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PowerPoint Slides for Professors - PPT Presentation

Spring 2010 Version This file as well as all other PowerPoint files for the book Risk Management and Insurance Perspectives in a Global Economy authored by Skipper and Kwon and published by Blackwell 2007 has been created ID: 718918

nonlife insurance market insurers insurance nonlife insurers market leading liability 2007 markets policies business largest property table risks lloyd

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Slide1

PowerPoint Slides

for ProfessorsSpring 2010 Version

This file as well as all other PowerPoint files for the book, “

Risk Management and Insurance: Perspectives in a Global Economy

” authored by Skipper and Kwon and published by Blackwell (2007), has been created

solely

for classes where the book is used as a text. Use or reproduction of the file for any other purposes, known or to be known, is prohibited without prior written permission by the authors.

Visit the following site for updates:

http://facpub.stjohns.edu/~kwonw/Blackwell.html

.

To change the slide design/background,

[View]

 [Slide Master]

W. Jean Kwon, Ph.D., CPCU

School of Risk Management, St. John’s University

101 Murray Street

New York, NY 10007, USA

Phone: +1 (212) 277-5196

E-mail:

Kwonw@stjohns.edu

Slide2

Risk Management and Insurance: Perspectives in a Global Economy 22. Nonlife Insurance

Click Here to Add Professor and Course InformationSlide3

Study PointsPolicies sold by nonlife insurance companies

Selected nonlife insurance marketsNonlife insurance issues3Slide4

Policies Sold by Nonlife Insurance Companies4Slide5

Policies SoldProperty insurance policies

Life insurances policiesPackage insurance policies5Check also Table 22.1 for OECD classificationSlide6

Property Insurance Policies – Common AspectsNature and property

Real (immovable) vs. personal (movable) propertiesTangible vs. intangible propertiesProperty lossesDirect vs. consequential (indirect) lossesNature of covered perilsNamed-peril policyAll risks policyBasic formBroad formSpecial form

6Slide7

Property Insurance Policies – Common AspectsNature of indemnificationActual cash value (ACV)

Replacement cost (reinstatement value)Economic (use value) of propertyMarket valuePricingCharacteristics of the covered property, such as construction, occupancy, protection, exposure and locationScope of insurance requestedLimit of insurance along withDeductible, coinsurance, and other optional coverages

7Slide8

Property Insurance Policies – TypesFire insurance

Commercial property insuranceConsequential loss insuranceIndustrial all-risk insuranceContractors’ (builders) all-risk insuranceBoiler and machineryFidelity/crime insuranceComputer fraud insuranceEmployee dishonestyExtortionForgery or alterationTheft and robbery

8Slide9

Property Insurance Policies – TypesInsurance for self-propelled propertyInsurance for motor vehicles

Insurance for shipsInsurance for aircraftInsurance for property being transportedCargo insuranceInsurance for transportable propertyInland marine insurance in the U.S.9Slide10

Liability Insurance PoliciesGeneral (public) liability insurance

Automobile (motor) liability insuranceProduct liability insuranceWorkers’ compensation insuranceEmployer’s liability insuranceProfessional liability insuranceErrors and omissions insurance10

Refer to Chapter 10 (Legal Environment) for tort and Chapter 12 for MNC-related liability risks such as product liability.Slide11

Package Insurance PoliciesHomeowner's (householder’s) insurance

Businessowner’s insuranceCommercial multi-peril insurance11Slide12

Selected Nonlife Insurance Markets Internationally12Slide13

The Americas – the U.S.The importance of understanding the U.S. market

World’s largest nonlife market for decadesHighly competitiveExperimentation in product development, methods of distribution and general business practicesThe size and complexity of many U.S. risks demand the capacity and expertise of the global insurance and reinsurance markets.FeaturesRanks second in per capita expenditures and first on premiums as a percentage of GDPThe U.S. per capita spending for private

health insurance the world’s highest

U.S. businesses and families spend more on liability insurance than do the citizens of any other country

13Slide14

The Americas – the U.S.Features (continued)A fast growth in recent years, especially after September 2001

A market prone to natural catastrophic lossesMore than 2,500 nonlife insurance companies compete.About 800 or so insurers are independent.Products and distributionsVirtually any type of nonlife insurance is available.Insurers use multiple distribution channels to reach their customers.Brokers also figure prominently in the market.14

Table 22.2Slide15

Distribution of Premiums in the U.S. (Table 22.2)

15Slide16

Distribution of Premiums in the U.S. (2006)

16Slide17

The Americas – the U.S.IssuesState regulation

Market consolidationLoss reserve adequacyImpact of catastrophes17Chapters

5 & 6

discuss

catastrophes.

Chapter

15

discusses

catastrophe RM. Slide18

Leading Nonlife Insurers in the U.S. (2007)18Slide19

Leading Nonlife Insurers in Canada (2007)19Slide20

The Americas – CanadaFeaturesShares some similarities with the U.S. market

As noted earlier, Canada maintains a dual regulatory system.Nonlife insurance accounts for 36% of the Canadian insurance market.Products and distributionsThe agency form of distribution dominates the Canadian nonlife insurance market.IssuesThe government continues to regulate rating of automobile insurance premiums.20Slide21

The Americas – Latin AmericaFeatures

Two groupsThe Caribbean (developed insurance markets)Other countries (including Argentina, Brazil, Chile, Colombia, Mexico, and Venezuela)A high growth potentialMany Latin American governments have privatized insurers and opened their marketsto foreign interests.Products and distributionsTraditional intermediaries (brokers and agents) and employees of insurance companies dominate the marketsBancassurance introduced in selected countries

21Slide22

The Americas – Latin AmericaIssuesEconomic crisis

Many Latin American insurers have comparatively high expenses, making their products less attractive.22Slide23

Leading Nonlife Insurers in Brazil (2008)23Slide24

Leading Nonlife Insurers in Argentina (2007)24Slide25

EuropeFeaturesConsists of big three markets – Germany, the U.K. and France

Rich history and tradition that are reflected in the marketsGained more attention globally with the creation of a single E.U. marketBancassurance primarily in life insurance25Slide26

Europe – Germany Features

The world’s second largest nonlife insurance market233 insurers and 47 reinsurersCreation of Bundesanstalt für Finanzdienstleistungsaufsicht (the Federal Financial Supervisory Authority or BaFin) in 2002Products and distributions

Workers’ compensation as part of the government’s social insurance program

Distribution dominated by exclusive agents

Guaranteed renewal features common in many nonlife insurance contracts

Issues

Coping with the E.U. single market policy

26Slide27

Leading Nonlife Insurers in Germany (2007)27Slide28

Europe – the U.K.FeaturesInsurers generate business from accepting domestic risks and overseas risks.

Table 22.3The world’s third largest nonlife insurance market886 insurers including 50 composite insurersForeign-owned companies generated about 40 percent of premiums writtenDistinctive markets or marketplacesThe London marketThe Lloyd’s of LondonInternational Underwriting Association of London

28Slide29

The London MarketAn international insurance centerSpecializes in large accounts and target risks such as MAT and hard-to-place business

Comprises insurance and reinsurance companies and Lloyd’s syndicatesIt is a subscription market in that the coverage needs are often satisfied by a group of insurers or reinsurers on a collective basis.Insurance brokers play a crucial role.29Slide30

Lloyd’s of LondonA marketplace for 64 syndicatesNames

Underwriting membersGenerated about one-half of their business from direct insurance for risks situated mainly in North America and EuropeReconstructed to regain reputation and financial strengthAdding limited liability corporate and individual membersCreation of Equitas to manage run-off nonlife liability business 30Slide31

Insurance Transactions at Lloyd’s (Figure 22.1)

31Source: Lloyd’s of London [www.Lloyds.com]

CLIENTS

Commercial

Personal

Lloyd’s Brokers

Service Companies

FRANCHISEE

Managing agents

Syndicates

Member’s agents

MEMBERS

Corporate groups

Private individuals (unlimited liabilities)

Private individuals (limited liabilities)

Business Flow

Capital Flow

FRANCHISOR

Lloyd’s of LondonSlide32

Nonlife Insurance in the U.K. (Table 22.3)

32Slide33

Leading Nonlife Insurers in the U.K. (2007)33Slide34

Europe – France FeaturesThe fifth largest nonlife insurance market globally

470 insurers, including AXA and GroupamaProducts and distributionsCompany employees and agents dominate.Brokers still strong in commercial businessBancassurance not as successful as in life business34Slide35

Leading Nonlife Insurers in France (2006)

35Slide36

Asia-PacificFeaturesCountries in various economic development stages

Middle East probably with least developed insurance marketsChina and India continue to growThe potential impact of WTO agreements in several countries36Slide37

Asia-Pacific – JapanFeaturesThe world’s fourth largest nonlife insurance market

But, the local market is heavily skewed toward the life businessProducts and distributionsCompulsory automobile liability insurance (CALI) and voluntary automobile insurance account for more than 50% of the nonlife insurance business.  Table 22.4Offer maturity-refund policies, which get less popular mainly due to the higher cost as compared to non-refund policiesThe agency system generates 90% of direct premiums.Mainly femalesBrokerage systems emerge.

37Slide38

Nonlife Insurance in Japan (Table 22.4)

38Slide39

Nonlife Insurance in Japan (Table 22.4)(Net Premiums by Line, Updated)

39Slide40

Leading Nonlife Insurers in Japan (2006)

40Slide41

Asia-Pacific – JapanIssuesReforms in the financial services market

Discussed in the life insurance chapterCompetition in the third sectorDominance of a few local companies which have become bigger through a series of mergers and acquisitionsFigure 22.2Management of catastrophic loss exposuresEarthquakes and earthquake insurance41Slide42

Mergers of Insurance Firms in Japan (Figure 22.2)

42Source: Japan General Insurance Association (2005)

Several new mega mergers going on in 2010Slide43

Asia-Pacific – ChinaFeaturesThe nonlife insurance market grew an average at 10.8% per annum between 1993 and 2003

But, still with low consumption and market penetration ratiosProducts and distributionsNew products are being addedIssuesContinuous market reformsFull compliance with the WTO accession agreementTransparency43Slide44

Leading Nonlife Insurers in China (2007)44Slide45

Asia-Pacific – IndiaFeaturesThe world’s 27th largest for 2005

Low insurance penetration and consumptionThe market opened in 1999 following the creation of the IRDAPublic insurers dominateProducts and distributionsNew products being addedIssuesRestriction on foreign ownership of local insurance companiesStringent investment regulation

45Slide46

Leading Nonlife Insurers in India (2007)46Slide47

Asia-Pacific – AustraliaFeaturesThe world’s 10th largest

A sophisticated nonlife market composed of 112 insurers and 21 reinsurersInsurance business locally and from overseasProducts and distributionsDomestic motor vehicle insurance holds the largest share47Slide48

Leading Nonlife Insurers in Australia (2008)48Slide49

AfricaFeatures

Extremely low insurance consumption and penetration (exception: South Africa)Northern Africa relatively activeProducts and distributionsMinimum in most countriesIslamic insurance increasingly available in Northern AfricaIssuesNumerous economic, social and political problems in multiple parts of the continent

Catastrophes – earthquakes, floods, draughts and cyclones

Compulsory reinsurance cession to state-owned reinsurers, African Re or both

49Slide50

Leading Nonlife Insurers in South Africa (2006)50Slide51

Leading Nonlife Insurers in Egypt (2006)51Slide52

Leading Nonlife Insurers in Morocco (2007)52Slide53

Nonlife Insurance Issues53Slide54

Nonlife Insurance IssuesLiberalization and deregulation

Coping with catastrophesSolvencySolvency IIRBC54Slide55

Discussion Questions55Slide56

Discussion Question 1This chapter discussed several key issues that affect nonlife insurance operations on a global basis. How do these issues interact with each other and how could they affect the way that corporations manage their risks?

56Slide57

Discussion Question 2Compare the nonlife liability insurance markets in developed countries and developing countries with respect to the following:

Types of insurance productsGrowth ratesRegulatory environments57Slide58

Discussion Question 3Distribution systems are a key component of any nonlife insurance market.

Compare the distribution systems used in two countries of your choice or in the U.S. with those of Japan.In your opinion, will nonlife insurance be transacted using the “information highway”?58Slide59

Discussion Question 4Privatization and deregulation are “mega-trends” in many of the nonlife insurance markets in the developing world. Discuss the challenges facing insurance executives of established domestic insurers in those markets.

59