With the UK market recovering from the shock of the budget announcements, the period since our last report has been relatively quiet in terms of reported transactional activity. However, a couple of points to note!
Report on Infrastructure Investing
First, on the asset and investment side, Swiss Re’s recently published report, entitled “Infrastructure Investing: It Matters”, is interesting and worth a read (available here)
Amongst other things, the report notes that:
- global annual infrastructure spending requirements are estimated to increase from USD 2.6trn to around USD 4.3trn by 2030
- the scale of demand, combined with ongoing banking sector deleveraging and other market participants’ uncertainty about regulatory and political developments, points to a major financing gap
- insurance companies and pension funds have potential to bridge that gap to some degree (the report noting that, within the OECD, the combined asset base of insurance companies and pension funds amounts to roughly USD 45trn).
With that context in mind, Swiss Re note a number of policy and market actions they hope will be taken, including the creation of a transparent infrastructure asset class on a global level; harmonisation of legislation for infrastructure investments; and a review of risk weighting of Solvency II standard formula to reflect the fact that infrastructure loans have lower default rates and higher recovery rates than e.g. corporate loans and bonds, all in order to attract long-term private investments into infrastructure projects. Ambitious ideas, and certainly food for thought.
Schemes of Arrangement?
Second, the PRA’s ongoing consultation on the use of schemes of arrangements by insurers for the purposes of closing down legacy portfolios (PRA’s September 2013 Consultation Paper and April 2014 Supervisory Statement on the matter are available here and here) is moving ahead to a case-by-case scrutiny.
The Consultation Paper and the Supervisory Statement appear to be directed solely towards general insurers, but a recent article by the Financial Times reported that that the PRA is likely to scrutinise life insurers as well (the full FT article is available here)*.
We’ve not been able to track down more information on this to say – but will keep a keen eye out for further developments. And for those involved on the non-life side, the Consultation is worth noting in any event!
Market Issues and Trends
- Bulk annuity market set for continued expansion; Aviva increases limit on bulk annuity deals, LV= looks to enter (link)
- Canadian defined benefit pension schemes looking to de-risk (link)
Company and Client news
- MetLife raises its quarterly dividend by 27%; buybacks on hold (link)
- MetLife launches new Voluntary Retiree Life Coverage products (link)
- MetLife’s American Life Insurance Company sells its share in American Life Insurance Company (Pakistan) Limited to ICI (link)
- MetLife to cooperate with AmBank M Bhd to distribute savings and insurance products in Malaysia (link)
- Zurich Asia sells 40% stake in MCIS Zurich (link)
- Zurich eyeing M&A opportunities in China (link)
- Prudential Group Insurance appoints new senior vice president of strategy and chief marketing officer (link)
- Prudential expects its Ghanaian acquisition, Express Life Insurance Co, to become profitable after four years (link)
- M&G enters Dutch market with €110m financing (link)
- Deutsche Bank considering a share sale according to sources (link)
- Deutsche Bank reducing staff in Latin America; considering closing its equities business in Chile (link)
- Former Deutsche Bank salesman admits to bribery in Japan; could lead to investigations in other countries (link)
- Deutsche Bank settles Parmalat affair law suit (link)
- Aviva reports 19% rise in fraud in 2013 (link)
- ILS capital inflows may slow if rates remain low according to Munich Re (link)
- Finance Director of Munich Re sees consolidation among small reinsurers (link)
- Munich Re’s asset manager MEAG benefits from growing ILS market (link)
Reinsurance Group of America
- RGA CEO takes a 33% pay cut (link)
- PRA to go ahead with scrutinising insurers’ use of schemes of arrangement; life insurers also to be included (link)
- 80% of insurers on track for Solvency II implementation on 1 January 2016 (link)
Investments and Long-Term Finance
- Speculation that Zurich backed a $400 million surety bond to allow work to continue at Panama Canal construction site (link)
- Deutsche Bank provides construction financing for two solar projects in Ontario, Canada (link)