Get creative: Mastering metrics
First published in the 1LoD Global Benchmarking Survey & Annual Report 2019
The US Appeal Court in Iowa held that manufactured plastic bags that deteriorated in sunlight because of the absence of an ultraviolet inhibitor and caused small shreds of plastic to commingle with a customer’s landscaping materials requiring clean-up was an accident and therefore an occurrence under their comprehensive general liability policy.
The policy provided coverage for an ‘occurrence’ resulting in ‘property damage’. An occurrence was ‘an accident, including continuous or repeated exposure to substantially the same general harmful conditions’.
Under Iowa law (like South Africa) an accident is an undesigned, sudden and unexpected event usually of a harmful or unfortunate character. This implies a misfortune with resulting damage to a victim. The accident is not their negligence which results in the misfortune.
The deterioration of the defective bags causing damage to other property was an indemnified occurrence. The property damage (if any) was to the customer’s property other than the bags themselves. ‘Occurrence’ must be construed to cover damage to property that was not the insured’s work-product (the bags). If there was damage to property the insurers must indemnify the loss.
The court left open the question whether there was ‘property damage’ and referred that issue back to the lower court.
For further information please contact Patrick Bracher in Johannesburg.
Since the entry into force of the new German Insurance Supervisory Act on 1 January 2016, third-country insurers are allowed to conduct reinsurance business in Germany only where they (i) have established a German branch for which they have obtained the relevant licence from the German Federal Financial Supervisory Authority (BaFin), or (ii) operate without a branch in Germany, but sell only reinsurance and have a head office in a country for which the European Commission has decided that the solvency regime for reinsurance activities is fully equivalent to the regime described in the Solvency II directive. The latter currently applies only to insurers based in Switzerland, Bermuda and Japan.
Third-country insurers that do not meet these requirements may only sell reinsurance cover to German cedants by way of reverse solicitation, also referred to as “self-procurement” or “insurance by correspondence” (Korrespondenzversicherung). On 31 August 2016, BaFin published an interpretative decision explaining the requirements that reinsurers have to comply with when concluding reinsurance contracts by correspondence. At the same time, BaFin confirmed that reinsurance contracts entered into on or before 31 December 2015 can be executed and run-off without authorisation.
Insurance by correspondence applies to reinsurance business where a reinsurance contract is concluded by correspondence between a cedant situated in Germany and an insurer situated abroad at the initiative of the German cedant and, as a rule, without one of the parties being assisted by a professional intermediary in Germany or a professional intermediary situated abroad but acting as an intermediary with regard to the German market.
The crucial elements are that the reinsurance contract (i) is concluded by way of correspondence, for instance telephone, fax, e-mail or post and (ii) on the initiative of the German cedant. This would not be the case if this initiative is instigated by activities carried out by a third-country insurer that qualify as conducting reinsurance business in Germany. Such activities include not only the establishment of own distribution structures in Germany, but also the deliberate targeting of the German market, e.g. by advertising specific products, maintaining an internet presence aimed at German protection buyers or sending employees to visit customers with the aim of offering reinsurance cover or the use of intermediaries, both within and outside of Germany, conducting business targeted at the German market. Further, an insurer entering into reinsurance contracts with German based cedants on a regular basis will also be regarded as conducting reinsurance business in Germany. As appears from BaFin’s reference to the (permitted) run-off of contracts entered on or before 31 December 2015, the interpretative decision is already relevant for the upcoming renewals of existing reinsurance agreements which do not simply roll over, but require a contractual agreement between the parties (in particular regarding key elements such as the scope of cover or premiums).
Within the definition of insurance by correspondence, BaFin states that it is permitted for German cedants to authorize, on their initiative, a third party, in particular an intermediary situated in Germany or abroad, to prepare and/or conclude a reinsurance contract with a particular third-country insurer provided that this insurer is not conducting any reinsurance business in Germany. BaFin considers the criteria for conducting business in Germany as fulfilled, if an intermediary situated in Germany or abroad offers contracts on behalf of the German cedant to a third-country reinsurer which either (i) maintains an ongoing business relationship with the intermediary, or (ii) otherwise deliberately targets the German market on a regular basis. Equally, a third party may, with the involvement of third-country insurers, advise a German insurer regarding the development of reinsurance solutions only where the relevant third-country insurer does not deliberately target the German market through this third party.
BaFin specifically points out that it has the power to stop unlawful operations of a third-country reinsurer, and that any individual responsible for committing (or aiding and abetting) an intentional or negligent breach of the new provisions may be subject to fines and imprisonment under criminal law.
Under the new German law provisions, this interpretative decision is an important step towards greater legal certainty on the definition of “conduct of reinsurance business by third-country reinsurers” and the circumstances under which domestic and foreign intermediaries can become an active part in selling reinsurances by way of insurance by correspondence.
It remains to be seen whether and to what extent BaFin’s approach will also be adopted by other regulators in the European Union and the European Economic Area.
From May to July 2016, the China Insurance Regulatory Commission (CIRC) issued circulars (the ‘CIRC circulars’) to its branches and insurance market participants, including insurers and insurance intermediaries, with regard to strengthening its supervision over the illegal sale of overseas insurances policies (‘Non-admitted policies’) in the People’s Republic of China (excluding Hong Kong, Macau Special Administrative Regions and Taiwan) (PRC). This is the second time that CIRC has expressly targeted the sale of non-admitted policies in China since 2004.
The major concerns and expectations set out in the CIRC circulars are as follows:
Notwithstanding the above, CIRC cannot prohibit PRC residents from purchasing non-admitted policies outside of China.
After the Monetary Authority of Singapore (MAS) expressed its intentions to promote Singapore as a financial technology (FinTech) hub on 1 April 2016, it rolled out various initiatives including:
The momentum continued in June and August with the issuance of two Consultation Papers by the FinTech & Innovation Group of the MAS and the opening of a FinTech Innovation Lab by MAS. Briefly:
For further information please contact Anna Tipping in Shanghai.
First published in the 1LoD Global Benchmarking Survey & Annual Report 2019
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