Welcome to the 10th edition of REG Reviews! In July we saw the theft of $100M worth of crypto, the FCA’s heavy fine for a London market broker and WTW’s new prediction tool. Read these articles and many more, along with our usual updates from REG and the REG Tech sector.
Porsche invests £1.2 million in cycling insurer Laka
The venture capital arm of German automobile company Porsche AG has invested $1.5 million (about £1.2 million) into Laka – a digital mutual insurer focused on providing cover for bicycles and related equipment.
Porsche Ventures’ investment brings Laka’s latest Series A round, which was led by Autotech Ventures, with the participation of Ponooc and ABN AMRO, to a total of $13.5 million (about £10.9 million). According to a statement on Laka’s website, it is “uniquely placed and first-to-market with an insurance model that has customer interest built-in to the core,” as there is no major European player for cycling and e-mobility insurance. The insurer also said that it has plans to expand its product offering to e-scooters, e-mopeds, and eventually even to e-cars. Laka also announced that it is expanding to cover commercial fleets across Europe, noting that companies shifting to greener transport and e-mobility are underserved by traditional insurers.
“The increasing digitisation and variety of sustainable mobility offers leads to the need for an innovative and customer-centric offer in the field of digital insurance,” said Patrick Huke, Head of Europe & Israel at Porsche Ventures. “To support this shift towards a greener future, we have a bold vision to become the world’s largest e-mobility insurance partner,” the Chief Executive said.
FCA fine London market broker £7.8 million for financial crime control failings
JLT Specialty, which has since been acquired by Marsh McLennan, was fined a total of £7,881,700. The London market broker failed to manage the risks of bribery and corruption associated with a third-party overseas introducer. The regulator stated that in one instance these failures allowed bribery of more than £3 million to take place.
The fine related to business placed by JLT Specialty in the London reinsurance market between 2013 and 2017 for JLT Re Colombia, another company in the JLT group.
During this time, JLT Specialty paid £12.3 million in commission to JLT Re Colombia, which in turn paid £10.8 million to a third-party introducer based in Panama. This introducer then paid more than £3m to government officials at a state-owned insurer to help retain and secure business for JLT.
The FCA found JLT Specialty failed to manage its business and risks responsibly and effectively. Mark Steward, Executive Director of enforcement and market oversight at the FCA said. “Lax controls by JLT Specialty meant, ultimately, money flowed into the pockets of corrupt officials. It is because of risks such as this we are maintaining our focus on financial businesses’ financial crime systems, taking action where these firms fall short.”
SMEs left exposed to hackers amid barring from cyber insurance policies
A recent report from GlobalData has echoed firms worries of SMEs vulnerability to cyber-attacks. Cybercriminals have been declared by the U.S. Small Business Administration (SBA) to be more attracted to small businesses due to their weaker infrastructure surrounding security, posing exacerbated threat to SMEs. Indeed, 88% of small business leaders have voiced their vulnerability to such dangers, as exposure to such activities is only forecasted to multiply throughout the rest of 2022, according to the report.
Cyber insurance protects businesses from potential losses incurred from cyberattacks or data breaches, by covering expenses associated with cyberattack investigations, regulatory fines, customer renumerations and infrastructure repairs; not extending to reputational damage losses. Particularly in the wake of the global pandemic and Ukrainian war, the importance of taking out cyber insurance has become more prevalent than eve due to the prevailing increase in hacking risk. The global pandemic has left business employees more susceptible to cyberthreats due to the shift to home working yielding a vector of opportunity for the hacker landscape, amid the fallout of weak home security. Ben Carey-Evans, Senior Insurance Analyst at Global Data stated, “A challenging worldwide geopolitical environment exacerbated by the COVID-19 pandemic – and, since February 2022, the Ukraine-Russia conflict – has gifted cyberattacks an uneven playing field, which they are actively exploiting’’.
Unfortunately, SMEs are being prevented from cyber insurance policy contracts, majorly due to premium prices and lack of access to high capital. The Ukrainian war and global pandemic have inflated the price of cyber insurance due to heightened exposure to attacks, making it unattainable for insurers to lower premiums to appease the UK cost-of-living crisis. GlobalData has unveiled that this adversity has ensued 1/3 of SMEs who were once policy holders to cancel subscriptions in order to reduce expenditure, volumes only expected to increase this year as consumers are juggling smaller disposable incomes.
Interestingly, 17.3% of SMEs were identified to have never been covered in the first place. This reveals a lack of cyber insurance necessity within the industry and worrying levels of exposure to cyberattacks.
Even though the global cybersecurity industry is forecasted to grow by $73 billion by 2021, Global Data suggests cyber insurers should be channelling innovation to overcome premiums preventing SME acquisition, to protect all business from the impending global hacking threat.
Exciting news for REG at the MGAA awards 2022!
The MGAA Awards 2022 was hosted this month, in which REG was the proud official award sponsor for the MGA Initiative Award. Representing REG on the night were CEO, Paul Tasker, Sales Manager, Victoria Slade and Head of Product and CX, Sandra Simoes.
Judges for the MGA Initiative Award were looking for MGAs that have delivered product innovation and market solutions that benefit distribution and carriers in a profitable and efficient manner. The finalists for the MGA Initiative Award were Geo Underwriting, Go-Insur, NBS Underwriting and Castel Underwriting Agencies Limited. However, there could only be one winner…Congratulations to Go-Insur, what a fantastic achievement!
We would also like to toast a massive congratulations to all the finalists and entrants who were part of the celebrations. Well done to everyone who was involved, we hope everyone had a lovely evening. We most definitely did!
Industry giant WTW launches prediction tool
WTW has released a tool that will assist insurers in forecasting the rise in the cost of car repairs across a variety of vehicle types, validated on historical data. The system makes use of maintenance data from Audatex, which covers 98% of all UK vehicles, which is supplemented with machine learning and an extensive examination of historical data by WTW.
WTW claims that traditionally, in order to anticipate the future cost of car repairs, insurers and underwriters have utilised a single inflationary figure across the board. The car population in the UK is quite diverse, with a large range of fuel types, producers, and gearbox types. According to WTW, this renders general pricing systems for underwriting wasteful and ineffective.
The UK also has the highest inflation rate in the G7, and it is experiencing supply chain challenges due to Brexit, COVID-19 and the Russia-Ukraine conflict.
“This tool offers insurers a significant competitive advantage,” said Stephen Cox, Head of Data Partnerships, Insurance Consulting and Technology, WTW. “In such a volatile market, access to accurate cost predictions gives underwriters the ability to avoid under-priced business, while also making their service more attractive to those consumers who will no longer face prices that are unduly high owing to being based on an average of all vehicles.”
“By making it possible to differentiate inflationary allowances between vehicle makes and models, this new price inflation tool allows insurers to boost their bottom line and offer more competitive pricing to customers,” said Tom Hart, Head of Account Management at Solera Audatex.
Launch of new Treasury sub-committee 'devoted to the scrutiny of financial regulations”
The UK Parliament is to set up a sub-committee to scrutinise regulatory proposals for financial services post-Brexit, a task previously undertaken by the EU. The new sub-committee will be led by Treasury committee members and advised by a group of experts. The Treasury committee said in a statement that the launch comes as “New forms of scrutiny will be required, given the number of regulatory initiatives is likely to grow as regulators assume additional responsibilities following the UK’s exit from the EU”.
The sub-committee will look at a growing list of proposals set to change the way watchdogs such as the Bank of England and Financial Conduct Authority supervise firms. They include plans to “simplify” regulations for smaller banks and building societies, including those that determine how much capital they should hold against risky assets.
Harmony offers $1m bounty to heist criminal who stole $100m of crypto
Cryptocurrency up to a value of $100 million was seized by threat actors via Harmony’s Horizon bridge; a system enabling the exchanging of crypto between different blockchains. The scandal has surfaced amidst a fury of crypto heists, Harmony joining the list of victims falling casualty to such prolific attacks. In fact, 2022 saw $1.26 billion stolen in the first three months alone!
In response to the attack, Harmony have offered a $1m bounty for the return of the funds. This renumeration hopes to return the funds to restore peace for both the company and customers.
Surprisingly, bounties are more common than one might think. Large companies are renowned for their bargaining with hackers and also, dismissal of criminal charges in efforts to partner with attackers to strengthen security. Poly Networks, for example, actually thanked their hacker for exposing flaws in their security and offered the masked exposer a position as Poly Networks’ Chief Security Advisor!
However, Harmony have not ventured as far as the latter, but have similarly advocated that no criminal charges will be instilled on the unknown attacker. On 26th June Harmony tweeted: ‘We commit to a $1M bounty for the return of the Horizon Bridge funds and sharing exploit information…Harmony will advocate for no criminal charges when funds are returned.”
Whether Harmony receive their funds back or not, these attacks ultimately shed light on the need for more stringent security systems in place to better protect businesses, employees and customers from unwarranted breaches and privacy infringement.
Young people in insurance - REG July Networking event
During an age of continuous digital transformation, opportunities for young people are continuously evolving. Over half of insurers struggle recruiting people under 30, and with 80% of insurers aspiring to employ young people, how have opportunities in the market changed over the years? Though the rail and tube strikes made it difficult to get together in June, we are excited to be hosting our July Networking Event to discuss all things young people in insurance. We look forward to seeing some new and familiar faces join us.
If you’d like to find out about the future of insurance for young people, join us for an evening alongside guest speakers and Register Here!
MIC Global gains approval to underwrite through Lloyd's syndicate
Texas-based insurtech firm MIC Global Services has announced that it has gained approval for Lloyd’s Syndicate 5183 to commence underwriting, effective immediately. Syndicate 5183 will be managed by Asta through Lloyd’s syndicate-in-a-box (SIAB) platform.
The approval bolsters MIC Global’s position in providing embedded insurance products to platform companies. Erik Johnson, who joined the firm in May, will serve as senior underwriting manager.
“As a syndicate of Lloyd’s, MIC Global can now offer companies highly rated, relevant, and affordable insurance products, which can easily be embedded into their existing digital processes,” said Harry Croydon, the company’s Founder and CEO. “This will accelerate the delivery of micro insurance products when and where customers need them by allowing access to cover that is not readily available through traditional insurance methods.”
The first partnership is with InsureTEK, a loss control-as-a-service (LCaaS) platform that helps predict and prevent catastrophic water events before they occur. The second account to be underwritten by Syndicate 5183 is h.way, a Hispanic-owned Neobank built around the financial needs and issues facing the Hispanic community.
“When we were seeking a strategic partner to help us create an embedded cover for IoT water sensor systems, we searched the market for a company that understood the need to evolve in order to stay relevant,” said Michael P. Murphy, CEO of InsureTEK. “MIC Global brought an entrepreneur’s spirit matched with a technical expertise that quite simply has become a cornerstone of our business.” When Founder and CEO of h.way, Lionel Carrasco found out that much of their customer base did not have health insurance, he explained that this is what drove them to collaborate with MIC Global. “By partnering with MIC Global, we are helping our members get access to up to US$1,000 for unexpected medical expenses as part of our h.way membership experience,” he said. “MIC Global’s value proposition clearly aligns with our company’s purpose of providing equitable financial services and cultural-driven product innovation.”
Brokers urged to look at their business models to combat the costs of regulation
A panel of experts at the Insurance Times BrokerFest 2022 conference have urged brokers to understand the value of their time and how to charge correctly for their services if they are to remain profitable amid rising regulatory costs.
Biba’s Executive Director, Graeme Trudgill, emphasised that today’s brokers must pay both the direct and indirect costs related to regulation. According to Trudgill, indirect costs such as having to find the time and personnel resources to respond to multiple surveys, which are sometimes sent to firms by the FCA on the same day – are in fact more costly for brokers than direct regulation ramifications. This is in addition to the fortnightly publication of ‘Dear CEO’ letters which is causing a lot of extra “pressure” and “expense”.
In addition, Michael Sicsic, Managing Director of Sicsic Advisory has discussed that amid these regulatory cost pressures, brokers must review their business models and ensure that the way in which they make money is sustainable. Sicsic stated, “There’s a discussion as to whether the level of commission is commensurate and understanding what you provide for that and if you are going over and above the amount of money that you’ve had in respect of commission and you’re providing so much more, then you’re able to justify the imposition of that fee or charge”.
W3 Energy and Marsh enter a strategic partnership to battle cyber attacks
The energy sector has been suffering with an increasing threat from cyber-attacks. As such, W3 Energy and Marsh have recently entered a strategic collaboration, focused on serving wind farm owners, in effort to directly combat prevalent cyberattacks. Such attacks pose danger to both the wind parks themselves and wider society.
The collaboration between Swedish independent Asset Manager, W3 Energy, and international insurance broker, Marsh, has enabled a robust anti-hacking system, particularly aimed at battling extortion and sabotage within the wind farm sector. As an independent player, W3 have seen first-hand the struggle of tackling cyberattacks in the energy sector, so can thus drive transformative security for all wind farms, even the ones not under W3’s management.
Marsh, boasting 45,000 employees, insures a large scope of the wind power industry, and together with W3 Energy, the partnership has created a new specialised cyber insurance product that seeks to “secure wind power owners’ assets in a long-term, comprehensive way”, states W3 Energy’s CTO, Ulf Johansson. Hitherto, Anders Orebrandt, Head of Renewable Energy Nordics at Marsh AB, exclaimed the service offers “a good combination of risk analysis, IT security and insurance, which provides increased security for our customers”.
REG heads to the Races
Thursday 30th June saw REG employees attend another monthly session of the REG socials! This month everyone put on their best frock and donned their best hat (or horse mask), to head to the Races. Well, nearly…
Upon arriving at REG’s Lime Street office for an evening of virtual horse racing activities, employees were met with an array of delicious cocktails and refreshments to choose from, whilst they lined up to collect their betting funds for the night from the Banker (CFO, Chris Bourke). After placing their bets and going all in, an enjoyable evening of race watching, laughing, shouting, chatting, losing, and winning was had!
A big well done to Sandro for triumphing as the top winner of the night! REG also voted for the best dressed, and there could clearly be only one winner…shout out to Ellie in the horse mask. It was certainly worth all of those funny looks on the tube ride home!
At REG, our monthly socials are extremely important to us. We value the opportunity to bring everyone together to celebrate each other’s achievements and differences, and already can’t wait for the next one!