Weekly Wrap: Major insurer Suncorp has ratings affirmed

Weekly Wrap: Major insurer Suncorp has ratings affirmed | Insurance Business

Weekly Wrap: Major insurer Suncorp has ratings affirmed
Major insurer has ratings affirmed
Suncorp Group (SGL) has had its ratings affirmed by global ratings agency Fitch, despite a recent dip in profits.
Fitch affirmed both the long and short-term issuer default ratings(IDR) of the business at ‘A+’ and ‘F1’ respectively.

The ratings agency also affirmed the ratings of Suncorp’s main non-life insurance operating subsidiary AAI Limited with an IDR at ‘A+’,  Insurer Financial Strength (IFS) rating at ‘AA-‘ and subordinated debt at ‘A.’
The outlooks for both are stable.

“The affirmations reflect SGL's and AAI's strong brands and franchise, solid operating performances, comprehensive reinsurance programme, robust capital ratios, moderate financial leverage, conservative investment approach and historically sound non-life reserving,” Fitch noted in a statement, according to Reuters.

“The group has maintained strong competitive positions in core markets, despite increased competition and new participants. SGL's simplification and optimisations programs have supported stronger group performance over 18 months to the financial half-year ended-2015 (1H16) compared to the previous three years.”

The ratings agency made mention of the recent profit dip the insurance business experienced but noted that other aspects of the Group helped lessen the impact.

“Earnings were below group expectations, in 1H16 mainly due to claims inflation and higher natural hazard losses in the non-life division. However, the life division continued to experience positive claims and lapse experience and the bank's contribution to earnings continued to improve,” The statement continued.

Looking ahead, Fitch stressed that “positive rating action is unlikely,” due to the large banking exposure of the Group and a “severe deterioration” in the long-term results of the non-life business would be needed for a downgrade.

“Key rating triggers that could lead to a downgrade include a severe deterioration in the non-life operations' long-term results, particularly if the deterioration coincides with weaker banking or life operations performance, damages franchise value or leads to lower capital ratios. Profitability in the non-life operations remains key to the group's ratings.

“Ratings could be downgraded should earnings be consistently below industry levels and, specifically given the group's high ratings, should combined ratios exceed 100% and insurance trading ratios fall below 10% over an extended period.”

Australia rises in global insurer ranking
Australia jumped from 14th position to 9th, in the 2016 FM Global Resilience Index conducted by international risk management and insurance firm FM Global.

Using vetted data from sources such as the International Monetary Fund, World Bank, World Economic Forum and FM Global’s own database of more than 100,000 insured locations, the study measured nine core drivers of supply chain risk, grouping them into three categories: economic, risk quality or supply chain factors.

Australia scored in the top 10 countries in the world with respect to both the economic and risk quality factors and ranked well in regards to both its economic productivity (9th) and in its control of corruption (10th).

Because supply chain disruption is one of the leading causes of business volatility, the index is designed to help executives evaluate and manage the risk to their supply chain by determining the nine key drivers of risk in the listed territories.

“By giving executives easy access to authoritative information on factors that could disrupt their supply chains, the FM Global Resilience Index provides a simply way to analyse the potential for business risk and drive better decisions,” said Bret Ahnell, executive vice president at FM Global.

“Resilient supply chains give businesses a distinct advantage by protecting their operational integrity, revenue stream, market share and shareholder value. A fragile supply chain, on the other hand, often harms the company involved, sometimes for the long term.”
How did other countries fare?

Norway lost the top overall spot to Switzerland, a move put down to declining oil prices, and Kuwait experienced one of the biggest declines, dropping nine places from 50 to 59.

Meanwhile, Armenia and Malawi were two of the biggest risers in the Index since their consumption of oil had fallen meaning the countries were less exposed to oil market dynamics.

New Zealand ranked 15th in the 2016 rankings, dropping two places from 13th position last year.

The lowest-ranked country in 2016 was Venezuela (130th) for the second year in a row, followed in ascending order by the Dominican Republic, Kyrgyz Republic, Nicaragua, Mauritania, Ukraine, Egypt, Algeria, Jamaica and Honduras.

“Venezuela’s position at the bottom of the index reflects its exposures to the twin natural hazards of wind and earthquake, perceptions of lack of control of corruption and poor infrastructure, as well as ill-perceived local supplier quality,” the report said.

France (19th) and the UK (20th) retained their positions from last year, while Germany (4th) rose by two places.

The Brexit referendum, scheduled for 23 June, was said to be likely to affect the country’s future ranking if the vote to leave the European Union wins.

The US was divided into three regions, with the central US ranking 7th, Eastern US ranking 11th and Western US 21st.

Global insurers come together over natural disasters
Global insurance executives have come together in an insurance forum to help reduce the impact of natural disasters and climate change in developing markets, according to a report by Financial Times

The Insurance Development Forum (IDF) was launched in Paris last year in a climate change summit in aims of connecting the insurance industry and development agencies. It brought together diverse institutions including the United Nations, the World Bank, government agencies, and insurance companies and brokers.

Comprising IDF’s steering group are Bank of England governor Mark Carney, Lloyd’s of London chief executive Inga Beale, Munich Re chairman Nikolaus von Bomhard, and incoming Swiss Re chief Christian Mumenthaler. Also among IDF’s rank of executives are Axa’s Denis Duverne, Scor’s Denis Kessler, and chief executives John Haley of Willis Towers Watson and Gregory Case of Aon.

Stephen Catlin, of XL Catlin, co-chairs IDF along with former New Zealand prime minister Helen Clark, and World Bank’s Joaquim Levy.

“I felt for a long time that our industry has been pretty hopeless at speaking with a single voice,” Catlin said to Financial Times. “I didn’t get turned down by anyone, which tells you something. There’s a lot of common interest in this, which is why so many chief executives are involved. We all feel that the product we sell has tremendous social value.”

Emerging countries vulnerable to natural disasters and climate change have long suffered from lack of coverage. The Nepal earthquake, for example, which according to Swiss Re is the biggest natural disaster of 2015, was not one of the top six insured catastrophe losses of that year.

Catlin told the Financial Times that the IDF will look at a range of options to ensure better coverage for those that need it most.

“It’s about giving more cover for emerging nations, especially for elemental perils which are on the increase,” adding that “solutions range from microinsurance right up to governments, regulators and banks seeing the benefit of having asset protections against catastrophe.”