The downstream insurance market continues to harden in Asia, with losses in countries, including Thailand and Korea, notes according to a new report by Willis Towers Watson (WTW), a leading global advisory, broking and solutions company. In the report titled “ESG: transforming energy’s risk landscape Energy Market Review 2020”, released yesterday, WTW says that the gap in pricing between Asian and London-based markets is reducing significantly, especially with a majority of the Asian markets making headquarter referrals before underwriting a risk. There are also elements of domestic hardening in countries like Korea, Taiwan and the Philippines amongst others. At the same time, the downstream market in China remains competitive for domestic risk following the COVID-19 lockdown and pandemic situation, which has affected supply and demand in the oil & gas industry. Upstream market On the other hand, the Asian upstream insurance market remains stable in respect of rate increases for operational business. However, there are significant increases in upstream construction rates. The Asian upstream construction market remains more competitive than their London counterparts for smaller projects with an estimated contract value of up to $500m. This hardening in upstream construction may be short-lived in Asia as volatile oil prices are causing project cancellation and delays. Such occurrences will put pressure on the markets regardless of their new business targets with less expenditure available. It will also create competition amongst the insurance markets to underwrite whichever projects that proceed. Mr George Nassaouati, head of WTW Natural Resources at WTW in Asia, said, “We cannot underestimate the immediate challenge faced in the loss of demand as a result of COVID-19 and the impact of the recent oil price war, notwithstanding the agreement now reached by OPEC+ to cut production by 10% of global supply. “While it is still too early to forecast exactly how these twin factors will play out in the months ahead, the potential effects on the energy industry are obvious; reduced capital expenditure, a reduction of exploration and production activities, lower refining margins and lower business interruption valuations. It will also have a knock-on effect on premium income levels for an insurance market that remains unprofitable for most lines of business.” He said that while the world will eventually recover from COVID-19 and the energy industry will recover from the oil price war, one issue that is here to stay on a permanent basis is climate change, and the transformed risk landscape that now confronts the energy industry. “In short, today’s energy businesses must commit to incorporating ESG standards and climate change into their risk mitigation strategies in order to ensure a sustainable future,” he said. Original Link by the Asia Insurance Review: https://www.asiainsurancereview.com/News/View-NewsLetter-Article/id/61255/Type/eDaily/Asia-Downstream-insurance-market-hardens-upstream-segment-stays-stable

COVID-19 for Insurers: 47 Questions to Ask Yourself by Ernest & Young LLP

A month after the eruption of Taal volcano, insurance companies have begun receiving claim notices from their clients affected by the calamity. The Philippine Insurers and Reinsurers Association said seventeen of its members have reported receiving 157 notices of claims amounting to an estimated P36 Million worth of damage to homes, businesses and motor vehicles. These claims are now being processed, with some of them already paid. Among the companies that reported receiving claims for the Taal eruption, one insurer had a high of more than P14 million, half of which were from damages to property, while the other half were from other forms of insurance such as casualty and business interruption.  They also received a P258,000 worth of claims for motor vehicle damage. The insurer with the second highest number of Volcanic Eruption claims logged in at more than P3 million in property damage and about half a million pesos in motor car claims. Those who reported receiving claims for motor vehicle damage were Commonwealth Insurance, Stronghold Insurance, SGI Philippines Insurance, and Fortune General. PIRA Executive Director Michael Rellosa said 11 other member companies of PIRA sent them a report indicating that they have not received any notice of claims from their clients. “We are still awaiting reports from our other members, especially those who are into microinsurance. In natural calamities like this eruption, farmers and fisherfolk can really benefit from their microinsurance,” he said. Microinsurance is a type of insurance that caters to low-income sectors. It is usually sold via cooperatives and pays P5,000 as calamity benefit for incidents like floods, typhoons, earthquakes or volcanic eruptions. For commercial insurance, only those with Acts of Nature coverage for their cars are covered for the Taal eruption. And only those with specific coverage for volcanic eruption for their homes or businesses may be able to file a claim. Rellosa said there is an extra premium for insuring for volcanic eruptions, and the rate for this is never fixed and varies from one insurance company to another. Insurance companies compute this rate based on the property’s proximity to an active or dormant volcano, as well as the historical events related to such a volcano. “To make sure that you are covered for volcanic eruption, please check your insurance policy,” he said. For those who are covered, filing a claim only needs basic documentation to prove one’s ownership of the insured car or property, plus proof of the damage incurred. In most cases, these include pictures and certification from authorities that the area was among those declared by government as affected by the eruption. Insuring against a Catastrophic Peril such as flood, earthquake or typhoon or an additional peril such as volcanic eruption requires a deductible or participation fee. “The deductible for Acts of Nature for cars is the same as that of Own Damage and may vary depending on the insurance company. For typhoon, flood and earthquake claims in property insurance, it is often pegged at 2% of the affected item or a minimal amount, whichever is higher. For volcanic eruption, the deductible is never fixed and would be dependent on the underwriter.

When Taal volcano erupted on January 12, 2020, thousands of Filipinos suddenly began calling insurance companies to check if they are eligible to claim for losses they incurred either for their house, their car, or for their business. For many of them, however, their houses only have the basic Fire insurance policy which protects them in case of fire. It does not include volcanic eruption. The same was true for those who have businesses in places like Tagaytay. The insurance they had for business interruption did not include volcanic eruption. Michael Rellosa, executive director of the Philippine Insurers and Reinsurers Association (PIRA), said these cases stem from the mindset of many Filipinos that insurance is just unnecessary and just an extra expense. “In their bid to save up on premiums, they just settle for the ‘minimum’ insurance cover or those that are required. Usually, just a Fire insurance policy for the house, or the most basic Business Interruption cover for their business. They do not anymore include a cover for VE or Volcanic Eruption,” he said. “This same thing happened in 2009 when tropical storm Ondoy flooded many parts of Metro Manila. Car owners suddenly realized that their cars were not insured against so-called Acts of God,” Rellosa added. Those who have AOG cover for their cars were able to have their vehicles replaced or repaired from their insurance policies. For vehicle owners with AOG who incurred damages on their cars because of the Taal eruption, they are eligible to file claims with their insurance companies. They just have to show proof that the damage was indeed caused by the eruption and file the usual documentary requirements in making insurance claims. “Disasters like this Taal eruption really highlight our vulnerabilities, and these vulnerabilities are the reasons why we get insurance,” said Rellosa. For more information about non-life insurance, log on to www.pirainc.com or call your insurance provider.

You may have encountered the phrase “Acts of God” when reading about news on typhoons, floods, earthquakes, and volcanic eruptions. This refers to any event that is accepted legally as outside of human control. Though often used in insurance policies, the term was first seen in religious texts dating back to the 13th century. The French phrase “force-majeure" is its closest equivalent and refers to unavoidable accidents that cause a certain financial loss. We interviewed Mr. Michael Rellosa, executive director of the Philippine Insurers and Reinsurers Association (PIRA) to once and for all clarify this issue. Here is a basic Question-and-Answer guide to understanding AOG based on his answers. QUESTION: Is AOG a type of insurance? RELLOSA: No. AOG is a type of peril that may result in a loss. You buy an insurance for AOG. But AOG in itself is not a type of insurance. QUESTION Why blame God for damages caused by nature? RELLOSA: The insurance industry does not blame God when it calls typhoons, floods, earthquake,  and volcanic eruptions as AOG. It is just a nomenclature invented by legal experts in Western countries which was later adopted by the rest of the world. It is by no means a way of putting blame on anyone, much more God. QUESTION: Why still call it Acts of God? RELLOSA: In 2009, after the flooding caused by tropical storm Ondoy, the Philippine Insurers and Reinsurers Association (PIRA) which is composed of all non-life insurance companies in the country, has recommended the use of the phrase Acts of Nature (AON) in place of Acts of God. Many PIRA companies now use AON. QUESTION: Is Acts of God or Acts of Nature standard in insurance policies for homes and cars? RELLOSA: No. AOG or AON remains a standard exclusion in the Fire insurance of your home or the insurance for your car. You have to pay an extra premium for such additional peril. In motor car insurance, you get it as AOG which refers to typhoon, flood, earthquake and volcanic eruption. For property insurance, however, typhoon, earthquake and flood are combined as one peril while volcanic eruption is treated as another separate peril. This is done to give the insuring party the chance to evaluate his or her risks and decide on buying insurance only for those that he or she is exposed to. QUESTION: How much is the extra cost for AOG or AON? The cost is a minimum of 0.5 percent or half percent of the sum insured. So if you have a car that costs P1 million, you need to pay at least an extra P5,000 to insure it for AOG. It may look expensive at first glance, but if you think of the chances your car will be damaged by typhoon, earthquake, flood or volcanic eruption, that extra amount seems a very good investment. QUESTION: Can you buy insurance just for AOG without buying insurance for fire for your house or comprehensive insurance for your car? No. The AOG — which, for property insurance includes only typhoon, flood and earthquake — is just an add-on to the Fire policy or an add on to the Comprehensive Motor Car policy. For property insurance, you have to pay an additional rate of 0.15%. The rate for volcanic eruption, however, is not fixed and varies from one insurance company to another. Insurance companies compute this rate based on the property’s proximity to an active or dormant volcano, as well as the historical events related to such a volcano. QUESTION: What do I need to show to my insurer to make a claim for AOG? RELLOSA: The basic documentation to prove your ownership of the insured car or property, plus proof of the damage incurred. In most cases, these include pictures and certification from authorities that your area was indeed hit by the typhoon, earthquake, flood, or volcanic eruption. QUESTION: Do I have to pay anything when making a claim for AOG? RELLOSA: Yes. Insurers usually require a deductible or participation fee for your claim. The deductible for AOG is the same as that of Own Damage and may vary depending on the insurance company. For typhoon, flood and earthquake claims in property insurance, it is often pegged at 2% of the affected item or a minimal amount, whichever is higher. For volcanic eruption, the deductible is never fixed. FINAL NOTE: Insurance is a contract between the insured and the insurance company. As in all contracts, it is best to read what is included or excluded in the agreement to avoid confusion and misunderstandings when claims arise. If you have questions on anything about non-life insurance, visit PIRA’s website at www.pirainc.com or the Philippine Insurers and Reinsurers Association Facebook page.

For many years, the Insurance Commission (IC) has been a key player in every Filipino’s aspirations of financial security. Guided by its mandate to help provide financial risk protection, the Commission has relentlessly developed and implemented plans and policies for the insurance, pre-need, and health maintenance organizations (HMOs) industries in the country. Creating a competitive and inclusive environment that benefits all its stakeholders has led to accomplishing outstanding achievements as an institution. by the ASIA INSURANCE REVIEW

The Financial Stability Coordination Council (FSCC) held its 4th quarter meeting and assessed the possible consequences of the emerging synchronized slowdown in growth. Building on new results from the behavioral models designed by the FSCC Secretariat, evidence that the market has entered into a "risk-off" mode was considered. A "risk-off" condition describes a market situation when uncertainties have increased. As a result, some investors respond by tempering their risk appetite while more risk aggressive investors search for higher yields. "The Philippines continues to enjoy one of the highest growth rates in the world but the FSCC is taking the pre-emptive move of assessing the possible consequences of the global growth moderation," said BSP Governor and FSCC Chairman Benjamin E. Diokno. The Council also discussed its various communication initiatives that would raise awareness of financial stability to varied audiences. Various audio-visual presentations are being finalized and would soon be made available to the public. The FSCC is chaired by the BSP Governor and is composed of the Department of Finance, the Insurance Commission, the Philippine Deposit Insurance Corporation, the Securities and Exchange Commission as well as the BSP as member institutions. It is the venue for financial market authorities to identify, monitor, manage, and mitigate the build-up of system risk in the Philippine financial system.

The Philippine Insurers and Reinsurers Association (PIRA), announces the appointment of an educator and a retired banker as two new independent directors for the next three years,  Dean Rodolfo “Rudy” Ang and Ms. Carmela “Carlette” Pama, respectively. Dean Ang heads the Ateneo de Manila University’s Graduate School of Business while Ms. Pama has recently retired as Chief Risk Officer of the Philippine National Bank. The two are the first independent directors of PIRA since the association revised its bylaws in preparation for its bid to be a Self Regulatory Organization. PIRA Executive Director Michael F. Rellosa said Dean Ang and Ms. Pama will be assets to PIRA. “We are honored to have Dean Rudy Ang and Ms. Carlette Pama in our board. Their wisdom, experience, and network will surely be an asset to our association,” said Rellosa, a classmate of Ang’s in college. Dean Ang completed his undergraduate studies at the Ateneo de Manila University, earning a double degree, AB Communications and BS Management (Honors program), Magna Cum Laude, in 1983. He earned his MBA at Boston College in 1988, graduating number one in his class. He is a PhD candidate of the University of the Philippines, where he completed all of his academic requirements except his dissertation. Ms. Pama, meanwhile, is a Certified Public Accountant from the University of the Philippines. She has an MBA from New York University’s Leonard Stern Graduate School of Business and has over 30 years of experience in financial markets and information technology. She has worked for Citibank and Banco Santander in various positions of critical responsibilities and for PNB as Chief Risk Officer/Data Privacy Officer. Prior to her entry to PNB, she was Practice Manager of Oracle Consulting Services for the Philippines. Ms. Pama is the wife of retired Philippine Navy Vice Admiral Alexander Pama who now heads the National Disaster Risk Reduction and Management Council (NDRRMC).

The government needs to streamline its regulations if it wants the insurance industry to grow and be at par with those in more advanced countries in the region. In a public consultation organized by the Development Academy of the Philippines (DAP), Mr. Michael Rellosa, executive director of the Philippine Insurers and Reinsurers Association (PIRA) said the insurance industry is already faced with a myriad of challenges, and the biggest challenge of all is the overlapping regulations that insurance companies have to comply with. “We have to work out a system where the various regulators agree on certain rules that would eliminate overlaps, redundances and duplication of reportorial requirements. We also need a system that would promote a common understanding and acceptance of definitions, formulas and concepts,” Mr. Rellosa said. Serving as a research fellow for DAP’s Modernizing Government Regulations project for the insurance industry, Mr. Rellosa facilitated stakeholders consultations and industry dialogues in Metro Manila, Davao and Cebu in October 2019. These dialogues aim to review existing regulations to streamline unnecessary rules and compliance cost. They advocate the adoption of Good Regulatory Practice and provides capacity-building trainings to government regulators on tools that promote effective regulatory-making process and review. From these consultations and dialogues, Mr. Rellosa was able to gather insights from various industry stakeholders on the issues and problems they encounter relative to government regulations. “Our industry is one of the most regulated industries with a huge number of regulators, thus resulting to conflicting or redundant reportorial requirements, compliance issues, confusing bureaucracy and stiffled industry growth,” Mr. Rellosa said. The insurance industry’s main regulator is the Insurance Commission (IC), which, according to the  research is composed by new officers with a relatively short experience in the industry and a limited understanding of the concepts and principles of insurance. These same officers even have new responsibilities as insurance-like industries such as Health Maintenance Organizations (HMOs), pre-need companies and Mutual Benefit Associations (MBAs) have been put under their watch. As if being regulated by the IC is not enough, insurance companies also report to the Securities and Exchange Commission, the Bureau of Internal Revenue, the Anti-Money Laundering Council. the Data Privacy Commission, the Local Government Units, the Supreme Court, the Department of Public Works and Highways, the Anti-Competition Commission, and the Bureau of Fire. Further complicating the situation is the fact that insurance companies are hard pressed to comply with the minimum capitalization requirement of P1.3 billion by 2022 as well as the International Financial Reporting Standards (IFRS) 17 also by the same year. On top of all these, insurance companies have to contend with a lackluster investment climate, the low premiums caused by cut-throat competition, and the increasing number of natural and man-made catastrophes. “We really have to review and streamline regulations in order to help the industry hurdle these challenges. Regulations are there to provide order and ensure protection to the insuring public. But they should also promote growth and a sense of service to those being regulated. If not, these regulations will feel more like a noose threatening to strangle the industry,” Mr. Rellosa said.