Pension trustees are now willing to accept that alternative assets have both a key role to play in reducing portfolio risk and offer the chance of delivering attractive returns, according to a poll by Aon Hewitt.
Indian regulator lacks autonomy
India's Insurance Regulatory and Development Authority (IRDA) has been described as insufficiently independent in a study by the World Bank and International Monetary Fund. The study also stated that the reserve powers of the central government "potentially detract from the supervisor's powers and independence".
The report was the first by independent assessors and went on to say that IRDA does not have risk-based early-warning systems in place to ensure the health of the insurance industry. The ratios measured (solvency margins) appear to be largely generic rather than based on emerging experience, it added.
The study criticised the government guarantee given to the policyholders of India's main life insurer, the Life Insurance Company, and said that it would be useful only during a time of global uncertainty. It recommended that the value of the guarantee should be included in product pricing.
It recommended that: "Relevant standards should be produced and ideally an Actuarial Standards Board established. In addition, there should be a plan to introduce specialised certification of actuaries, particularly for non-life business."
FCA to address data collection
The Financial Conduct Authority has said that it recognised that the way in which the Financial Services Authority (FSA) collected data from firms was poor and that it will address the "data and information legacy it inherited". The regulator published a data strategy paper on how it will manage and use the data collected from firms. The FCA said it recognises that in the past the FSA did not always request data from firms in a "clear and effective way".
It said: "We have listened to the firms we regulate, who told us there are a number of failings, including: too many requests for data and information without clear information about why it was needed; unreasonable timescales, resulting in firms needing to divert resources to meet our requests; and a failure to communicate what the data and information was used for, leaving firms questioning whether it was used at all."
The FCA also said it recognises that the FSA did not have the internal checks to identify what was being asked of firms, and lacked the necessary technology to store and use the data it had appropriately.
Capital influx puts market at risk
A flood of investment capital into structures linked to insurance could lead to instability and spark a new financial crisis if left unsupervised, the chairman of Lloyd's of London has warned. This has allowed insurers to spread risk and drive down prices.
John Nelson, head of the historic insurance market, said the trend helped fund expansion to keep pace with growing economies and rising demand. But he warned that, without proper supervision, the fund flows could end up undermining the stability of the insurance sector.
"Some of the structures being used could undermine the qualities of the insurance model, which provides a secure and reliable risk transfer market for specialist risk, and indeed the reliable payment of claims," Nelson said. He added that the industry and financial regulators must be "extremely watchful".
"We must make sure that the capital remains properly attached to the underlying transaction so that the risk is properly assessed, properly priced and properly supervised," he said.
These statements came at a time where reinsurers and brokers have made comments for the Monaco reinsurance conference that demand for catastrophe cover is expected to rise by around 50% by 2020. Global insurance broker Willis has also warned that $40bn (£25bn) of traditional capital is likely to be replaced by new forms of capital.
Settlement ends AIG litigation
A US judge has approved a $72m (£45m) settlement to resolve shareholder claims that Berkshire Hathaway's General Re Corp engaged in a deal that helped to inflate the reserves of American International Group (AIG).
Approval of the settlement brings to an end nearly a decade of litigation surrounding AIG's accounting practices and brings the total of approved settlements to more than $1bn (£6bn).
In April, a related $115m (£72m) settlement with AIG former chief executive Maurice Greenberg, three other executives and two of Greenberg's companies was approved. A $725m (£455m) settlement with AIG and a $97.5m (£61m) accord with accounting firm PricewaterhouseCoopers has also been agreed.
The lawsuit, led by two Ohio state pension funds, alleged that AIG and Gen Re violated federal securities laws through a $500m (£314m) reinsurance transaction in 2000.
LARGE LOSSES:
US$400m
Estimated total economic losses from the storms that hit the US states of Colorado, Wyoming and Montana in September
Thunderstorms, United States, September
Powerful thunderstorms swept across parts of the Rockies and Plains in early September, causing damage in several states.
Montana was worst affected, with a wind gust of 104mph (167kph) recorded in Beaverhead County. Hailstones the size of golf balls were noted elsewhere in the state. As well as property damage, agriculture was heavily affected, especially wheat, barley and potato crops. Losses are expected to be in the region of US$50m (£31m).
At least eight tornadoes touched down (six of which were in Colorado), although most of the damage resulted from hailstones the size of a softball and flooding in north-eastern Colorado. Thousands of homes, businesses, schools and vehicles were affected. Agriculture was severely damaged as well. Total economic losses were estimated at US$400m (£251m), with insured losses over US$225m (£141m).
