes its responsibilities as the largest insurer seriously, and Leona Murphy is at the centre of its blue-sky thinking By Michelle Hannen

THAT WOMEN ARE SKILLED at multi-tasking is often acknowledged, but few could claim to live up to Leona Murphy’s ability to handle a wide range of responsibilities at once. IAG’s Chief Strategy Officer since 2011, Ms Murphy was subsequently seconded to the role of Chief Transformation Officer, overseeing the strategic integration of the Wesfarmers Insurance business and the move to a new operating model within the organisation. She returned to her strategy duties in March this year, but retained the transformation role and more recently added Enterprise Operations – the support services division which includes people and culture, procurement and supply chain. Just reading about it is enough to bring on the urge for a nap, but rather than being fazed by the workload, Ms Murphy is relishing the challenge – and the opportunity – to drive change in Australasia’s largest insurer and in the industry. “I’m very fortunate to be able to help the organisation solve some complex strategic issues, and think about where to from here,” she tells Insurance News. “For me, that’s a wonderful opportunity. “The acquisition of Wesfarmers put us in a great position in Australia and New Zealand, being leaders in both commercial as well as personal lines – the first time IAG holistically could actually hold that mantle. 20

“That provided us with wonderful opportunities strategically as well as great opportunities internally in terms of how we might look at how we go to market.” But with great power comes great responsibility, a fact that has not escaped the attention of IAG, which plans to also be ahead of the market when it comes to thought leadership. “Our role in society is more than just underwriting policies and paying claims – it is much more expansive than that,” Ms Murphy says. “Being number one in Australia and New Zealand not only gives us lots of strength and lots of influence, but it also provides us with a really important responsibility. “We have a responsibility to our customers and a responsibility to our communities to create safer, stronger and more confident communities.” She says this means everything from educating consumers to ensure they have a better understanding of risk, providing them with the knowledge and tools to reduce their risk, helping them recover from losses when they occur and perhaps, most importantly, to build community resilience. IAG management “dug really deeply” to question why it actually exists. “Where we landed was that we exist to help make your world a safer place. “So whether you’re a customer, a partner, a shareholder, a member of the community, or in fact whether you’re one of our employees, that’s our pur-

INMAG OCT 15_page layouts 2/10/2015 12:30 pm Page 21

it’s all about responsibility: iAG’s leona murphy

pose as an organisation – to help make your world a safer place.” It is Ms Murphy’s responsibility for communicating that new purpose both within – and outside – the organisation. “I’m spending a lot of my time really getting people engaged on what that means for them personally, and what it means to be part of an organisation that is purpose-led and very driven to looking at how it leverages its scale for the broader creation of value.” In terms of the bigger picture, Ms Murphy identifies digital and emerging technologies, affordability issues and natural perils as the three biggest issues facing the industry. In order to future-proof itself against the flight to technology, IAG recently created its Labs division, headed up by former commercial boss Peter Harmer. With a remit to take advantage of the digital evolution – and revolution – of insurance, Labs encompasses technology, project management, customer insight, product development and service development capabilities. “We really wanted to get at the forefront and look at how we drive the agenda, rather than sit back and go, ‘Oh, my gosh, look what’s happened to us’,” she tells Insurance News. Ms Murphy’s strategy team is assisting Mr Harmer with the development of IAG Labs, while a venturing unit, which previously reported to Ms insuranceNEWS

Murphy, has joined Labs to look at new business opportunities and disruptive technology. “What we’re wanting to achieve is not just how we do product innovation, but how we really innovate on a frontier, how we rethink the whole con-

what happens post natural disaster. “We decided as market leader we needed to really lean into that social issue of affordability and ask ourselves what it is that we can do to leverage our skills, our experience, our

“What we’re wanting to achieve is not just how we do product innovation, but... how we rethink the whole concept of insurance, how we rethink what is required in the community.” cept of insurance, how we rethink what is required in the community under the guise of helping make your world a safer place. “Because it is more than just protection when it comes to the delivery of that purpose.” IAG is also tackling the issue of insurance affordability for lower socio-economic groups with the recent release of a new product, Insure Lite. Ms Murphy says that, industry-wide, around 30% of consumers fail to renew their household insurance each year. “That is quite a serious social issue, particularly for those who are left unprotected. But it’s also a social issue for the government in terms of October/November 2015

capabilities into helping solve that problem.” Developed in consultation with welfare and community groups, Insure Lite offers an alternative for customers unable to afford traditional building insurance. In the event a home is destroyed or damaged beyond repair, policyholders can either have a new three-bedroom home built to the value of $150,000 or $200,000, or receive a cash lump sum of the same amount. The company is trialling the no-frills policy in Queensland, with a view to a national rollout. Ms Murphy says that IAG is pleased with the product’s feed21

INMAG OCT 15_page layouts 2/10/2015 12:30 pm Page 22

back to date, but adds “there is no way that Insure Lite is going to solve the entire affordability problem”. “I think it’s truly classified as a wicked problem of which there is no one solution. But it’s certainly our contribution to helping solve that problem.” She says insurability is the trickier piece of the affordability puzzle to resolve – and inextricably linked with natural perils. While she has no doubts weather-related catastrophes are increasing in frequency and severity, Ms Murphy says the insurability issue is “not one of how do we fix protection. It actually goes back to how we look at creating safer, stronger and more confident communities.” It’s a problem that requires all levels of government and the private sector to work together, she says. Following IAG’s leadership on the issue with its 2012 Risk Summit, Ms Murphy was a key architect of the Australian Business Roundtable for Disaster Resilience and Safer Communities. The group, which comprises senior executives from IAG, the Australian Red Cross, Investa Property Group, Munich Re, Optus and Westpac, has so far produced a white paper looking at the economic cost of natural disasters and demonstrating the ability of mitigation projects to reduce those costs. It is now embarking on two new pieces of research. The first is a framework to measure 22

the long-term social impact of natural disasters on the Australian community, and the other an investigation into the economic and social benefits of building resilience into the design and construction of new infrastructure. Ms Murphy says despite a quieter period of natural perils in the local market recently, the conversation between the roundtable members and various levels of government has continued, and has changed in tone thanks to the research and education efforts of the industry. “One of the things that we found was that once you have data that demonstrates the size of the opportunity or the size of the problem it makes the conversation much easier and less emotional,” she says. “We don’t always have to agree on all the same things. What’s important is that we have a voice and leverage that diversity of thought. “What we’re most pleased with is that the quality of the conversation has actually changed.” The success of the roundtable, and in particular its research and education approach, inspired Ms Murphy to bring those learnings to the United Nations Environmental Program’s Initiative on Principles for Sustainable Insurance, of which she is CoChair. “After we had done some external research about the big macro global issues that need to be resolved which are impacting not just the industry insuranceNEWS

but the communities in which we operate, it became very clear that resilience was top of the pops,” she says. “The work that we’ve done in Australia with the Australian Business Roundtable was something that could be leveraged globally.”

the launch at the United Nations of the Global Risk Map, which combines insurance data with natural disaster statistics to help provide a greater understanding of global natural disaster risks. Launched at a special session involving the annual

“Once you have data that demonstrates the size of the opportunity or the size of the problem it makes the conversation much easier and less emotional.” That research led to the creation of the Global Resilience Project, a threephase approach to global resilience to be undertaken by the signatories to the Principles for Sustainable Insurance, who account for 20% of global gross written premium. They include the world’s largest reinsurers, Swiss Re and Munich Re. The first phase evaluated the effectiveness of risk reduction measures following research into the social and economic devastation caused by cyclones, floods, earthquakes and related perils over the past 115 years, along with which mitigation efforts have worked and those that haven’t. Phase two culminated with October/November 2015

conference of the International Insurance Society in New York, the map’s interactive, openplatform means that it can be used by insurers, governments, disaster relief organisations and other interested parties. But Ms Murphy says that while the map looks to identify the most vulnerable communities, “it’s not a matter of ranking one two and three”. “It’s a matter of pooling and there’s a pool of probably 15 countries that require some support in terms of building resilience.” Phase three looks to help provide that support by mentoring at-risk communities and creating a how-to guide for multi stakeholder engagement

INMAG OCT 15_page layouts 2/10/2015 12:30 pm Page 23

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 24

– soon to be released – in order to increase investment in pre-disaster resilience and in implementing risk reduction measures. As co-chair, Ms Murphy is a key force behind the project, which she says “lines up beautifully with why we exist at IAG”. “The whole vision of the Principles for Sustainable Insurance is to create a riskaware world where the insurance industry plays its rightful role in helping manage environmental, social and governance risk and really drive change in how we create resilient communities.” The fact that many Asian countries have emerged as those that are in need of help to build resilience also dovetails into IAG’s strategy of future growth in Asia. She says on a personal level, being involved with the UN project has been a “wonderful opportunity to see the true value of diversity of thought, and how important inclusion is”. Her work – both at IAG and the UN – was recently recognised with a place in the Australian Financial Review’s Top 100 Women of Influence Awards in the global category. Not bad for someone who began on the front desk of the RACQ Insurance branch in the outer Brisbane suburb of Eight Mile Plains. Ms Murphy says that job, which she took while she deferred from a double degree in accounting and law, “was a wonderful beginning in 24


October/November 2015

the insurance industry”. After finishing her studies during the recession of the early 1990s, she applied for a job at CIC Insurance, which was later taken over by HIH. “I went back in thinking, ‘I’ll do this until I find out what I really want to do’.” A familiar story follows, with Ms Murphy never leaving the industry but instead working her way up to claims director at HIH, before executive general manager roles at Vero and Promina saw her shift into the strategy space. She was then appointed executive general manager of the joint integration committee at Promina to manage the merger with Suncorp, before joining IAG as head of organisation transformation and change in 2007. She subsequently worked in business services at IAG before proving her ability to multi-task by concurrently holding roles as group executive, corporate office and chief executive of The Buzz, IAG’s short-lived online-only home and motor insurer. Outside of her IAG and UN work, Ms Murphy is on the Business Advisory Council for World Vision, and does community work with an early intervention centre for children. A self-confessed “mad-keen cook”, thanks to her 11-year-old son Ms Murphy also holds her own at basketball. Which is hardly surprising, considering how many other balls she is able to keep in the * air.

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 25

We’re always thinking about brokers. Specialist Underwriting Agencies Pty Ltd is an independent, Australian owned and operated underwriting solutions provider. Since 1992 our thinking has been about our broker customers, and providing you with a diverse range of quality products. SUA is one of the few truly independent underwriting agencies in Australia. We don’t engage in retail broking. We don’t deal with unlicensed intermediaries nor unauthorised Insurers. Product development and claims management are our strengths, meaning we are Always Thinking of ways to achieve the best possible solution for your clients. We are aware of the ever-changing demands of the Australian insurance market, so better able to offer a range of products that will satisfy your clients’ needs.

C Contact on t ac t P P:: 0 07 73 3624 624 9400 940 0 F: 0 07 73 3624 624 9433 9433 2 255 55 S Sandgate andgate R Road oad A Albion lbion QLD QLD 4010 4010 P PO OB Box ox 3 324 24 C Clayfield lay field QLD 4011 QLD 4 011

w w w. s u a .c o m. au

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 26

Cracks in the ceiling The insurance industry has plenty of work to do on gender equality, but it is making steady progress By Leo D’Angelo Fisher


THERE’S NO SHORTAGE OF REPORTS reminding the insurance industry it can do better in opening its senior ranks to women. One of the most recent was particularly damning: an Australian Bureau of Statistics report found women make up just 4% of chief executives in the insurance and financial services sector. Only the mining sector was worse, with 3% of chief executive positions filled by women. The fact the unflattering ABS statistic was based on 2013/14 data softens the blow to some extent, but there’s no avoiding the underlying truth: the insurance industry has a problem with women. And women have a problem with the insurance industry. A recent global study by PricewaterhouseCoopers found the insurance industry is the least popular financial services employer among young women. Most female “millennials” – born between 1980 and 1995 – believe it is too difficult for them to build careers with insurers. The survey of 8000 young women, including respondents in Australia, found 80% believe insurance businesses do not provide equal opportunities; 64% of young women in insurance say their employer falls short on encouraging diversity; 30% feel women are given fewer opportunities to undertake international assignments in the industry; and 13% would not work in insurance because of its image. Carl Piesse, a Sydney-based recruiter with Hays, says the industry must do more to attract and retain women. insuranceNEWS

October/November 2015

“Definitely there are women in the insurance sector with the skills and experience to reach the top of the industry, but not enough is being done to encourage women to move into those positions,” he says. Mr Piesse calls for a commitment at management and executive levels to encourage more women into leadership roles, plus formal policies and processes. “Gender diversity doesn’t just happen. A company needs supportive management, flexible work conditions, transparent career paths and a culture where female employees are supported and encouraged to make it into senior roles.” While it is recognised that the insurance industry has problems attracting and retaining women at senior levels, the barrage of bleak statistics tends to overshadow the work of some major companies to remove impediments to building a career in insurance. Some of those barriers are rooted in deeply entrenched traditions and cultures unique to the centuries-old insurance industry, while others are issues employers in most sectors are grappling with, such as unconscious bias, inflexible workplaces, gender pay gaps and inadequate policies and systems. Tony Barber, Deputy Chief Executive of broker Willis Australasia, says that in a truly diverse and inclusive workplace, female staff have confidence that there is no obstacle to achieving their full career potential. “Australia is a very blokey place and the insurance industry has a reputation for being a blokey industry,” he tells Insurance News.

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 27

“Maybe women feel they don’t have those choices, but I believe the situation is improving and it’s a discussion that is being held in a lot of companies. “Diversity of thought is key to me. I want everyone to feel they are working in an inclusive culture in which everyone’s input is valued.” In September Willis Australasia held its inaugural Women at Willis Diversity Symposium in Sydney. The event was sponsored by CGU and Vero, reinforcing Mr Barber’s contention that the problem is being tackled at an industry-wide level. At the symposium Mr Barber, who in January replaces retiring Chief Executive Roger Wilkinson, committed himself to the principle of diversity. “While I am not going to come out and give you targets today,” he said in his opening address, “what I can assure you is that I will have self-imposed [key performance indicators] around diversity.” He nominated as priorities the areas of recruitment, flexible workplaces and returnto-work policies, and the gender pay gap. “Aside from my own drive, I will also have the right people [in my leadership team], challenging me to deliver on these and drive this through Willis.” Mr Barber stresses diversity is not just about women, but he acknowledges “it’s probably the biggest challenge at the moment and certainly one we need to take on”. He has introduced a requirement that the selection panel for any job that reports

“Women are more likely to shine if they have role models, if they see women in a role that they would like to aspire to.” to him must feature at least one member of each gender. Shortlists of candidates, whenever possible, must also include at least one of each gender. Willis Australasia’s 23-strong senior executive team includes six women, but none has a role with direct profit-and-loss responsibility. “We’ve got to find a way to encourage women into these positions,” Mr Barber says. ONE OF THE INSURANCE INDUSTRY’S most senior female executives was once the most powerful public servant in Victoria. Helen Silver was secretary of the Victorian Department of Premier and Cabinet and head of the state’s public service until she took up her appointment insuranceNEWS

October/November 2015

as Chief General Manager Workers’ Compensation at Allianz in 2013. An economist by training, her rolledgold CV includes spells as executive director at the Victorian WorkCover Authority, first assistant commissioner at the Productivity Commission and chairman of the Council of Australian Governments. Her position at Allianz clearly is not the result of a conventional insurance career path, but Ms Silver says she has always used her leadership positions to encourage women to plan their careers and seek new opportunities. “I have made a point of encouraging women to think about where they want to be, what they want to achieve and, if they want to, to take up opportunities as they present themselves.” Ms Silver says role models are important in encouraging women to pursue career opportunities. “Women are more likely to shine if they have role models, if they see women in a role that they would like to aspire to.” She is a big believer in the importance of “active sponsorships”. “That’s what women really want. Active sponsors that can identify roles for them, whether it’s inside a company or outside, and recommending them for those roles.” The role of active sponsors in effect replicates the networking that has traditionally helped men develop their careers. As part of career planning, Ms Silver advises women to find themselves a sponsor – “somebody to help you navigate your career”. 27

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 28

She also encourages women to consider diverse career opportunities that lead to senior roles, or “pipeline jobs”, with the potential for advancement to leadership positions. And she urges women not to wait until they believe they are 100% ready for a role. Her advice: “Just go for it – men go for it when they think they’re 30% ready for a role.” Confidence often keeps women back, and senior managers need to be aware of this. “Often it’s not because they lack ambition, or because they don’t want that promotion, it’s just a lack of confidence,” Ms Silver says. “Having a cup of coffee with that person might be all it takes to find that out. To women who say they haven’t got all the skills required [for a promotion], if they are right for the role, I say to them, it’s OK, we can pull you through.” Ms Silver says unless a company’s leaders commit to fostering female talent, little progress will be made in filling those thin ranks of senior women executives. “As an economist, I feel it’s just such a waste that talented women are not being given the opportunities that reflect their abilities. We can’t afford to exclude these women – something needs to be done and at a much faster rate.” Ms Silver says attracting more women to leadership roles is a management responsibility, not a human resources (HR) one. “HR is very important in that is gives you an understanding of the tools you can 28

“Getting women into leadership roles and into leadership pipelines is not going to happen unless a company’s management buys into it.” – Allianz’s Helen Silver use, the transparent reporting tools that are available, but getting women into leadership roles and into leadership pipelines is not going to happen unless a company’s management buys into it, as they have at Allianz,” she says. Head of Human Resources at JLT Australia Peter Normand says it’s critical to match HR initiatives with diversity objectives. “JLT is committed to increasing the number of women in managerial roles, with a number of initiatives in place to develop talent and provide opportunities,” he says. These include a formalised talent review insuranceNEWS

October/November 2015

for senior management positions, mentoring programs, a global talent exchange scheme, internal and external secondments, and a graduate program. “All these initiatives are designed to identify, develop and promote talented women into and through the management ranks.” At JLT Australia 25% of managerial roles are filled by women, including 15% of senior manager roles. Each industry HR executive interviewed by Insurance News agrees that while there has been progress in increasing the number of women in senior positions in recent years, it is slower than they’d like. However, none believes the answer is quotas. Aspirational targets, yes; firm targets, maybe; quotas, definitely not. Peter Gooding, Director of People and Culture at Aon Pacific, says the group has “made some reasonable progress in terms of women in management. Three years ago 5% of senior management roles [at Aon] were held by women, today it’s 20%. We’re not there yet, we know we have a way to go, but we don’t have hard and fast targets.” Lower down the management chain, the representation of women is higher: 30% of middle managers and 35% of team leaders are women. Mr Gooding says the insurance industry has a mixed record on gender. “When I talk to my peers there are war stories about where the industry is going, and it’s fair to say some colleagues have more frustration than others,” he says.

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 29

Charting a new course in marine insurance

Nautilus Marine, by partnering with AIG, will bring to the Australian broker market product innovation, greater support, increased risk capacity all securely anchored by local knowledge. For more information on our new product enhancments or details regarding this partnership, visit or call 1300 780 533

Nautilus Marine, the leading insurer fo for recreational boat insurance, charter vessel and insurance fo for the industries that support these vessels, is a brand of the NM Insurance group. Vi Visit A All ll p products roducts aand nd sservices ervices aare re w written ritten o orr p provided rovided b byy ssubsidiaries ubsidiaries or or affiliates affiliates of of American American International International Group, Group, Inc. Inc. In In Australia, Australia, products Au products and and services services are are written written or or provided provided b byy AI AIG G Australia Limited imited AB ABN AFSL Products orr sservices may not N 93 004 727 753 AFS L 381 686. P roducts o ervices m ot be be available available in all all countries, countries, and and coverage to actual actual policy policy language. language. A ustralia L ay n coverage is is subject subject to

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 30

Groups that succeed in getting more women into senior roles invariably have structured programs and policies in place. “Commitment from the top is essential, but words can become pretty hollow when progress becomes dependent on the goodwill and whims of individual leaders,” Mr Gooding says. “There needs to be a consistent policy framework in place. It’s important to move beyond just waving the flag.” Women’s prospects at Aon are promising: 45% of employees on the company’s leadership programs are female. Aon also focuses on empowering women to drive their own professional development. The drive includes state-based chapters of the Aon Women’s International Network, the “lunch and learn program”, which encourages networking groups to hold events with guest speakers at the company’s expense, and time to pursue external interests. “These are not initiatives that HR drives, it’s the women who drive them,” Mr Gooding says. “HR provides guidance when needed, but these are activities for the employees to do themselves. “We also encourage our leaders to be more broadly involved in activities with an industry and community focus, and we have a number of women that sit on external bodies. “We seek to create an environment where women and people from different backgrounds can succeed... the aim is to 30

“We seek to create an environment where women and people from different backgrounds can succeed.” – QBE’s Sally Kincaid create empowered leaders around a culture that is inclusive and encourages excellence.” QBE Chief Human Resources Officer Sally Kincaid says it’s important to consider gender in the context of diversity and inclusion. A workplace that is truly diverse will necessarily include women in appropriate numbers. “We seek to be reflective of the community in which we operate – we want to be sure we reflect our customer base internally,” she says. “This influences how we source and recruit, how we promote, and how we measure remuneration and performance.” She says it is through behaviour that culture shifts occur, which is one reason why quotas don’t appeal. “We’re looking to create an environinsuranceNEWS

October/November 2015

ment of acceptance and inclusion. We don’t support quotas at all. We certainly have goals, aspirational goals, but we don’t believe quotas are the answer.” In 2010 QBE set a goal for 20% of senior leadership positions to be held by women. Last year the proportion hit 27% and this year it’s 28%. Ms Kincaid believes cultural change is the key to getting more women in leadership positions. Two years ago QBE launched a pilot training program for senior management on unconscious bias, tackling the hidden attitudes that influence how male executives hire, promote and relate to employees, and which almost invariably disadvantage women. It was so effective the training is now mandatory and 400 leaders have since participated. Other initiatives include ensuring recruitment processes are regularly monitored and are geared towards achieving diversity; a sponsorship program that encourages executive general managers to act as career sponsors to two women each year; ensuring women on maternity leave are included in annual remuneration reviews; and including diversity criteria in managers’ performance appraisals. “I’m not sure we’re there yet when you look at the insurance industry, or Australia generally, when it comes to female participation at senior management levels,” Ms Kincaid says. “I am optimistic, but optimism doesn’t * mean we should rest on our laurels.”

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 31

GAME ON... Sports Underwriting Australia is pleased to announce it has entered into a new agency agreement with Great Lakes Reinsurance (UK) SE trading as Great Lakes Australia. Great Lakes Reinsurance (UK) SE is a wholly owned subsidiary of Münchener RückversicherungsGesellschaft AG (‘Munich Re’). Munich Re Group is one of the largest insurance groups in the world. The new agreement with Great Lakes Australia covers 100% of business written by Sports Underwriting Australia in its market sectors of Sports, Leisure & Licensed Clubs. Enhancements include: t Expanded property capacity and appetite t New Licensed Club property facility t Liability limits up to $50,000,000 t New Cyber cover Please contact your Business Development Underwriter for further information.



Call Call 03 03 8862 8862 2600 2600 Visit Visit w w w.spor tsunder Email info@spor Email

Underwriting Australia

Clubs Licensed Sports Leisure

A Australian ustr alian Financial Financial SServices e r v ice s L Licence icence 3 302484. 0248 4.

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 32

Hunting with Lyons Arthur J Gallagher’s chief operating officer wants to help more women sit atop the management food chain By Leo D’Angelo Fisher

IT’S DIFFICULT TO RECONCILE the heft of Sarah Lyons’ 20-year career resume with the perception that the “blokey” insurance industry has little to offer talented and ambitious women. There’s no denying the Chief Operating Officer of Arthur J Gallagher has enjoyed a distinguished career in Britain and more recently in Australia, but a bush statistician might say she’s just the exception that proves the rule. Ms Lyons doesn’t mind attracting attention as a successful woman in insurance. She knows the industry has had a problem with women – and she intends to do something about it… in between overseeing Gallagher’s 30 branches and 800 employees nationwide, that is. “Historically, the insurance industry has not been seen as an attractive one for females,” she says. “The perspective of women would be that it’s not an industry for women to be successful in. Fortunately, I’ve seen changes in the past 10 years. We are seeing more women becoming successful in the insurance industry.” She particularly likes what she has seen since being headhunted from the UK to take up a role as head of commercial broking at OAMPS Insurance Brokers in Melbourne early last year. “The insurance industry in Australia is more enlightened than the UK. “As well as more senior female executives – [Executive General Manager of Broker Business] Donna Walker at CGU comes to mind – there are several broking firms whose owners are women.” But if that sounds like a declaration of “job done” when it comes to gender equality at the top, think again. Ms Lyons wants to see more women in management, all the way up to the Csuite and the boardroom. 32

Despite being a relative newcomer to Australia, she is already an indemand speaker at women-in-insurance networking events. She was recently part of an insurance industry networking breakfast “to connect the next generation of female leaders”. Ms Lyons was joined by CGU’s Ms Walker, Honan Insurance Group National Financial Lines Director Jacqueline Romero and BJS Insurance Brokers director Belinda Scott. “I’m happy to share my own experiences with other females in the industry, to use me as an example of how females can succeed in this sector,” she says. “It would be remiss of me not to share those experiences. “If you’re a good leader, one of the things you do, which I see as fundamental to the role, is to inspire others. I think insurance is one of the best jobs you can be in, but outside of the industry it’s not seen as exciting, so I’m more than happy to be out there as an example to other women.” Ms Lyons was chief financial officer and central operations officer for broker UK Global Risk Solutions when she was lured to Australia. Before that she was group managing director of Giles Insurance Brokers, head of risk management at banking and insurance group HBOS and business development director at Halifax Insurance Ireland. In 2011, while at Giles, Ms Lyons was inducted into the London-based Cambridge Who’s Who networking group as a VIP member. This “special distinction” recognises “exceptional commitment to achieving personal and professional success”. Ms Lyons, who was cited for her “expertise in leadership, problem-solving and relainsuranceNEWS

October/November 2015

tionship management”, attributes her career accomplishments to her “passion for the insurance industry”. So what stirs that passion? Ms Lyons is second-generation insurance, but she admits it began as just a job. “Like a lot of people, I fell into insurance. I lived in the Lake District [of England], where the main employer was Provincial Insurance, now part of Axa, and my options were limited. “My dad was in insurance, he ran broker sales for Provincial, so that’s where I started my career, as a claims handler.” And like a lot of people who “fall into” insurance, Ms Lyons has never looked back. “I’m someone who likes variety and likes a challenge, and I’ve been

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 33

loving the variety insurance provides: Arthur J Gallagher’s sarah lyons

extremely fortunate to have had such a variety of roles. The variety has been immense. “I’ve had roles in change management, e-commerce, product development, risk management, strategy… in my career I’ve never been pigeon-holed into a certain role that would be suitable for a female. It’s always been about the skills I bring to that position. “My skills are portable to any other sector, but when there are so many opportunities to do different things [in insurance], why would I want to go anywhere else?” Ms Lyons had never thought about working overseas until she was approached by headhunters conducting a global search for OAMPS. In the end, she says, it came down

“If you’re a good leader, one of the things you do, which I see as fundamental to the role, is to inspire others.” to “not the job title but the breadth of the role”. The position at OAMPS came with many possibilities. For some industry pundits in Australia, the appointment of an overseas executive with such an extensive background in growing broker businesses signalled that OAMPS was on the acquisition trail. “Some people aspire to work in the [United] States or overseas, but I was quite happy to remain in the UK. I had insuranceNEWS

October/November 2015

never thought about working overseas and I never thought I’d ever work in Australia. “For me it was more about the role. OAMPS at the time was owned by Wesfarmers, but that didn’t mean anything to me. I came for the role.” The job provided almost immediate variety – provided by a change of owner. OAMPS was indeed on the acquisition trail, but it wasn’t doing the buying. 33

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 34

In April last year Gallagher announced the $1.1 billion takeover of Wesfarmers’ broking businesses: OAMPS, including OAMPS UK, and Crombie Lockwood in New Zealand. The deal was completed that June and by last August – with OAMPS to be rebranded Arthur J Gallagher by year’s end – Ms Lyons was appointed Chief Operating Officer. The role has been a perfect fit. “My job has tremendous variety. Every day is different, every day is exciting. No one day is ever the same.” Asked if her position makes her heir apparent to Chief Executive Andrew Godden, Ms Lyons says “it’s not a traditional COO role in that sense”. Her job provides all the variety she has come to expect from her career, including responsibility for profit performance in a 30-strong commercial insurance and personal lines branch network, product development, partnerships and change management. “I’ve got a great level of responsibility and I have the opportunity to shape Arthur J Gallagher in Australia and to shape commercial broking in Australia,” she says. “What I really want is to have the most admired commercial broking team in Australia, and by that I mean in terms of financial results, culture and the quality of people.” Ms Lyons says a core part of her job is to identify and nurture rising talent. “If I spot talent outside of our own company and I think, ‘I’d love that person to come and work with us,’ then my job is to convince them that [Arthur J Gallagher] is a great place to be,” she says. She also has an eye on other industries. “It depends on what the role is, 34

“It’s about the right fit, the right people for the right roles. I believe you can teach people skills, but you can’t teach them attitude.” of course, but do all our [branch] managers come from a broking background? No. The bulk of them do, yes, but I’ve also got managers who have come from banking and pharmaceuticals. “In some of the smaller branches I’ve appointed people who haven’t had leadership experience, but I can see that they have the capability to take on the challenges they will face. “It’s about the right fit, the right people for the right roles. The big thing for me is cultural. I believe you can teach people skills, but you can’t teach them attitude.” Ms Lyons says in recent years the insurance industry has attracted more people from other industries – in part reflecting a talent shortage – which she believes has “made it more attractive”. She wishes her beloved industry could be better at spreading the word about what it offers, not just for women but also graduates and young candidates from other disciplines “irrespective of gender”. “The insurance industry can learn from other industries when it comes to attracting the best talent. I know I could learn from other industries about how to attract talent into insurance broking. “This industry is not good at promoting itself. It’s not good at talking to school-leavers or graduates at universiinsuranceNEWS

October/November 2015

ties about what working in the insurance industry looks like. “In the US, the industry is doing a lot more, but in the UK and Australia we have to get better at explaining and promoting our industry. “We have to let younger people know about opportunities in the insurance industry, we have to let women know they can have an exciting career in insurance. “We have to be able to compete for the best talent. When we can do that, perceptions of the industry will change.” In the meantime, Ms Lyons hopes her success – and her passion for the industry – rubs off on others. “This business [Arthur J Gallagher] is always growing, and it will get bigger. If being a role model attracts more women to insurance, and encourages more women to plan careers in the industry, I am in a position to be that role model.” As for her own career, Ms Lyons is focused on her current role. “I’ve got a lot I want to achieve in this role. I love Australia, I think it’s a tremendous country, and I love Melbourne. “From a work perspective, I see no reason to be back in the UK – and I’m not just saying that because of the * weather.”

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 35

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 36

The team is everything Meet an executive who believes in the power of change and people’s ability to make things happen

That didn’t stop with the arrival of two children and her husband’s career switch to banking, which has seen the family learning about different lifestyles in Paris, Hong Kong and now Sydney. Hong Kong in 2009 saw Ms Russell return to the workforce as a project manager with a fitness company. Through that work she met up with another former GE manager, who ended up acting as her mentor. By Terry McMullan “I wanted to make sure that what I was doing was the best I could be doing. We would meet INGRID RUSSELL IS PASSIONATE ABOUT GOOD probably every three weeks, and just go through ideas and making them happen. As the Sydneystuff. It helped build my confidence. based Global Engagement Leader and Chief “We didn’t talk too much about what he did or Operating Officer Asia Pacific of Aon Inpoint, she where he worked. It was more about, ‘Here’s what has a job where delivery is what it’s all about. I have in front me, and the situation’.” Aon Inpoint supports “the entire insurance Her mentor friend just happened to be a value chain”, working with everyone from insurers senior executive at Willis Asia Pacific, and and reinsurers to clients to provide technical supinevitably he was impressed with her experience port and consultancy services. and attitude. It’s an interesting concept, using data and anaIn April 2011 Ms Russell joined the company lytics to share information like benchmarking and as head of operations, responsible for the global market trends with insurers and reinsurers. broker’s Hong Kong and Macau offices and manSome 400 Aon specialists around the world aging the outsourcing of some services to an office assist them with new sales opportunities and even in Mumbai. develop models to help them retain clients. It was a time of rapid growth in the region for Answering to Aon Asia Pacific Managing Willis, and Ms Russell says she learned fast. Director Ralph Butterworth, the Pittsburgh-raised “Hong Kong is so fast-paced,” she says. Ms Russell works mainly on what Aon calls “carrier “Millions of people and just a lot of growth potenrelations” – managing the process and ensuring tial. The environment’s just so different to Sydney. clients’ needs are understood and being met from “The markets here are very savvy and very Aon’s global facilities and services. mature. They’re also innovative, but I do think Asia As a manufacturing technology specialist, she just takes it to a different level.” demonstrates the insurance industry’s ability to In October 2013 the family moved to Sydney, absorb and utilise the most diverse of skills. and Ms Russell became integration leader She tells Insurance News that if someone had Australasia for Willis. asked her early in her career “what my perfect In June this year, after a short stint as a concareer situation would be, I would have said it sultant to insurance broker InterRISK, she took up would combine strategy and operations”. her present posting at Aon Inpoint in Sydney. “Because I love to execute, but I also love develHaving survived many moves across countries oping and working with teams. and the world, and enjoying new challenges, Ms “And I really love the strategy segment of it. I’m Russell doesn’t see the swift pace of change engaged with Aon Risk Services on the customer sweeping over corporate Australia as anything to segment, the placement channel, working with be worried about. claims, IT and so on. “Some people are resistant to change, but “It’s a very collaborative approach when we that’s human nature,” she says. “I particularly love speak with the carrier and show how we can be that change. Because of the situation – the climate and value differentiator.” environment you’re in – you just have to adapt. Ms Russell started work in 1990 with a degree in “And so regardless of whether or not change is science and manufacturing technology, working in tough on you, you just have to do it, because that’s product control and distribution, then as a busijust the way the environment is.” ness analyst for Motorola. At the time of this interview in September Ms Her big break came in 1997 when she joined Russell had only been working in Aon’s Sydney office GE and got a promotion after eight weeks, working for four weeks. But her introduction to the group’s over the next few years in quality systems, customer way of doing things was nothing if not thorough. service and commercial quality programs. “I was in the States on vacation before I started Marriage to the captain of her old high school with Aon, and my boss said, ‘Before you come back distance-running team – a natural match for Ms to our Sydney office, why don’t you check out our Russell, who still runs the occasional marathon – Chicago office, and then our New York, London and his career in the US armed forces saw her and Dublin offices?’ “moving around the world a lot”.



October/November 2015

INMAG OCT 15_page layouts 2/10/2015 12:31 pm Page 37

Aon inpoint’s ingrid Russell: working on collaborative approaches


October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:32 pm Page 38

“It was a great idea. I got to meet people from “I always tell people, specially in management the consultative side, the data analytic side and roles, ‘Never say you’re too busy’, especially for from the engagement side. people. “It was interesting to see how each office oper“Yes, we’re all busy, but I don’t need to hear ated, and then to go to the analytic centre and talk somebody tell me they’re too busy. to a bunch of people who are just crazy about data.” “Mentoring is about being a good listener. It’s Accepting or even taking advantage of change not, ‘Okay, let me tell you how you need to do requires commitment from all the members of a things’. They need to come up with a kind of selfteam, and Ms Russell has deep experience in introactualisation and realisation on where they want to ducing employees to change and showing how it go. You can only guide them. can improve everyone’s work. “It’s not like coaching, which I think is more “You have to be good at that, and you have to like, ‘Okay, what’s the end result?’ and setting a be able to measure the result. You can’t manage game plan.” what you can’t measure, and you can’t measure it if Similarly, she sees a need for the insurance you can’t describe it. industry to “at least think about” ways it might “People need to see why they are getting attract high-quality recruits in the future. involved in something, what’s the purpose, what’s the end result. And if you can articulate that, then people are going to buy into it because it makes sense. “Obviously concentrate on where you are now, but there’s always got to be a vision.” She is interested to hear that there are relatively few women in the highest levels of management in Australian insurance companies, but cautions that the causes and possible solutions are equally complex. “I think it has a lot to do with a combination of things,” she tells Insurance News. “There’s definitely women who are qualified out there, but it comes down to perhaps a timing of events.” Ms Russell sees succession planning as “hugely “It’s so vast. In the past insurance was never important” in the process of advancing women into probably part of a curriculum, but now you do senior roles. have colleges offering innovation-type degrees. “I think people use the term ‘succession plan“You’ve got to be an influencer, and you’ve got ning’, but I’m not sure if there really is any to be passionate about what you do. And then you succession planning involved in some cases.” find a little gold mine called insurance.” She says some industries have put measures in She also sees the industry’s ability to use a vast place to ensure women get a fair go in the promovariety of skills and qualifications as a major plus. tion stakes, but talking about the issue and “I always say I hire for attitude and I train for understanding what’s possible is also important. aptitude. I think a good example of that is the US “Before, it probably wasn’t even talked about. military. Now, by talking about it, by putting it in the goal“These guys and women have all these difsetting agenda, it’s much more likely to be ferent backgrounds. Some are philosophy majors, addressed. some are engineers, some are education majors. “But it shouldn’t be about ticking a box or “Yet the way they rotate them around, all the saying, ‘Okay, we’ve got our quota in, we’ve got our way up the chain, means that when they’re a comthree women at that level…’ pany commander, for example, it doesn’t really “At the same time, you know, there’s a huge matter what they studied, because they’ve been amount of women already there that are qualified, trained for the task. so it’s not just a case of putting someone into a job “In the workforce I’ve met some amazing anafor the sake of it.” lytical people who were psychology majors, and I’ve That comment leads the conversation to the met some amazing people who were computer scisubject of mentoring, which Ms Russell first experience majors. enced in GE and is something she admits she’s “So I think a lot of stuff can be learned and passionate about. developed. It’s the individual that’s important to She intends to get involved in mentoring within me. Aon, and she believes that as a senior executive “I always look for people that have an amazing “making time for people” is an important part of attitude and aptitude for learning. People like that * the job. are golden.”

“You have to be able to measure the result. You can’t manage what you can’t measure, and you can’t measure it if you can’t describe it.”



October/November 2015

INMAG OCT 15_page layouts 2/10/2015 12:32 pm Page 39

WE EMBRACE CLAIMS CLA AIMS Not many insurers do. When that moment arriv arrives, Assetinsure believes in ers do professionals, alia. pr fessionals,, in Australia. A eer claims pr professionals embracing it. Your our claims processed by career names ur history as a broker with us, so People whose nam mes you know. Who know your you to ma make yyou don’t have to o start from scratch on every all. People ke p empowered p ry ccall. wiftly. tly. decisions swiftly. swiftly fa and transparent. Yo Your We don’t approve e them all, but our processes are a fair clients will notice e the difference. diff differ ference. Surety. rety. General ral aviation. a Credit Enhancement. Property Incl. Stra Strata. trata. ta. SME ME (Package) (Pa Business. Farm arm & Mo Motor

Underwriters who can make a decision

INMAG OCT 15_page layouts 2/10/2015 12:32 pm Page 40

Get smart

the internet of things is expected to trigger a flood of useful data. how insurers handle it may determine whether they sink or swim By Andy Swales



October/November 2015

INMAG OCT 15_page layouts 2/10/2015 12:32 pm Page 41

WHEN BRITISH TECHNOLOGY PIONEER Kevin Ashton first uttered the words “internet of things”, he perhaps didn’t realise he was giving name to the next phase of the digital revolution. Had he known, he might have had another go at it. But whatever he lacked in linguistic flair, he more than made up for in foresight, and his somewhat inelegant phrase has stuck. In 1999 – when mobile phones were the preserve of a flashy few and loading a web page was often a task best completed either side of a tea break – Mr Ashton predicted a world in which sensors and computer networks would allow a constant capture and communication of data between everyday items, from cars to carpets. It is a world in which, to some extent, we already live. Chances are the phone in your pocket is (or at least is capable of) sharing data with any number of other electronic objects, from home entertainment systems to printers and building security devices. But so far, we have only scratched the surface. A recent report on the Internet of Things (IoT) from global insurer AIG says a decade ago there were about 500 million devices connected to the internet. There are now 10-20 billion, and in five years the figure is predicted to reach 40-50 billion. The report predicts a range of applications, from driverless vehicles to smart thermostats that check the weather outside and tell our smart wardrobes which clothes to present us. Applications already in use around the world include sensors that monitor tempera-


October/November 2015

ture and humidity in bushfire-prone areas, the health of crops and water flow in rivers. These sensors can then interact with other devices to prompt corrective actions, such as the opening or closing of a dam. Researchers in the UK have even developed a carpet that knows when someone has fallen on it, and can send out an alert to carers if necessary. It seems the only limit to IoT connectivity is our imagination. But it’s not all good news. Swiss Re’s latest Sonar report on emerging risks rates IoT as “high-impact”. Security is a particular concern: the AIG report suggests hackers and cyber criminals are licking their lips in anticipation of the potential lucre heading their way. “Every object that connects with the internet is another entry point through which the cyber criminals can enter a business’ enterprise system,” it says. Aon Client Manager and Cyber Risks Practice Leader Eric Lowenstein expects to be increasingly busy placing cyber insurance. “We’ve seen some interesting stories recently,” he tells Insurance News. “A Jeep was remotely hacked into while someone was driving it. We’ve also seen how a security researcher managed to hack into the GPS system of a rifle and change the firing direction, so absolutely from a cyber-security perspective it creates a huge risk.” Swiss Re says IoT has “significant potential to challenge entire lines of insurance business”. Mr Lowenstein agrees. “It’s totally going to shift the landscape,” he says. “It’s creating more opportunities for information-collection and sharing, and increased competition based on data-driven insights. “Certainly I see it as a disruptor in terms of existing relationships between customers, the data and the insurance provider they use.”


INMAG OCT 15_page layouts 2/10/2015 12:32 pm Page 42

IoT is already making an impact on motor insurance through in-vehicle telematics, whereby sensors record real-time data on speeds, braking pressures, fuel use, location and a host of other measurements. The data can be viewed online by individuals or fleet owners, to inform future driving behaviour. And insurers can use it too. “They’re using it to offer discounts for good behaviour, or charge [higher premiums] for bad driving,” Mr Lowenstein says. In Australia, offerings such as the QBE-owned Insurance Box provide telematics-based policies for private motorists, while Zurich is among the pioneers in the commercial field, with its Fleet Intelligence product. IoT will also take over our homes, Mr Lowenstein says. “Everything from smoke alarms to air conditioning and automatic home security systems… You’re starting to see how this technology – and the use of smartphones with this technology – allows people to really inexpensively acquire and manage processes. “If you think about the power of what that can do... in terms of an insurer being able to mitigate, control and understand what’s happening from a security and safety perspective, that obviously has some huge benefits.” He gives the example of a smoke alarm that not only alerts the homeowner but calls the fire brigade and notifies the home and contents insurer. In a recent blog post on IoT, Nigel Walsh, Vice-President and Head of UK Insurance at global consultant Capgemini, says people too are becoming connected. “The latest in wearable [devices] allow companies such as Vitality Health Insurance [in the UK] to encourage and reward healthy behaviour, reducing your premium for the more active and healthy you are.” Ultimately, the benefit to insurers equates to one thing: information. Swiss Re says IoT will become “the true foundry” of Big Data. 42

“There will be many more ways to avoid losses, while risk assessment can be improved thanks to the availability of additional data,” Swiss Re’s Sonar report says. “This could make the physical world safer, reducing the need for risk management and risk transfer.” Handling the surge of IoT-generated data may prove the difference between success and failure for insurers. As Swiss Re warns, the sharks are circling.

“If there’s no one driving the car, what insurance policy is responding? How do you insure a car that doesn’t have a driver?” “Other players such as large technology companies may consider entering the insurance market to capitalise on their enormous amount of data.” In his blog post, Mr Walsh says insurers are “now really competing on data, nothing more. We never produced any products anyway, now it’s even more transparent.” He says insurers must “make sure you know your data, can process it efficiently and effectively, understand it and, most importantly, use it”. “How we use this to enrich our world will be key. Don’t drown – the volume is about to explode.” Swiss Re flags further threats from the flood of data. insuranceNEWS

October/November 2015

“There may… be legal and compliance risks because new legislation and regulation on data use and privacy could come into force in many jurisdictions, with the risk of little co-ordination and standardisation across countries.” IoT also presents an existential threat to some insurance lines – threatening to eliminate or significantly reduce risk, or to shift liability. In motoring, telematics is a start, but the great leap forward will be the driverless car. Google’s version has hit the streets of America for tests – and has already been involved in its first bumps. Nissan has announced plans to sell driverless cars by 2019 and Ford expects to sell its first by 2020. In November Adelaide will host the first driverless car trials on Australian roads. The insurance industry, not surprisingly, is watching developments closely. In July Munich Re America announced a partnership with robotics company Comet to research autonomous vehicles, with the aim of understanding their risks and how to cover them. Munich Re Senior Vice-President Strategic Innovation Leader Mike Scrudato says the transition to autonomous vehicles will add complexity to underwriting and liability. As Mr Lowenstein notes: “If there’s no one driving the car, what insurance policy is responding? How do you insure a car that doesn’t have a driver?” AIG suggests liability will become a point of debate as the lines become blurred “on who is responsible for what data”. “An IoT heart monitor won’t just monitor a patient’s heart looking for warning signs of an impending heart attack,” its report says. “It might also access data from another object that tracks the patient’s fitness routine, which in turn takes data from a device that monitors food intake. “If the patient has a heart attack, who’s * responsible?”

INMAG OCT 15_page layouts 2/10/2015 12:32 pm Page 43

INMAG OCT 15_page layouts 2/10/2015 12:32 pm Page 44


A court decision places limits on insurers’ ability to control recoveries in class actions

AS CLASS ACTIONS BECOME MORE common – the past year has seen the most class action settlements to date in Australia – insurers’ participation in these “representative proceedings” has come sharply into focus. That’s why lawyers are carefully studying the decision in August of New South Wales Supreme Court judge Peter Garling, which limits insurers’ ability to control recoveries in class actions if they don’t have a contractual right to do so. Justice Garling found a group of insurers acted beyond their authority in mounting a representative proceeding on behalf of more than 550 policyholders affected by the 2013 Blue Mountains bushfires. He decided paying part of a policyholder’s loss doesn’t give an insurer the authority to control the policyholder’s right to recover the entire loss, unless there is an express contractual right to do so. In the Johnston v Endeavour Energy case, the insurers filed opt-out notices for the policyholders to remove them from a previous class action. The insurers then started their own class action, including in it the policyholders’ claims. Law firm Clayton Utz says insurers will probably now amend policy wordings following the decision to secure broader rights to recover both insured and uninsured losses. It warns policyholders should be cautious of policy wordings that confer broad recovery rights on an insurer, “particularly where the value of uninsured loss may be significant”. 44

The case had its origins in May 2014, when a class action was started by Mr Johnston against Endeavour Energy for damages arising from the bushfires. This action became known as “the Johnston proceedings”. The following October, legal representatives for IAG and related insurers CGU, NRMA Insurance, Coles Insurance, WFI and Lumley Insurance filed notices opting out 565 identified individuals and entities they insured from the Johnston proceedings. Letters sent to the policyholders noted the opt-out and asserted that the insurers were entitled – and better placed – to conduct the recovery action. They started a second action against Endeavour Energy, with their policyholders as group members, seeking recovery for both insured and uninsured losses arising from the bushfires. These are known as “the insurer proceedings”. The central issue before the court was the validity of the opt-out notices. The insurers asserted they had contractual rights under the policies to file the opt-out notices and start the insurer proceedings for both insured and uninsured losses. But Justice Garling held that unless the insurance contract contained express contractual terms to the contrary, the general principles of subrogation applied. That is: • Unless an insurer had fully indemnified an insured for all losses arising from an event, the insured remained dominus litis – literally “the master of the suit” – and retained the right to start and control recovery proceedings for both insured and insuranceNEWS

October/November 2015

uninsured losses, free from interference by the insurer; • In those circumstances, the insurer has an equitable interest by way of a lien over the monies recovered by the policyholder; • If the policyholder conducts recovery proceedings that include losses paid by the insurer, the policyholder will be obliged to have proper regard to the insurer’s interests; • The insurer’s rights do not include the right to claim any sum of money in excess of the amounts it has already paid. As a result of this decision, the insurers had no entitlement to recover any uninsured losses, nor to opt out the policyholders from the Johnston proceedings in circumstances that limited the opt-out to the amount the insurers had paid. This is not permitted under the representative proceedings regime in NSW. The next question was whether the insurance policies gave the insurers the express right to opt out in respect of claims covering both insured and uninsured losses. The 24 types of insurance policies were grouped as follows: seven covered a small number of group members, and gave the insurers the authority to execute and file the opt-out notices; eight policies covered more than 550 group members and did not contain any clauses under which the policyholders assigned their rights or contractually authorised the insurers to take proceedings against a third party covering uninsured losses; nine other policies covering a small number of group members gave the insurer “rights to claim from anyone else” for an incident or event cov-


In, out, shake it all about

More Business More Value More Often For Your Brokerage Adding a new, profitable income stream to your business is as easy as FlexiFundIt.



INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 45

Paying part of a loss doesn’t give the insurer the authority to control the policyholder’s right to recover the entire loss: victims of the 2013 Blue mountains bushfires inspect their ruined home

ered under the policy. Justice Garling construed this broadly as an assignment of the policyholders’ rights of recovery against third parties in respect of both insured and uninsured losses. These policies therefore authorised the insurers to opt out of the Johnston proceedings and start their own proceedings for both insured and uninsured losses. However, Justice Garling warned that such an interpretation “will undoubtedly have the effect of placing onto the insurer some significant obligations owed to the insured with respect to litigation in which claims are made for losses over and above that which the insurer has paid. Such obligations would include but not be limited to obtaining the agreement of the insured to any settlement proposal”. Clayton Utz says following the decision insurers are likely to amend their policy wordings to give them broad recovery rights, including the right to recover both insured and uninsured losses. “In doing so, insurers will need to be mindful of Justice Garling’s warning and ensure they act towards the insured with utmost good faith.” And in an observation of particular interest to insurance brokers, the law firm says policyholders should carefully consider any wording that “explicitly or as a matter of construction amounts to a complete assignment of rights, or gives the insurers the right to pursue recovery of all losses”. It suggests they should seek to negotiate appropriate terms to protect their rights in * respect of uninsured losses.

With minimal risk and capital outlay, the FlexiFundIt system uses the technique of compound interest to generate increased profits by accurately managing the time from receiving client repayments to making payments to the underwriter, therefore maximising the use of funds in your ‘in-house’ financing business.

Powerful Features, Profitable Benefits Easy to use with powerful functionality Safe & secure payment & storage Full & detailed reporting on demand Detailed auditing of users and activity Cloud based access 24/7 Mobile device interface We are here to guide and assist you through this entire process. Our aim is for you to create a successful income stream for your business.

Start your free trial today, contact us on 1300 850 890 19 Rosedale Street, Coopers Plains, Brisbane 4108 insuranceNEWS

October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 46

Berkshire Hathaway Specialty Insurance is pleased to bring underwriting flexibility, claims handling excellence,and financial strength to Australia and New Zealand. Our experienced teams in Auckland, Sydney and Melbourne are committed to providing precisely the coverage you need.



Property Casualty Financial Lines Marine Cargo Healthcare Lines

Property Casualty Financial Lines Marine Cargo

Atlanta | Boston | Chicago | Fort Lauderdale | Houston | Los Angeles | New York | San Francisco | San Ramon |


n |

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 47


Stevens Point | Auckland | Hong Kong | Melbourne | Singapore | Sydney | Toronto

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 48

Easy does it Beazley chief Andrew horton’s ‘cautiously bold’ approach to foreign markets is starting to pay dividends in the us. he’s hoping to do it again in Australia By Michelle Hannen


ANDREW HORTON IS ON A mission to drink every red wine on the planet. It’s an ambitious target that requires the Londonbased insurer’s Chief Executive not to fall in love with any particular style or region. Funny then, that the highly specialised company he helms follows exactly the opposite approach. Beazley is the ultimate niche specialist, with operations focused on six narrow areas: specialty lines (professional indemnity and directors’ and officers’); property; marine; reinsurance; life, accident and health; and political risks and contingency. Within those limits, its focus is on even narrower niches – and when it finds one it likes, it sticks to it. London born and bred, Beazley was a Lloyd’s-focused UK operator until 2004, when it opened its first office in the US. Its footprint expanded further insuranceNEWS

Beazley’s Andrew horton: the ultimate niche specialist

in 2008 with the acquisition of Brisbane-based accident and health underwriter Momentum Underwriting Management, giving it a foothold in Australia. It also has offices in France, Germany, Singapore, Dubai and Norway. Since 2008 its local offering has expanded from accident and health and income protection into contingency business (mostly event cancellation), while its 2011 acquisition of two Sydney-based managing general agencies – Australian Income Protection and Blue-GUM Special Risks, which focus on the group disability market – added considerably to its local bulk. Australia is now its thirdlargest market after the UK and US. Mr Horton uses the phrase “cautiously bold” to describe Beazley’s growth strategy. Taking its expansion in the US October/November 2015

as a model, rather than making a splash by launching into the market with a vast array of products, it cautiously introduced one or two, adding lines as its confidence grew. Beazley now has 400 staff in the US and has focused in the past year on “filling out the map” with additional offices. It has added products and deals with fewer brokers in more depth, which resulted in a 25% increase in gross written premium (GWP) from the US business in the six months to June 30. Key to the “cautiously bold” approach is finding the right people to move a business line forward, and finding a niche in the market. It’s a blueprint for growth in Australia. “We have six divisions, and only two are represented in Australia at this point,” Mr Horton tells Insurance News. “We will grow when we find good

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 49

“If we have good relationships and offer a good service, and remain innovative – then we can continue to stand on our own two feet.”







Qualified as a chartered accountant with Coopers & Lybrand.

Joined Lloyd’s Bank as an accountant in the international banking division before joining the head office finance team.

Joined NatWest as a senior accountant in the investment banking arm.

Joined ING, where he held various positions including deputy global chief financial officer and global head of finance for the equity markets division, and chief financial officer for the UK wholesale banking division.

Joined Beazley as group finance director.

Appointed chief executive after Andrew Beazley resigned to fight the cancer that took his life two years later.

people, and we can offer something different. “There’s no point in coming here and offering a product that many of the local insurers do brilliantly well.” In GWP terms, the Australian operation stands at $55 million, but Mr Horton says Beazley is a patient beast. While it aims to grow the accident and health business by 10-20% a year, careful growth matters above all else. “Our aim isn’t just to grow top-line to a number X times wherever we are. We want to grow it carefully.” Despite downplaying the potential for growth in Australia, growth has possibly never been more important for Beazley, with the glut of capacity in the market resulting in a shrinking of the company’s London business. The Lloyd’s franchises are facing increasing competition, so it shouldn’t be

surprising that Beazley has been cited as a potential merger and acquisition (M&A) target similar to the takeover of Catlin by XL, and that of Brit by Fairfax Financial. But Mr Horton categorically states that whether or not other parties are interested in Beazley, the company is “comfortable not being merged or acquired or acquiring at this point”. And he disagrees with the current mantra that bigger is better. “We’re comfortable with our size, and with being independent. Our view is, as long as we’re relevant in the lines of business we’re in – so we’re large enough in the lines of business we’re in, and people will continue to deal with us, and if we have good relationships and offer a good service, and remain innovative – then we can continue to stand on our own two feet.” insuranceNEWS

He says the present wave of market consolidation may actually provide opportunities for Beazley. “M&A gives us an opportunity to recruit more people because I think some people will fall out, or be unhappy with being merged.” He says due to its independence and penchant for organic growth, Beazley is “an attractive place for people to join [when] they’ve left organisations that have been taken over or reorganised”. Beazley was an early adopter in terms of Lloyd’s businesses creating an on-the-ground presence in Australia, rather than purely writing business via local coverholders. This trend has become increasingly common among Lloyd’s counterparts in recent years. Mr Horton says the increasing establishment of local offices is driven by less business finding its October/November 2015

OFF DUTY: Aside from touring vineyards around the world, mr horton can be found on the golf course in his downtime, a passion from his youth reignited by his 19-year-old son, whom he describes as a “complete golf fanatic”. his other son, 22, is studying film in los Angeles. A manchester City football team tragic, mr horton relishes the club’s recent success, which comes from having “the most money on the planet” after a takeover by sheikh mansour bin Zayed alnahyan in 2008.


INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 50

“The industry is still generally slow. It doesn’t move forward that quickly into new things. It’s not innovative enough.”

focusing on the quality of people: Andrew horton (centre) with company executives (from left) head of Contingency Australia damian Kerin, Chief Risk officer Andrew Pryde, Global head of life, Accident & health Christian tolle and head of life, Accident & health Australia suzie white


in waiting for that – we’ve got to live with what we’ve got.” He says despite noise to the contrary, the industry is “doing too well [and] returns are still too good” to force up rates. “It’s going to be a case of returns deteriorating until they deteriorate to such a low level they can’t go any lower, and then the market slowly comes back.” When the market does bottom out, he believes things will probably look fairly ugly, with some groups making losses. With growth difficult, particularly in the mature and currently stagnant Western markets, Beazley is also among the operators looking towards Asia. Mr Horton says that means building on the presence it already has in Singapore, adding products into that market and putting its first underwriter into China. But he says growth will be slow due to the developing nature of the Asian economies. “The Chinese market tends to buy motor and homeowners, and life policies and then crop. A lot of Asian economies don’t really buy much directors’ and officers’ and professional indemnity.” insuranceNEWS

A relative newcomer to insurance – he joined Beazley as group finance director in 2003 from the world of banking – Mr Horton summarises the industry’s strength as its focus on relationships and trust between insurer and cedant, which contrasts sharply with the “more transactional” world of banking. “I really like that, and that was the real eye-opener, switching from large banks into an insurance company.” He also cites the industry’s “very bright, thoughtful” people and its ability to help communities and businesses recover as key attributes. On the downside, Mr Horton laments the plodding pace of the insurance industry and its risk-averse nature. “The industry is still generally slow. It doesn’t move forward that quickly into new things. It’s not innovative enough and it’s a bit reluctant to cover new risks. There’s a lot of risk in the world that insurance doesn’t really cover, which I find interesting.” He also cites its lack of October/November 2015

appeal to graduates as a source of frustration. “Bizarrely, despite the banks having a challenging past five or six years, most bright graduates will probably still choose banking over insurance.” Mr Horton wishes he had considered the insurance industry early in his career. His decision to choose insurance over banking came after he was headhunted for the role of European chief financial officer at Marsh. “I was being interviewed for that, and then all of a sudden got a phone call from a headhunter regarding the new chief financial officer’s job at Beazley, which had just floated in 2002.” After meeting with founder Andrew Beazley and his business partner Nick Furlonge, Mr Horton says he was offered the job within two weeks of the first interview. “I thought I’d joined an industry that can make up its mind quickly. So people got me in – people and speed. “Our aim is to continue to focus on the quality of people and be more nimble than every* body else.” AIB 9110

way to the London market than in the past. He says by building closer local relationships Beazley has accessed more SME business in the US – the type of risks that would never find their way to Lloyd’s – and channelled more US business to Lloyd’s through a strong local marketing force. However, it is a strategy that is not without risks. “It’s the most debated topic in London, this issue of the Lloyd’s operators and how many local presences they have. With every local presence are you cutting off what was historically a powerful central market?” Another heavily debated topic – within Lloyd’s and in the wider market – is how much further rates can fall due to the capital glut, and what it will take to break that cycle. Mr Horton, for one, is not relying on a major catastrophe to save the day. “It’s not a case of you and I sitting here waiting for the $150 billion hurricane, earthquake, meteorite strike or whatever, because it might not happen in our lifetimes. There’s no point

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 51

AVAILABLE NOW: MORE COMMISSIONABLE PRODUCTS FROM AIB WHOLESALE! In addition to our ground-breaking Childcare Centre and Tourism Operator schemes, we can now offer packages to licensed brokers for:







As usual with AIB, broker partners will receive the best service, generous broker commissions and excellent cover for their clients at the most competitive price.

PLEASE SEND ALL QUOTATION REQUESTS TO: or to discuss the features and benefits of our unique facilities, contact AIB Wholesale Division Manager, John Lewis on 07 5409 4600.

AIB 9110

AIB Pty Ltd

ABN 87 009 635 527

AFS License 246282

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 52

Wired for disaster faulty cabling has turned thousands of Australian homes and businesses into potential deathtraps – so why aren’t we paying more attention? By John Deex

IT IS BECOMING AN ALL TOO familiar story. A non-compliant building product, imported into Australia, and used widely with little thought for the consequences. Flammable building cladding from China has left the safety of many high-rise apartments across Australia in serious doubt. Now there’s another threat that’s less visible but just as dangerous. Thousands of buildings are riddled with non-compliant electrical cabling that is expected to cause fires and electrocution. However, the community seems reluctant to wake up to the threat. The most high-profile product is the Infinity and Olsent-branded cable, manufactured in China and installed throughout Australia between 2010 and 2013. The cables do not comply with ageing requirements of the electrical safety standard. They may become prematurely brittle and break if disturbed. This would expose internal conductors, potentially causing electrical shock or fires. The product was recalled in August last year, but the Australian Competition and Consumer Commission (ACCC) says only about 28% of the 3900km of unsafe cable has been accounted for. 52

There have been no incidents to date, which may account for the apathetic response, but time is running out. Timescales vary across states and territories, but degrading cable is expected to start causing shocks and fires in New South Wales from next year. It is feared that up to 40,000 homes, commercial and residential buildings in Australia could be affected, but Infinity could be just the tip of the iceberg. Late last year the Ecablesbranded product was also recalled after tests showed it could not withstand high temperatures. This recall was more successful because Ecables products were sold through recognised wholesalers, whereas the Infinity and Olsent cabling was sold directly to the public. However, it could be just as dangerous. “Both products were found to present serious future risk of fire or electrical death,” Australian Cablemakers Association (ACA) Chairman Andrew Davenport tells Insurance News. “Both were admitted for sale on the Australian market under the ‘self-assessment’ model of certification for products categorised as low risk. “And in both cases the insuranceNEWS

importing business was placed into receivership, leaving property owners, electrical contractors and retailers with no redress for the serious failures.”

“Home owners, electrical contractors and retailers can face financial liability where unsuitable products are allowed on to the market.” Alarming as these examples are, they are not the end of the story. The ACA says it has uncovered many other instances of cables that, although not as dangerous, still fall short of the Australian standard. Mr Davenport warns that fatal fires and electrocutions are not the only things to worry about – there are financial risks too. “Home owners, electrical contractors and retailers can face financial liability where unsuitable products are allowed on to the market, sold at a price point, and

October/November 2015

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 53

then the importer goes into liquidation when the product is found to be faulty,” he says. “The two risks compound, because businesses and consumers that face major out-of-pocket expenses are indisputably less likely to take the necessary action to remove and replace the faulty product – heightening the longterm danger to life and property.” Mr Davenport believes the authorities were slow to act, but welcomes the national recalls that were eventually achieved. However, the regulatory environment that allowed the failures

to occur remains the same. The ACA wants changes to current rules allowing manufacturers and importers of electrical cabling to self-assess compliance with the Australian standard. “We believe compliance should be upgraded from the existing system of self-assessment to a more rigorous testing regime,” says Mr Davenport. “This should apply to all products on the market. “We also believe there should be a more stringent regime of ongoing product testing, to avoid the situation of a ‘golden insuranceNEWS

sample’, where an importer brings a compliant product for testing but the mass-produced material does not reach this same standard.” Addressing the problem will take co-operation across jurisdictions, and additional resources. “We acknowledge that both of these are difficult to achieve,” Mr Davenport says. “However, if governments do not address the ease with which substandard electrical cables can be sold into the Australian market, there will be more widespread failures.

October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 54

“If your house or business burns down because of this cable, then you would not be covered. The same applies with liability if a visitor was electrocuted.”

“In that case, it is only a matter of time before there are fatalities.” There are clear insurance implications, for consumers and the insurance industry, that require home and business owners to tread very carefully indeed. Allan Manning, the founder and Managing Director of loss and claims consultant LMI Group, says some policies have blanket exclusions on faulty workmanship. “If your house or business burns down because of this cable, then you would not be covered,” he tells Insurance News. “The same applies with liability if a visitor was electrocuted.” Professor Manning says good policies, while not covering rectification of faulty work, do cover resulting damage. However, if an insured knows a building has Infinity cable installed they have a duty to disclose it. Mr Davenport fears the recalls will have limited effect, leaving insurers facing a potential raft of claims. “The fact is that any recall struggles to achieve 100% return of faulty products,” he says. “Considering the expense involved in removing and 54

replacing faulty electrical cable, we believe that many people will ignore the recall. “Consider also the fact that the sale of Infinity products through retail hardware channels meant there was no record of where the product has been installed. “Dangerous cables will remain in situ for many years. This presents a latent risk of fire or electrocution – potentially triggering a raft of property or liability claims for years into the future.” He believes the insurance industry should add its voice to calls to reform the product safety regime, “to ensure this kind of widespread catastrophic failure does not occur again in the future”. The Insurance Council of Australia (ICA) says insurers are monitoring the situation and will “respond to any claims for damage as and when appropriate”. “The product recall of Infinity cables is a community safety issue being managed by the ACCC,” says ICA General Manager Communications and Media Relations Campbell Fuller. “The ACCC has been outlining the steps householders and businesses need to take if they believe Infinity cables have insuranceNEWS

been used in their property, and how these are to be removed and replaced.” It took the Lacrosse apartment blaze before the issue of

Ticking timebomb: where Infinity cables are installed, and when they become a hazard State

Km of cable










































Source: ACCC

flammable non-compliant cladding was taken seriously. Nobody was hurt or killed, but it could so easily have been different. It is too easy to ignore faulty electrical cabling while nothing is happening. But all the experts agree – it is only a matter of time, and we might not be so lucky this time * around.

October/November 2015

Installation period

Safety risk could start

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 55

Specialist Sp ecialist Underwriter Un der writer

E xper ience aand nd e xper tise Experience expertise tthat hat you you aand nd yyour our c lients d eser ve. clients deserve. Nova Underwriting Pty Ltd

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 56

Pen underwriting’s Alex tarantino: competing in a very crowded market

Seizing the day former lloyd’s casualty specialist Alex tarantino says joining Pen underwriting and moving to Australia was too good an opportunity to miss By Shelley Dempsey



October/November 2015

BRITON ALEX TARANTINO STARTED working on Australian shores just this year as Pen Underwriting’s National Underwriting Manager for Liability and Long-Tail – but as a former London-based Lloyd’s man he started writing Australian cover in 2006. He visited Australia in 2009 and witnessed first-hand the savagery of its natural disasters. One weekend after Black Saturday in Victoria he visited Marysville, where bushfires had killed 45 people and destroyed 90% of the buildings. “It was an eye-opening experience for me,” he tells Insurance News. “It’s hard not to be affected emotionally when you visualise the speed at which fire travels. It’s one thing to be underwriting those risks, but it’s another to actually go there and see it.” Mr Tarantino, who has specialised in casualty since 2001, clearly likes a challenge, and is not afraid to roll up his sleeves and build a fresh business. His job in Sydney fills a new role at Arthur J Gallagher-owned Pen Underwriting – one of Australia’s newest and largest underwriting agencies, with gross written premium of about $700 million a year in the UK, Canada and Australia. Pen combines the established brands of Australis Group Underwriting and SRS Underwriting Agency, and was launched last November. Mr Tarantino was recruited from QBE Canada early this year. “To be presented with an opportunity to move to Australia, probably one of the leading territories for Lloyd’s, really was too good an opportunity to miss,” he says. “But it was also about the chance to live and

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 57

“The plans for Pen sort of stopped me in my tracks. I had to rethink what my options were for my career.”

breathe the Australian market, having already written it from London for a number of years.” Mr Tarantino was known to SRS founder and now Pen Managing Director Paul Lynam from his time with DA Constable Syndicate 386, one of the largest international casualty portfolios on the London market. The syndicate handled ASX 100 accounts and was integrated into QBE Europe in 2008. “We were lead capacity provider, so I already had a relationship with SRS from an underwriting point of view.” SRS later contacted him in Toronto, where he was working for QBE as head of casualty lines. “The plans for Pen sort of stopped me in my tracks. I had to rethink what my options were for my career.” He and his wife decided they did not want to regret missing out on Australia. “We really like to seize the moment… and not live life with that sort of doubt.” This spirit of adventure had already taken them to Toronto, where Mr Tarantino set up and led the QBE casualty team. “When I was asked to go to Canada in 2011 I saw that as a huge opportunity to gain real local experience, and also start and grow a book of business from scratch.” In Sydney Mr Tarantino leads a team of about 20 for Pen, which also has offices in Melbourne and Brisbane. By the end of the year its two Sydney offices will be combined at the ANZ building in Kent Street, overlooking Darling Harbour.

“The main advantage is we will have both short and long-tail underwriting all sitting together and offering solutions to brokers. That was a new concept for me in Canada, because in London it was very silobased.” Pen is a Lloyd’s coverholder, which Mr Tarantino says “allows you to churn through a large amount of business without loss of underwriting discipline”. At Pen he hopes to make that process more efficient, and has recently reviewed underwriting methods. “The reality for Pen is it’s a very crowded market space that we compete in here, so we need to clearly demonstrate where we can add value and where we differentiate ourselves. One of these areas is in offering a superior in-house claims service.” Another differentiator is in the products offered, such as environmental impairment liability relating to gradual pollution, for example from underground tanks that store pollutants. “It’s a product we launched in Canada that was widely available in the Lloyd’s market. Not too many insurers are playing in that space in Australia.” Mr Tarantino also hopes to grow cybertech cover and pharmaceutical and life sciences capability for clinical trials, and to raise capacity. “We get a lot of enquiries where contractors are working on tracks within a rail corridor, so they are required to carry up to $250 million of liability,” he says. A broker may not have the network or insuranceNEWS

October/November 2015

time to place $250 million, but Pen can quote it as one large chunk of capacity. “It’s about the broker being able to contact one channel, and then it’s done.” Another priority is integrating the legacy systems of SRS and Australis. A partner is building a new system to let Pen work faster, innovate with products and achieve greater access to data such as policy issuance, invoicing and late payments. Mr Tarantino also hopes to promote the Pen brand. “What I’d like Pen to be is the first port of call for brokers, and to be that first phone call, not just on complex risk but also on a broader range of appetite.” He says Pen’s portfolio is diverse. “I don’t think that’s widely known. We also write some very large middle-market to largemarket business, and a lot of that was my background prior to joining Pen.” The largest risks are manufacturing, construction and mining, oil and gas. Mr Tarantino enjoys liability and longtail business because they are never static, and underwriters are always learning. “It’s constantly evolving based on legal or regulatory requirements or local issues. Over my career of 15 years there’s always been the same noise regarding worker recoveries, tort reform and labour hire.” Mr Tarantino says it has been a big year, but another milestone is in store: his first child is due in November. “We’re going to have a little Australian, but it was very nearly a little Canadian,” * he says. 57

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 58

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 59

Living on the wedge

lt u fA e Christchurch Pin l A

A major earthquake zone proves to be much wider than anyone thought. And statistically, it’s nearly ready to let go



NEW ZEALAND, MANY EXPERTS SAY, IS one great big earthquake risk. While it’s still recovering from the series of quakes that devastated Christchurch in 2010/11, the discovery of yet another earthquake risk factor should come as no surprise to the residents of a country that sits astride the planet’s most active tectonic plates. Recent deep drilling research has shown that the Alpine Fault, at 600km long easily New Zealand’s largest and longest geological fault line, has a “high probability” of rupturing in the next 50 years. And when it does, it will release about 30 times more energy than the Darfield earthquake of September 4 2010 – a Magnitude 7.1 event that did so much damage to Christchurch. The difference in force is massive. For every one unit increase in magnitude there is a 30-fold increase in energy release. It will be “one of the biggest earthquakes since European settlement”, according to the government-owned research institute GNS Science. The agency says a series of quakes south of Wellington in the past two months were not connected with the Alpine Fault, which it predicts has a 30% chance of causing a big quake within the next 50 years.

The Alpine Fault runs alongside the “spine” of the South Island – the Southern Alps – and marks the confluence of the Australian and Pacific tectonic plates. Data using radiocarbon analysis collected near Milford Sound in the deep south of the country has shown a succession of 24 Alpine Fault earthquakes, with four of around magnitude 8 in the past 900 years. The most recent major quake – above Magnitude 8 – was in 1717. Prior to that major quakes occurred in 1620, 1450 and 1100 – an average of one every 330 years. However, there have been a series of lesser quakes in the region, most recently in the remote Fiordland district, with one in 2003 measuring M7.1 and 2009 M2.7. GNS Science warns in its report that the sequence of quakes above M8 is “remarkably regular by the standards of other large faults”, but because the Alpine Fault doesn’t rupture like clockwork every 330 years, the estimates are just that. New research published in September by a team from Victoria University in Wellington has revealed previous geological assumptions about the fault are wrong, and the fault is extremely wide at its southern end. While it had always been assumed to be a giant vertical crack in the earth’s crust where insuranceNEWS

October/November 2015

the two plates met and pressed against each other, it is now known to be far more complex. The university team’s report, published in the American Geophysical Union journal Geochemistry, Geophysics, Geosystems, says the edge of the Pacific Plate “is actually sitting and sliding right on top of the Australian Plate” for some 350km along the Alpine Fault. “You can see the surface expression of the Alpine fault from space as an incredibly straight line running up the west side [of the South Island] of New Zealand,” says the report’s lead author, Associate Professor Simon Lamb. “What we’ve showed is that the fault actually curves around and then becomes horizontal, so that it underlies a large chunk of the South Island. “So rather than the two tectonic plates sliding past each other, you have a different situation where one plate is actually sitting on top of the other and sliding on top of it” for some 350km of its length. “The fault grows wider as you go further south, becoming wedge-shaped. It is pushing under the South Island and at its southern edge is around 100km wide.” Professor Lamb says this means the extent of the fault is much greater, and the 59

INMAG OCT 15_page layouts 2/10/2015 12:33 pm Page 60

the series of earthquakes that damaged so much of Christchurch and even changed its landforms were far smaller than a major Alpine fault quake is likely to be. But just like the old real estate maxim of location location location, the locality of a natural catastrophe is just as important as its severity. while Christchurch is one of the three largest population centres in new Zealand, the southern end of the Alpine fault area designated as most likely to unleash a magnitude 8.1 earthquake is relatively lightly populated. the largest town in the region is the tourist centre of Queenstown (right), with a population of around 28,000. however, damage to roads and communications would nevertheless impact severely on communities in the region. the Christchurch earthquakes have cost the insurance industry an estimated $nZ17 billion, the government-operated earthquake Commission some $nZ12 billion and the new Zealand Government directly an estimated $nZ6.7 billion.

area that could rupture during a big earthquake is much larger. “So the energy that could be released would be far greater than people have thought.” “The Alpine Fault when it goes will be almost certainly a big earthquake. “What the research is showing that the area that breaks during that quake will be bigger than previously thought, so that the energy released would be larger and presumably the shaking would be over a wider area, too.” Previous research has shown that a large Alpine Fault earthquake will cause major changes to landforms and rivers. Horizontal movement of the Alpine Fault is about 30 metres every 1000 years, which GNS Science says is “very fast by global standards”. Each time it has ruptured, it has also moved vertically, lifting up the Southern Alps in the process. In the past 12 million years the mountain chain has been lifted by an estimated 20km. “It is only the fast pace of erosion that has kept [the mountains’] highest point below 4000 metres,” GNS Science says. “The glaciers and rivers have removed the rest of the material and spread it out across the lowland plains or onto the sea floor.” 60

An Alpine Fault earthquake will likely rupture along a larger fault length – several hundreds of kilometres rather than several tens of kilometres – over a longer period of time and affect a much larger area than the Darfield earthquake did. Moreover, it is likely that the aftershock sequence following an Alpine Fault earthquake will involve earthquakes of as much as M7. Research conducted at the University of Otago and GNS Science in the last few years has revealed that a large Alpine Fault earthquake will trigger a cascade of environmental effects that could persist for up to 50 years after an earthquake. “Violent shaking along the entire length of the earthquake rupture will trigger large landslides in steep topography and weaken hill slopes, making them more susceptible to landsliding in subsequent storms,” the groups say in a report published by GNS Science. “As west coast rivers and streams transport material produced by this landsliding down stream, alluvial fans and floodplains will aggrade, rapidly causing rivers to change their course abruptly and more frequently. “The cascade of impacts has the potential to chronically affect towns, road, insuranceNEWS

October/November 2015

communications and power infrastructure for decades after the earthquake.” “Additionally, aftershocks triggered by the main earthquake could be expected to be as large as M7 and to continue for many years.” Professor Lamb says his group’s research has established that someone standing many kilometres inland from the line of the fault might in fact now find they are standing right on top of it. The southern “wedge” helps to answer why the mountain ranges are wider and higher in the south, and why there has been a higher frequency of small earthquakes in the southern zone. He says the seismic testing has demonstrated that the crust under the South Island is very thick. “Seismic waves tend to travel faster the deeper they go, but seismic waves get slower under the Southern Alps. That is not what you would expect if the two tectonic plates were just sliding past each other on a near vertical fault. “That makes these regions more vulnerable than we first thought. “I think one of the lessons we have learned is that all of New Zealand is actually * earthquake-prone.”

INMAG OCT 15_page layouts 2/10/2015 12:55 pm Page 61

Need insurance for clients in the

fire protection industry?



• Public & Product Liability • Professional Indemnity • Business Package

• Highly competitive rates • Approved by ACCC • Underwritten by Vero Insurance

Please contact ntact A AWIB WIB on: Phone 1300 888 111 Email W eb www Web

Alan W Wilson ilson Insurance Brokers PO Box 1045 T Traralgon raralgon VIC 3844 AFS Licence No 234502 Proudly supported and recommended by the Fire Protection Association Australia. Approved by ACCC to allow enhanced policy benefits and affordable premiums.

INMAG OCT 15_page layouts 2/10/2015 12:55 pm Page 62

When you need us most, we’re we’re at our best. Call us on 1800 618 700 or visit

INMAG OCT 15_page layouts 2/10/2015 12:55 pm Page 63

Ripples of concern As he calls time on a memorable career, Lal De Silva expresses fears for the future of marine insurance claims By John Deex

Always trying to find ways and means of improving claims: Lal De Silva with Ruffy

OVER ALMOST 50 YEARS, LAL DE SILVA HAS DEALT WITH JUST about every aspect of marine claims, and his principled approach has earned him the respect and friendship of colleagues in many countries. He can reflect fondly on a long and varied career that includes personal messages of thanks from Royal Navy captains and a whiskytasting tour of the Scottish Highlands. But while wishing the insurance industry the best for the future, he has deep concerns about its resilience to the departure of old hands such as himself. The retiring Technical Claims Manager for Zurich does not hold back, declaring he has “a message” for general insurers. “There is a marked difference between marine insurance and any other insurance class,” he tells Insurance News. “Marine claims can be complex and require high levels of technical expertise, and general insurers are overlooking this. “What I have seen over the years is that young people do not have the opportunity to learn. “My generation has experience, theoretical as well as practical, and we will not be easy to replace.” Mr De Silva says it was a privilege to mentor and train young staff during his career. “Today, many of them hold high positions and that makes me very proud. The challenge is to get young people to participate, and encourage them to improve their skills base. “My advice for young people in the industry is they should get a good knowledge of relevant documentation, understand marine liability regimes and understand the various conventions that govern decisions about claims. insuranceNEWS

“You need an eye for detail, and to be very rational in your thinking. You need a very balanced approach. Success in marine insurance is to understand various risks, covers and laws. “For the industry to move forward with success there has to be a lot of focus on staff training.” Mr De Silva’s story starts in Sri Lanka, where he was born and raised. He took his first position with the British-owned Imperial Lighthouse Service in 1967, handling the import and export of heavy machinery. He then became a customs house agent and customs broker working in logistics before joining the British High Commission in Colombo, again handling imports and exports under the global insurance program. Some memories from the early days have stayed with him. “I was always the preferred customs broker for liquor imports,” Mr De Silva says. “As a result I was invited to a whisky factory in Scotland to inspect the packaging of Glenfiddich. My job was also to taste the whisky.” While attached to the British High Commission, he was responsible for the clearance and delivery of ships’ stores from Royal Navy ships that visited Colombo. “The clearance and forwarding had to be done quickly so the naval vessels could depart on schedule,” Mr De Silva says. His expeditious handling earned him two personal messages of thanks from navy captains. “Very many thanks for your expert and efficient handling of our stores,” wrote Commander AS Ritchie of the Leander class frigate HMS Achilles in 1983. “Your understanding of local bureaucracy has been a most valuable asset.” Captain PJ Bootherstone of the destroyer HMS Battleaxe offered October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:55 pm Page 64

“I always said we must endeavour to assist those claiming compensation from us. It used to be that you tried not to pay.”

his thanks for “hard work on our behalf in tracking down our stores and ensuring their passage through customs” in 1985. Mr De Silva’s next position was with the National Insurance Corporation of Sri Lanka, before he took the huge step of moving to Australia with his wife Jeanne and three children in July 1987. “My wife had family in Melbourne but at the time I was not keen. I already had a good job,” he tells Insurance News. “I was looking for a job either in marine insurance or the freight forwarding area. “As luck would have it, I saw an advertisement in the newspaper. As things worked out, I know I made the right decision to move to Australia.” The ad was for a marine underwriting and claims position with General Accident Insurance in Melbourne, where he stayed until 1989, when he started as a claims manager with NZI. In 1999, when NZI’s marine insurance operation became part of the then-new marine insurance joint venture known as Associated Marine, he went along. Mr De Silva then served as marine claims superintendent, before taking on the title of claims manager Victoria and Tasmania in 2003. In 2010 Associated Marine was absorbed by Zurich Australia, and Mr De Silva took the title of Technical Claims Manager for Zurich. He is a senior associate of the Australian and New Zealand Institute of Insurance and Finance, associate fellow of the Australian Institute of Management and a member of the Customs Brokers and Forwarders Council of Australia. He says he has no idea how many claims he has dealt with, but he believes the most expensive was a $10 million warehouse fire in Melbourne during his NZI days. However, despite its size, it was relatively straightforward. “It was caused by an electrical short-circuit and was done and 64


dusted within three or four months,” he says. Throughout his career Mr De Silva has aimed to approach every situation with fairness and honesty. “I believed it was important to look after the interests of the company and the claimant,” he tells Insurance News. “At the end of the day I have to be happy with myself. “I think that approach is why I am respected in the market. People know that I will be fair but firm. “I always said we must endeavour to assist those claiming compensation from us. It used to be that you tried not to pay. I changed that thinking.” As a result of this approach, Mr De Silva successfully handled many legal mediations relating to disputed claims. And now, at the end of a long and successful career, Mr De Silva has no intention of leaving Australia, although he admits to an enduring affection for Sri Lanka. He intends to spend more time with family, as well as his beloved “spoodle” Ruffy. But also, at the age of 68, he “can still offer quite a bit of my grey matter”. “In my spare time I research various topics,” he says. “I’m always trying to find ways and means of improving how claims are handled. “Even at my age I still want to learn. I want to be in touch with the market. “There are a few opportunities that have come in the way of education. Certain organisations have expressed interest.” There is no doubting the impact Mr De Silva has had on the industry he knows and loves so well. But given his comments regarding the industry’s future, could it * be that his most telling contribution is yet to come? October/November 2015

INMAG OCT 15_page layouts 2/10/2015 12:55 pm Page 65

INMAG OCT 15_page layouts 6/10/2015 10:21 am Page 66


CGU enhances its uSurvey app: Commercial lines addition boosts value

SUA’s John Iles: keeping products “premier in their class”

CGU HAS RELAUNCHED ITS USURVEY INTERACTIVE RISK QUALIFICATION tool to offer broader coverage and an improved design. The app was launched earlier this year for farm risk surveys, but has now been enhanced to include commercial lines. Originally only available on iPad, it has also been extended to offer iPhone functionality. “We believe it’s an industry-first mobile application,” a CGU spokesman told Insurance News. “It has delivered immediate benefits to our affiliated partners by helping our underwriters to better understand the risks, and providing faster responses back to brokers. “We have already cited instances where brokers have been able to secure additional business by being on-site and providing a comprehensive risk review and positive experience, particularly for renewals, for their clients.” The app takes advantage of devices’ geo-location technology and also allows the survey to be submitted immediately if desired. Brokers can save up to four surveys for both farm and commercial products, and pictures can be submitted direct from the mobile device. “It reduces the amount of time brokers have to spend processing, and they can dedicate more attention to clients’ needs,” the spokesman said. “There is no need for clipboards, paper or camera stills. “It also works in offline mode, which can be very useful if there is poor network coverage in rural areas.” * The app is free to download from the App Store.

SUA chooses Berkley as underwriter: Reputation ‘made decision easy’ SPECIALIST UNDERWRITING AGENCIES (SUA) has a new underwriter for its business protection products – Berkley Insurance Australia. The WR Berkley-owned operation has been providing cover for SUA’s Business Practices and Corporate Practices Protection products since September 23. The new partnership is an ongoing arrangement and replaces the previous contract with Axis Specialty, which has been the underwriter since 2010. Berkley stood out in a crowded field of potential new partners because of what it could bring to the table, SUA Director John Iles says. “Berkley has a long history in the financial lines space, and its ability to respond quickly made the decision a simple one for us.” SUA wants its business protection products to remain a “premier product in their class” and recently relaunched them to underline the suite of offerings’ coverage features. Mr Iles says SUA is focused on remaining “the prominent provider of these classes of insurance” in Australia. “We’re one of the few truly independent agencies remaining in Australia, and we continually research trends from a legislative and insurance perspective to ensure we stay on top.” The deal marks Berkley’s latest success in growing its Australian business after the rebranding initiative announced last year by its US parent. In the past few months, Berkley has also announced deals with Arena Underwriting * and Community Underwriting. 66

Now you can use an iPhone: CGU’s uSurvey boosts response times between farm and broker

Sports Underwriting scores new partner: Great Lakes replaces Calliden SPORTS UNDERWRITING AUSTRALIA has signed an agency agreement with Great Lakes Australia, to assist its growth ambitions. The Melbourne-based company, which specialises in the sports, leisure and licensed club sectors, had previously spent nine years with Calliden as its underwriting security provider. “We have negotiated several enhancements with Great Lakes, and brokers will see a change in appetite and capacity,” Managing Director Steve Gilbert says. “These include an expanded property appetite and a liability facility with limits up to $50 million.” Mr Gilbert says Sports Underwriting will extend its insurance coverage to include licensed club property, in addition to its liability lines for the club sector. insuranceNEWS

October/November 2015

However, it has no plans to pursue new market segments or expand its 550strong national broker network. He tells Insurance News the agency agreement was “some months” in the making and “very much aligns with our views on building long-term, sustainable partnerships”. The new “long-term” agreement with Great Lakes, which kicked in on October 1, covers 100% of business written by Sports Underwriting. “These changes will ensure Sports Underwriting remains the preferred market for brokers in the sports, leisure and licensed club sectors,” Mr Gilbert says. Calliden was split up last year after Steadfast bought it for its underwriting agencies and sold the general insurance * operations to Munich Re.

INMAG OCT 15_page layouts 2/10/2015 12:55 pm Page 67



Management Liability

With more resources, more products and a level of service second to none, Pen Underwriting combines the very best of Australis and SRS. + Professional underwriting teams

Recruitment Services

Professional Indemnity

+ Specialised product knowledge + A track record for excellence + Commitment to building long-term relationships

Summit – Prestige Homes

+ Extensive product list + Unparalleled access to Lloyd’s and Australian insurers First class insurance solutions from one of Australia’s largest underwriting agencies.



Liability – General

Accident & Health


Pen Underwriting is the new brand identity of Australis Group (Underwriting) Pty Ltd and SRS Underwriting Agency Pty Ltd.

Liability – Niche


Brisbane +61 7 3056 1400

Melbourne +61 3 9810 0600

Sydney - Clarence +61 2 9200 4000

Sydney - Kent +61 2 9323 5000


Mobile Plant


INMAG OCT 15_page layouts 2/10/2015 12:55 pm Page 68

Let’s talk smarter strata For smarter strata insurance, talk to your ORFDO /RQJLWXGH RIÀFH RU DVN \RXU EURNHU for a quote from Longitude.

NSW/ACT 1300 442 676

VIC/TAS 03 8823 9419

QLD 07 3434 2680

Longitude Insurance P/L is an authorised representative of Austagencies P/L ABN 76 006 090 464 AFSL 244584

WA/SA/NT 08 6380 6609

INMAG OCT 15_page layouts 2/10/2015 12:55 pm Page 69


Meeting specialised needs: Shieldcover is focused on a more direct approach

Berkley updates IT and medical cover: Cyber extension and new wordings added

Shieldcover moves into liability: Agency identifies market gaps

BERKLEY INSURANCE AUSTRALIA HAS UPDATED ITS INFORMATION technology liability cover – known as ITOPS – for SMEs and contractors operating in the IT sector. The wording has been revamped, resulting in a leading product that brokers should consider for IT clients, according to Berkley National Underwriting Manager Matt McPhee. “We last upgraded our IT wordings in 2008 and a great deal has changed in seven years,” he told Insurance News. “With this update, our product stacks up very well with available policies in the market. “We have always offered brokers and their IT clients excellent underwriting expertise, turnaround times, financial security and now with the launch of our ITOPS wording we offer broad market-leading coverage.” The cover offers broad-based civil liability, professional indemnity and public liability cover, plus fines and penalties, contractual liability, indemnity, claims preparation costs, costs of court attendance, PR expenses, mitigation costs, fee recovery, emergency defence costs and a legal panel. Berkley has also made available a cyber extension to its Management Liability offering, with a sub-limit of $100,000. The extension comes in response to demand from brokers for a practical solution to the growing cyber risk exposures of clients, Mr McPhee says. “The idea is to give some coverage for people who don’t need to, or don’t intend to, purchase very expensive cyber cover. “This gives a small amount of assistance, and some peace of mind. “However, for larger entities with large exposures to cyber risk, then brokers and clients should consider specific cyber cover.” Berkley also has a new Medical Malpractice wording known as Health Care Practice Protection. This includes civil liability wording and 27 policy extensions including privacy complaints and claims, fines and penalties and legal panel. “This is a very good, broad coverage in a market that is less serviced by insurers and where there is less capacity,” Mr McPhee says. “We undertook research within the medical profession to better understand the needs of the industry. “We then designed our new Health Care Practice Protection product around areas the medical profession recommended. “Even the name reflects the profession’s wish to remove the word malpractice, which they believe carries negative connotations. “The result was a protection policy specifically tailored for the medical * profession.”

UNDERWRITING AGENCY SHIELDCOVER HAS expanded into public and product liability. The agency, founded by East West Insurance Brokers Managing Director Greg Rynenberg 18 months ago, previously concentrated on accident and sickness cover. Shieldcover was spun out of Mr Rynenberg’s Ryno Insurance offering, which focuses on insuring classic and prestige vehicles. “We saw the need to offer an alternative in accident and sickness,” he told Insurance News. “Policy wordings didn’t always meet clients’ needs, particularly workers in the older age group. “We go up to 75 years, whereas most only go up to 65. “The population is growing older, and older people are staying in the workforce working as contractors and so on. But accident and sickness cover for these people was limited.” Now Mr Rynenberg sees another opportunity in the liability space. “For the blue-collar workforce, it is getting harder to get a specialist policy designed for their needs. “We are talking about welders, scaffolders, cleaning contractors and transport organisations.” Mr Rynenberg says he wants to deliver a much more direct experience for the broker. “I have 30 years’ experience as a broker,” he said. “We saw an opportunity to put brokers in touch with underwriters more directly. “They can pick up the phone, discuss the risk and have a solution within 24 hours.” Shieldcover policies are underwritten by a Lloyd’s syndicate. National Underwriting Manager Nathan Sommer has previously worked with Zurich and two other underwriting agencies with Lloyd’s syndicates. “Nathan is well versed in the Lloyd’s market and liability underwriting,” Mr Rynenberg says. As a result of the changes, Shieldcover has * relaunched its website.


October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:22 pm Page 70


APIG conference ‘best yet’ More than 300 people attended this year’s Australian Professional Indemnity Group (APIG) national conference, with many hailing the event as the best so far. Now in its ninth year, the conference and gala dinner was held in Sydney in September. Keynote speaker Chris Colahan, Australasia President of Berkshire Hathaway Specialty Insurance, kicked off the program at The Westin by discussing industry changes and challenges. There were also sessions on class actions, cyber war stories, investigations and inquiries, mergers and acquisitions and industry innovation. About 500 guests attended the gala dinner at Sydney Town Hall, with former ABC radio presenter Adam Spencer proving a popular MC. “The speakers were knowledgeable in their fields and impressive in their delivery of the broad content and topics presented throughout the day,” a spokesman tells Insurance News. “APIG celebrates its 20th anniversary this year and the conference and gala dinner did not disappoint.”



October/November 2015

INMAG OCT 15_page layouts 2/10/2015 12:22 pm Page 71

AXIS Specialty Australia provides distinctive specialty products backed by the “A+” (Strong) by Standard & Poor’s and “A+” (Superior) XV by A.M. Best. Our highly experienced underwriting and claims teams have a breadth and depth of knowledge that distinguishes us in the industry. You can count on us for customised insurance solutions, quick turnaround and skilled claims management. For a powerful insurance partner – contact us today!

AXIS Specialty Australia A branch of AXIS Specialty Europe plc

Phone 02 8235 1000

Service, Expertise, Strength & Claims Partnership Professional Indemnity Multimedia Liability



Directors & Officers’ Liability

Financial Institutions


Property Insurance



IT Liability

Marine Insurance

AXIS Specialty Europe SE (ARBN 131 203 122) is a general insurer regulated by the Central Bank of Ireland. Its branch in Australia is authorised and supervised by APRA.

INMAG OCT 15_page layouts 2/10/2015 12:22 pm Page 72

INMAG OCT 15_page layouts 2/10/2015 12:22 pm Page 73


Steadfast Re hits the roof The tequila flowed as steadily as the spring rain at Steadfast Re’s Mexican fiesta on the roof of Sydney’s Glenmore Hotel late in September. More than 125 staff and clients, along with representatives of reinsurers and insurance-linked securities funds, attended the party on September 24 to celebrate the company’s first anniversary. This time last year Steadfast bought a 50% stake in the reinsurance brokerage, which was formerly part of Beach & Associates. “Previously we had beach parties, but we can’t do that any more and a fiesta was the next closest thing,” Chief Executive Simon Cloney tells Insurance News. “The weather was terrible but the combination of a rooftop cover and tequila meant it didn’t matter and a good time was had by all.” Mr Cloney says the event will be held every two years to coincide with the Aon Benfield hazards conference. Guests included Steadfast Chairman Frank O’Halloran and Mr Cloney’s father John, who is a director of Steadfast Re.


October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:22 pm Page 74


Beazley moves to new Sydney address UK-based specialist insurer Beazley has a new address with prime views of Sydney Heads and the Woolloomooloo harbourside precinct. About 135 guests including 100 brokers joined Group Chief Executive Andrew Horton, who jetted in from London for the opening reception at Piccadilly Tower. The 20th-floor office currently accommodates 27 Beazley staff. Chief Risk Officer Andrew Pryde and Global Head of Life, Accident & Health Christian Tolle also flew in from London to mark the occasion. Guests nibbled Beazley-themed cupcakes and sipped wine while being entertained by an acoustic duo, caricaturist and roving magician. Mr Horton gave an update on the company’s view of Australia, pointing out that the investment in the new office underlines the importance of the local market to Beazley.



October/November 2015

INMAG OCT 15_page layouts 2/10/2015 12:22 pm Page 75

INMAG OCT 15_page layouts 2/10/2015 12:22 pm Page 76




October/November 2015

INMAG OCT 15_page layouts 2/10/2015 1:24 pm Page 77


CQIB opens up at Sea World The theme was “Closing the Deal” and the Council of Queensland Insurance Brokers (CQIB) achieved more than just that at its annual convention in August. More than 450 brokers and business partners gathered at the Sea World Resort to network and learn from experts on ways to manage in an evolving business landscape. The conference teed off with a golf tournament sponsored by Allianz at the Sanctuary Cove Golf Course. CQIB President Sean Bemrose expressed confidence in the council’s “strong position” in supporting its members and partners into the future. Rugby league legend Wally Lewis closed the conference sessions with a motivational address on facing challenges in life. As is traditional at CQIB conferences, participants dug deep for charity, this year raising more than $33,000 for the Mater Foundation to purchase a specially designed cot for premature twin babies and for hiring an art therapist for Mater Cancer Care Centre. The conference closed with a bang as attendees attended a dinner and danced to hit songs from the 1980s at an event sponsored by gold partner QBE.


October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:22 pm Page 78


Up close and personal with the All Blacks On the eve of the Bledisloe Cup in early August, AIG invited a select group of rising star brokers to attend its “Preparing to succeed: Lessons from the All Blacks” event at the Waterview Function Centre at Sydney’s Bicentennial Park. With 22 brokers hosted by AIG Australia Chief Executive Noel Condon and Head of Client & Broker Engagement for Australasia Jared King, the exclusive event was as inspirational as it was memorable. The intimate event allowed guests to gain a personal and rare insight into how team culture plays a critical role in a high performance team. All Blacks Manager Darren Shand provided an entertaining and thoughtful presentation on the inner workings of the world’s most successful rugby union team. Guests were then treated to a fascinating Q&A panel with six current All Blacks players. The players mingled with guests afterwards – posing for photos and autographing All Blacks items. As a reminder of the event, guests were presented with a book, Legacy – 15 Lessons in Leadership: What the All Blacks Can Teach Us About the Business of Life, by James Kerr. AIG is the major global sponsor and official insurance partner of New Zealand Rugby, which includes the All Blacks. The rugby legends played the Wallabies the following evening at ANZ Stadium in the first Bledisloe Cup match, and were beaten 27-19. The second cup match at Eden Park in Auckland a week later saw the All Blacks exact revenge with a display of power and teamwork, winning 41-13 and retaining the cup for the 13th consecutive year.

Celebrating a company milestone? Holding an event? Email to find out more 78


October/November 2015

Talk to insurancenews as part of your planning. We can help you make the most of it.

INMAG OCT 15_page layouts 2/10/2015 12:23 pm Page 91

Reinventing Broking.

CBS Mobile The ideal companion for insurance professionals constantly on the road.


INMAG OCT 15_page layouts 2/10/2015 1:24 pm Page 80


Old meets new at Claims Convention It was a case of old meets new at the Claims Convention in Sydney in August. Hosted by the Australasian Institute of Chartered Loss Adjusters (AICLA) and the Australia and New Zealand Institute of Insurance and Finance, the annual event attracted almost 250 claims specialists and loss adjusters. The experts networked over drinks and dinner at Doltone House after a full day of talks about driverless cars and other emerging risks that will shape the new world order. An illusionist provided the evening’s main entertainment at the venue, whose old-world interior design of five-metre high ceiling with crystal chandeliers and unparalleled views of Hyde Park proved a highlight of the convention. In keeping with the theme of “Meeting the Challenge”, topics discussed at this year’s convention were designed to help delegates “continue to learn and keep up with changes within the industry and society”, AICLA President Michael Collins says. The convention was held at the Sofitel Sydney Wentworth.



October/November 2015

INMAG OCT 15_page layouts 2/10/2015 12:22 pm Page 81



October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:23 pm Page 82

peopleNEWS Quill Club charity lunch draws record crowd A record 384 people attended this year’s charity lunch day hosted by the Quill Club in Melbourne in August, which raised $28,000 for Parkinson’s Victoria. The amount raised was $10,000 up on last year’s event. “I am really pleased with all the support we are getting from the insurance industry,” said Club Secretary Tony Carmusciano, pictured left, who is also Principal of Woodridge Insurance Services. In the past few years, the club has increased in popularity by changing from male-only membership and encouraging professional development through attendance at lunches. “We have lowered the age of members by 20 years in the past three years,” he says. The Quill Club is an insurance industry-based group established in 1977 to bring together industry professionals for education and networking. It meets every month and concentrates its fundraising activities on charities that receive little or no support from governments. Mr Carmusciano was presented with a Golden Quill Award at the lunch for services to the organisation. Only four of these awards have been handed out in the club’s 37-year history.



October/November 2015

INMAG OCT 15_page layouts 2/10/2015 12:23 pm Page 83

Some people just like to lead At LIU, claims come first. Our highly rrecognised ecognised claims team ar are e as proficient proficient at assessing risk as they are are in managing claims. It’s It’s this in-depth knowledge of each risk that ensures ensures their claims response response is pragmatic, fast and well-communicated. For claims service that puts you ahead, contact LIU.

LIU. The People, The Products, Products, The Capacity Capacity. www

INMAG OCT 15_page layouts 2/10/2015 12:23 pm Page 84

INMAG OCT 15_page layouts 2/10/2015 12:23 pm Page 85


Underwriting expo scores in Adelaide The Underwriting Agencies Council’s (UAC) annual South Australian Underwriting Expo took place on a gloomy and wet Adelaide day in August, but underwriting agencies from around Australia provided plenty of warmth for those local brokers who braved the rain and wind. The event was held at the historic Adelaide Oval, and while the weather dampened down the number of brokers attending compared with previous events, those who made it into the expo hall found plenty to interest them. The day began with a Young Professionals breakfast organised by the National Insurance Brokers Association. The expo included a complimentary lunch in the expo hall, which was sponsored by Hollard Australia Group.


October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:23 pm Page 86


Insurance leaders meet rising stars An “A-list” line-up of insurance leaders attended this year’s Young Professionals Luminaries Dinner in Sydney, hosted by the New South Wales chapter of the Australian Insurance Law Association (AILA). They included Steadfast Managing Director and Chief Executive Robert Kelly, Allianz Managing Director Niran Peiris and Berkshire Hathaway Specialty Insurance Australasia President Chris Colahan, among others. About 120 people attended the dinner, held at Centennial Park. Each luminary brought with them a young “rising star” from their company, so there were 60 luminaries and 60 rising stars. NSW AILA President Angus Kench told Insurance News the progressive dinner was a great success, with all guests moving tables for each course. “It gives everyone a chance to mingle. The chief executives love it because it gives them a chance to get to know the young people, and the young people love it because they get to meet some pretty significant leaders in the game.”



October/November 2015

INMAG OCT 15_page layouts 2/10/2015 12:23 pm Page 87


The Wise alternative

Recent changes in the motor fleet and heavy motor market means we must remind you that Berkley Insurance Australia is the Wise Alternative for your Motor Fleet and Heavy Motor clients. In our first full year operating in the motor space we have: - Written over 1̪00 policies - Insured ʐʗʆʓ ̮000 vehicles - Managed hundreds of claims worth more than $2m to the satisfaction of our brokers and clients Our claims management process, in partnership with Gallagher Bassett claims services and AAMC Accident management services, has proven to be incredibly efficient in achieving positive results for our Insured customers and their brokers. So if you are looking for the Wise Alternative for your motor fleet and heavy motor clients then contact one of our experienced motor underwriters in your state!

Get in touch with one of our Motor Underwriters today! NSW / ACT Paul Macdonald 02 9275 8557

VIC / TAS Tim Moore 03 8

QLD / NT Barry Ung 07 3220 9910

WA / SA Richard Dettmer 08 9380 8326

Contact: Local call: 1300 800 772 Berkley Insurance Australia is a registered business name of Berkley Insurance Company ABN 53 126 559 706 an APRA authorised insurer. Australian Financial Services Licence 463129.

INMAG OCT 15_page layouts 2/10/2015 12:23 pm Page 88

peopleNEWS Ausure conference provides food for thought More than 220 insurance professionals – with a thirst for knowledge and a commitment to help hungry schoolchildren – attended Ausure Insurance Broker’s conference in Darwin. The event took place at the Doubletree by Hilton in August, and included an interactive trade exhibition of 40 insurers, underwriting agencies and premium funders. Top-notch keynote speakers and industry representatives provided stimulating content over two days, and the Ausure annual awards were presented at a gala dinner on the final night. All conference delegates were invited to contribute a bag of groceries to the Food Bank NT Breakfast Program as part of Zurich’s local community initiative. Ausure’s General Manager Distribution Graeme Lilley says support for the charity was overwhelming. “The event providing the perfect setting for [authorised representatives] and sponsors to network and have some meaningful discussions,” he tells Insurance News. “Our family culture has continued to play a dominant part in our conference and is something we never wish to change, no matter how big we get. “A big thanks to all the 40 insurance sponsors for supporting the event and a very special thanks to our gold sponsors CGU, NTI and QBE.” The next Ausure Conference will take place in Las Vegas during August or September next year.



October/November 2015

INMAG OCT 15_page layouts 2/10/2015 1:24 pm Page 89



October/November 2015


INMAG OCT 15_page layouts 2/10/2015 12:23 pm Page 90

maglog »

Sam Pentecost Contributor

DELANEY KELLY GOLDING DIRECTOR MARY Kelly (above) reckons she’s “not much of a sailor”, which is a bit hard to believe when you see the sailing trophies she’s picked up over the past few years. The one she’s holding in the picture is the trophy for winning Cruising Division 1 at the Hamilton Island Race Week in August. Mary is the wife and right hand of Steadfast’s peripatetic Managing Director and Chief Executive Robert Kelly, who counts sailing among his passions. But building the Steadfast empire has left little time for on-water activities, and the Kellys’ gorgeous sailing yacht, Virago II, was feeling a bit neglected when Mary suggested in 2013 they should enter it in the Hamilton Island race series. The idea was that she would organise everything involved with looking after the crew and moving their 15.5-metre racing thoroughbred to the Whitsundays. That included the delivery trip to and from Sydney – a 3000km odyssey. Mary, it transpired, would travel the whole distance and be very much more involved in the races than she might have originally envisaged, while Robert would fly in to take part in the actual racing. What has in fact happened is that he’s dropped in for a couple of days before flying off again on Steadfast business, leaving Mary to get involved in the whole event. And she has thrived. It says a lot about her attitude to life that Mary’s role aboard Virago II, apart from overseeing everything, is to act as “sewer-rat”– the crewmember who pulls the giant spinnaker with the Steadfast logo down below decks. “We did the first year for fun,” Mary says. “We concentrated on doing better the next year, and this year we went up there to win.” And win they did. Robert, needless to say, is tickled pink and swears he’ll be up there next time for more than a couple of days. Yeah, right. 90

Insurance is the most family-oriented industry around. That’s a big statement, but consider the following evidence. How many times do you attend an industry function and end up chatting to the son, daughter, partner or cousin of someone in the industry you already know? And how many siblings or various generations of the same family work in separate companies? See what I mean? Insurance News has previously run articles on brokers whose offspring have joined them in the business, but I wonder if we could stretch it to three generations of the same family? Although she’s cheating a bit age-wise, Allan Manning swears his granddaughter Audrey, is the third generation of the Mannings to work in the family firm, LMI. Her dad Steve and mum Chantelle are already fixtures. Fair enough. She attended the NIBA Convention in August aged eight months, and by the end of the year Allan says she’ll have attended a total of five conferences and will qualify for her Tier 1 in broking. Doubtless as soon as she finishes uni 22 years from now Audrey will join the company fulltime. Allan might be starting to think about retirement by then. Continuing on the family theme, what’s in the water at the AIG marketing department? National Marketing and Communications Manager Lisa Rose is on maternity leave until January, and is the very happy mum of eight-month-old Finn. Shortly after Lisa went on leave her replacement in the role, Julie-Ann Wigham, fell pregnant and now she’s on maternity leave as well. Lisa’s former assistant Nancy Fetouh is also on maternity leave, and Nancy’s replacement Louise Templeton is now pregnant and leaving work next month, when Nancy returns. Not surprisingly, Chief Executive Noel Condon is now referring to his marketing department as the maternity ward.


October/November 2015

INMAG OCT 15_page layouts 2/10/2015 12:22 pm Page 79

REACHING NEW HEIGHTS IN STRATA INSURANCE QUS and AIG have partnered together to deliver superior value and stronger support to strata insurance brokers.

This new partnership with AIG enables QUS to provide even stronger support to the Australian broker market, through an increase in risk capacity and location appetite. For more information on our new product enhancements or for full details regarding this switch, visit

1300 814 011 AFSL 321877

In Australia, products and services are written or provided by AIG Australia Limited ABN 93 004 727 753 AFSL 381 686. Not all products and services are available in all jurisdictions and are subject to actual policy language and underwriter discretion.

INMAG OCT 15_page layouts 2/10/2015 12:23 pm Page 92

After a lifetime of surfing, a six metre fall in Thailand changed Sam’s life forever. Our team was committed to getting her home safely to Sydney.

Watch part 1 of Sam’s story here:


QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239 545