Canadian Underwriter

Zurich aims to ‘better account’ for interconnectivity of risks in general insurance

February 11, 2016   by Canadian Underwriter

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Zurich Insurance Group reported a combined ratio of 103.6% in general insurance in 2015, up 6.8-points from 96.8% 2014, and while part of that was due to an explosion in a Chinese port last summer, the insurer said its results for the second half of last year “have fallen far short of what was expected.”

In its investor presentation released Thursday, Zurich said there was “insufficient underwriting discipline in some areas such as global corporate, where issues with accumulation management were identified.” In the future, Zurich suggested, its general insurance operation “will need to better account for the interconnectivity of risks.”

The explosions in 2015 in Tianjin, China contributed to losses for Zurich Insurance Group 

In general insurance, Zurich reported gross written premiums and policy fees of $34 billion last year, compared to $36.33 billion in 2014. While that was a 6% decrease in U.S. dollars (the currency in which Zurich reports its financials), general insurance gross written premiums and policy fees were actually 3% higher last year than in 2014 when measured in local currency.

The general insurance segment “saw good growth in some of its priority markets” such as North American commercial, but “the push for growth in other areas was not supported by the market,” Zurich reported.

Zurich added that in 2015, it had an increase in new business through captives in North America Commercial and an increase in premiums in Latin America due to inflation.

Company-wide, Zurich reported net income attributable to shareholders of $1.84 billion in 2015, down 53% from $3.949 billion in 2014.

The result in general insurance in 2015 “was partly due to large losses and natural catastrophe claims, including severe flooding in the UK and Ireland in December,” as well as US$275 million in claims from the Aug. 12 tragedy in Tianjin, China.

Associated Press reported earlier that the explosions in Tianjin originated from a warehouse storing 700 tons of sodium cyanide, which can form a flammable gas on contact with water. At least173 were killed. Guy Carpenter & Company LLC reported that the blast damaged shipping containers and vehicles, and blew out windows several kilometres away.

During the most recent quarter, Zurich reported a combined ratio of 108.6% compared to 99.3% in the same period in 2014. During the three months ending Dec. 31, 6.7 points of the combined ratio was from catastrophe losses, while during Q4 2014, only 2 points of the combined ratio was from cat losses.

Also during the fourth quarter, gross written premiums and policy fees in general insurance were $7.39 billion, down 7.1% from $7.96 billion in 2014.

Total gross written premiums and policy fees for the group – including life, farmers and other operating businesses – were $44.374 billion in 2015, down from $46.448 billion in 2014. In Q4, total gross written premiums and policy fees for the group were $10.53 billion, down from $10.905 billion in Q4 2014.