The acquisition has been confirmed with the Superintendencia General de Seguros (SUGESE), Costa Rica’s supervisory authority. Oceánica has a track record of more than 10 years having been operating in Costa Rica since 2013. It joins a number of insurance businesses that are backed by MNK Group, including MNK Re, a Lloyd’s Broker and Specialty MGA UK, an MGA focused on providing additional capacity for specialty lines of businesses and hard-to-place risks.

Manoj Kumar, Chairman of the MNK Group, said:

“This acquisition is fantastic news for the MNK Group, and continues our rapid expansion in the LatAm market. Oceánica de Seguros provides us with an excellent platform to continue building a book of business in the region.”

Oceánica de Seguros will keep its current management team, led by General Manager, Daniel Hernández. A new Board of Directors has been appointed, with Ricardo Retana as President of the Board. The local team will work to strengthen the firm’s operations, boost its business books and expand the products and services it offers to the region.

Ricardo Retana, President of Oceánica, said:

“I’m delighted our team will be working with the MNK Group, and excited about the opportunities this will provide us going forwards. The acquisition means that Oceánica will be able to bring more innovative products and greater reinsurance support to the market.

MNK Group’s knowledge, experience and access to a globally-recognised market such as Lloyd’s will bring real benefits for our clients.”

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Notes to Editors

About MNK Group:

MNK Group, founded in 2009 in the United Kingdom, includes a Lloyds broker (MNK Re) with operations in every continent and a web of MGAs (Specialty MGA in UK, Italy, US). In addition, MNK Group has recently been granted license from Labuan regulators to set up its own Reinsurance Company in Labuan. The group currently controls in excess of US$ 500 million in Gross written premiums.

About Oceánica de Seguros:

Oceánica de Seguros is a solid company in the insurance sector with a track record of more than 10 years in the international market, having arrived in Costa Rica in 2013, after six years of the opening of the insurance market in the country. The company has the international backing of reinsurance companies with high international prestige and was awarded by the Chamber of Intermediaries with the first place as a private insurer in Automobile Insurance and General Insurance, respectively.

For more information please contact:

Ben McCarthy:
benmccarthy@luther.co.uk
+44 (0)7740 486 728

Hamish Venters:
hamishventers@luther.co.uk
+44 (0)7827 971 741

With the climate crisis continuing to escalate, extreme weather events are becoming more and more common. 

In South Africa, in particular, climate risk continues to be a key focus for insurance brokers, with the impact of droughts, floods and earthquakes growing over the last 10 years. The April 2022 KwaZulu-Natal floods, for example, was one of the costliest natural disasters on record in South Africa, with $3.6 billion (67 billion ZAR) in economic losses and $1.8 billion (34 billion ZAR) in insured losses. Overall, Africa loses up to 15% of its gross domestic product per capita every year due to the impact of climate change.

Furthermore, the recent Santam Insurance Barometer Report, which surveyed over 900 consumers, businesses and brokers across South Africa, revealed that 12% of consumers in South Africa had experienced financial loss due to extreme weather events over 2021 and 2022. Moreover, 47% of South African commercial and corporate entities regarded climate change as a top risk in 2023. It is now, therefore, more important than ever for South African farmers and businesses to find measures to mitigate and prevent the severe impact of climate change. 

Using Generative AI

Over the last few years, we have seen an increase in the use of Generative AI (GenAI)to help increase the resilience of businesses and economies as they continue to fight against climate change. 

Defined as a set of algorithms which can create new, realistic content, such as images, audio and text, from training data, GenAI is expected to have a global market value of $60 billion by 2025. Over the last three years, GenAI start-ups across the world have received $20 billion in funding, five times more than the investment they received over the previous three years. 

The rise of GenAI is set to benefit communities across Africa. For example, the UN has recently set up an AI-driven project, to support vulnerable communities in Burundi, Chad and Sudan by using GenAI to look into past environmental patterns around displacement hotspots and produce predictions to help inform measures to limit the impact of any future extreme weather events. Furthermore, in Kenya, the MyAnga app helps pastoralists prepare for drought with satellite data sent to their phones, meaning they can better manage their cattle and livestock, and save time looking for green spaces. 

Brokers can leverage GenAI

Insurance and reinsurance brokers in particular can leverage GenAI to enhance the capabilities of African governments and economies in addressing climate related challenges. GenAI’s strength lies in the fact it can rapidly identify patterns and trends. For example, machine learning models can process satellite imagery, climate models and historical data to project the probability and severity of specific events within different regions in South Africa. This, therefore, allows insurance products to be tailored to the specific needs of agricultural communities, ensuring that they manage and recover from climate-related losses. 

For instance, parametric insurance is one of the insurance products that has seen rapid growth over the last few years. The parametric approach uses GenAI to automatically trigger payouts based on predefined climate-related parameters. If there has, therefore, been an extreme weather event, and the parameter is met, the payout can be with the customer almost instantly, whether that be a farmer losing his crops as a result of drought or a business facing damages from flooding, ensuring that the consumers can mitigate the impact of the event as quickly as possible. 

New risk-mitigation programmes

In the coming years, the South African insurance sector must look to collaborate with agricultural experts and farmers to use GenAI to improve and create new risk-mitigation programmes. For example, by analysing soil conditions, crop resilience and climate data, AI models can give insights into methods for sustainable farming that minimise the impact of climate change on agricultural productivity. 

Programmes may include giving insurance coverage for climate-smart agricultural practices, such as water-efficient irrigation methods or drought-resistant crops. By encouraging and incentivising climate resilient agriculture, the insurance industry can protect and enhance the overall resilience of the South African agricultural sector as we continue to combat climate change.

You can read the original article on the FA News website

The last year has been a relatively kind period for cyber insurance buyers, with a slight softening in market conditions, caused by a reduction in loss-causing events.

Cyber remains a new market but one that is rapidly maturing, meaning that insurers are much better at recognising and evaluating risks than they were even a short time ago. Nonetheless, it remains a highly unpredictable sector, and as the technology and tracking software adopted by firms become ever more sophisticated, the risk of unexpected, large-scale losses increases.

A potential problem for insurers

In Africa, these risks are exacerbated by the continent’s rapid digital transformation and the fact that information security has not kept pace. The market is growing, but this is constrained by a lack of cybersecurity infrastructure.

Customers’ low awareness of cybersecurity risks and lack of proper security measures is a potential problem for insurers, impacting how they refine their pricing strategies.

Intermediaries have an important role to play, by working with clients to make sure that they have effective data protection measures in place and that they are abreast of the rapidly changing risks they face.

Pixel privacy claims

We are increasingly having to engage with clients and insurers on the growth of ‘pixel’ privacy claims. Pixels are widely used pieces of code that track user behaviour online. They have spawned significant data privacy concerns, especially when they are used to collect data without consent, or the data collected is shared with a third party. The rise in claims highlights the need for firms to treat data sensitively, as well as how cyber claims can arise from unexpected places.

Companies working in the health sector have been particularly vulnerable to claims regarding their use of pixels or the data collected by them. The sensitive nature of much of the data they collect means that the fallout from a breach can be much more severe than in other sectors. As an example, as well as class-action lawsuits, pixels can introduce regulatory risk if firms are in breach of South Africa’s Protection of Personal Information Act 4 of 2013 (POPIA). That said, firms in any industry can and have been affected by pixel tracking risk.

Insurers are raising the standards

The insurance industry has moved quickly in response to the growth in claims, with many underwriters carefully scrutinising policies and amending them where necessary. Typically, cyber insurance will cover third-party privacy liability, however, insurers are beginning to explicitly exclude wrongful data collection claims, including those relating to pixel tracking. Given the flux, intermediaries must ensure they are confident of the terms that clients are agreeing to and be able to explain them properly.

Insurers are also raising the standards they require of policyholders, toughening up their expectations regarding privacy policy and the notices given to website users. Intermediaries should be aware of these requirements and support clients to meet them. Typically, coverage will depend on proactive risk mitigation by policyholders, including regular audits of web infrastructure, including pixel tracking, robust privacy policies, and detailed incident response plans.

African businesses, like businesses everywhere, are facing numerous cybersecurity challenges and insurers are constantly evolving their coverage to reflect changing risk profiles. Intermediaries are essential to ensuring that companies are putting themselves in a position where they have strong privacy measures in place and can secure the coverage that they need. The growth in pixel claims highlights how preparedness is an ever-moving target, and that agility is vital to navigating the market successfully.

You can read the original article on the FA News website

Policymakers agreed to establish a fund that would help compensate vulnerable countries coping with loss and damage caused by climate change during COP28 in November and December 2023. According to MNK Re DIFC’s Mr Mario Nahas, reinsurers can also make an impact through schemes that combine private sector finance with government funding. Middle East Insurance Review spoke with him.

By Sarah Si

Like other regions, the Middle East has been impacted by climate change. According to the Tahir Institute for Middle East Policy, the Middle East is “one of the most vulnerable regions to climate change”.

MNK Re DIFC executive director and board member Mario Nahas said to Middle East Insurance Review

“Water scarcity is becoming more and more of a serious challenge, with 60% of the region living under extreme water stress whilst reports predict that temperatures in the region are set to rise by almost half a degree Celsius per decade, impacting crop yields, livestock and agriculture in particular.”

Damages and losses from climate-related events have also reached an average of over $1bn annually, he said.

Volatility for the reinsurance industry

Particularly in business lines such as agriculture and P&C, the effects of climate trends and the severity and frequency of natural disasters are difficult to predict, increasing volatility for reinsurance brokers, Mr Nahas said.

“In order to deal with the unpredictability of climate change, we also have seen a surge in the use of technology from reinsurers,” he said.

Impacted future insurability

According to the Greenpeace report Living on the Edge: The implications of climate change for six countries in the Middle East North Africa region, the Middle East is warming “nearly twice as fast as the global average”.

Mr Nahas said,

“Gulf coastal cities by the end of the century could find themselves inundated as waters rise.”

In five to 10 years, he said, the long-standing problem of the protection gap in the MENA region may increase.

“With extreme weather events including droughts, flooding, wildfires and cyclones increasing across the region, traditional insurance markets are less likely to have answers as the gap between the needs of businesses and consumers and actual available coverage increases,” he said.

COP28: How reinsurance can make a difference

According to Mr Nahas, at COP28 UAE in November and December 2023, policymakers agreed to set the ‘loss and damage’ fund in motion, with the UAE and Germany pledging $100m each to support vulnerable countries damaged by climate-related events.

He also said that the impact reinsurers could make in the Middle East “lies with the new schemes that combine private sector finance with government funding, allowing countries most vulnerable to climate change to build up resilience”.

Such a scheme includes One Acre Fund Re, a reinsurance fund that aims to protect millions of smallholder farmers across Africa by 2030 from the impact of climate change on agriculture.

According to the report Insuring a Sustainable Future: Building climate resilience through takaful by the United Nations Development Programme, takaful could also be used to build financial resilience in vulnerable Muslim-majority communities in the Middle East.

“With awareness of this risk-sharing product continuing to increase, there will be more and more opportunities for Middle East reinsurers who provide these services,” he said.

Mitigating the effects of climate change

Despite the negative impacts of climate change, Mr Nahas said that there was opportunity for collaboration.

“Policymakers, regulators and governments in the Middle East can gain valuable risk data and insights from the reinsurance sector on the impact of climate change, which can help form climate policies and regulations to encourage climate[1]resilient practices in a variety of sectors,” he said.

Public-private partnerships (PPP) could also be essential in mitigating the impact of climate change on communities in the Middle East, he said.

“It would share the financial burden of climate-related losses between the private sector and governments,” he said.

The creation of insurance pools to cover natural disasters could also be explored under PPP, he said. Education programmes would also be vital to raising awareness about climate risks and resilience measures.

“Policymakers can work with reinsurers to invest in the ability of local businesses and communities to deal with the impact of catastrophic events through knowledge transfer and training,” he said.

This year will be defined by the sheer volume of elections taking place worldwide and Africa is no exception, with a third of the continent voting in national elections.  This includes South Africa but also in other major economies such as Algeria, Ghana and Tunisia among others.

Many commentators expect South African President Cyril Ramaphosa to win the legislative election, but are also predicting margins to be tight, so there is a chance that the ANC could fall short of securing an overall majority and be required to work with smaller parties. In other nations, incumbent parties are expected to come under pressure, which could have the effect of raising political tensions.

Political risk will therefore be one for the insurance industry to keep an eye on in 2024. The National Assembly elections could, for the first time, deliver a hung parliament and a coalition government.  Tight election results can create uncertainty about how a new government would tackle the many challenges that the country faces and potentially increases risk.

On the back of armed conflict across the Sahel; Chad, Mali and Burkino Faso are due to hold presidential elections this year, although a number of these have already been delayed. Insurers will likely be considering the extent of their risk appetite when contemplating this, given that contested results could increase the chance that tensions are further inflamed.

This means that insurance intermediaries will have a vital role to play in the next 12 months: ensuring that much-needed investment continues to arrive and support critical infrastructure and the transition to more sustainable forms of energy. Despite these issues, the African economy is anticipated to grow strongly next year, meaning that there will be no shortage of demand for cover and international capacity.

You can read the original article on the FA News website

As the reliance on advanced and new digital platforms from businesses across the globe grows, the threat and impact of cyber-attacks continues to rise. 

These attacks can result in extreme damages for firms including lost revenue, as well as severe legal and reputational costs.

Cyber-attacks in South Africa

South Africa has experienced one of the most substantial year-on-year increases in cyber-attacks globally, registering a surge of over 200% in cybersecurity breaches since 2019. 

Multiple factors have contributed to this, including the absence of comprehensive cybercrime legislation in South Africa and inadequate investment in cybersecurity, making the country an appealing target for cybercriminals. 

Most notably, we have seen Transnet, the South African state-owned rail, port and pipeline company, suffer from an extremely serious ransomware attack in 2021, forcing the company to declare force majeure in multiple key terminals including the Port of Durban, Port Elizabeth and Cape Town, leading to severe disruption.

Growing cyber threat caused by AI

More recently, there has been an increase in the use of AI in cyber-attacks in South Africa, to maximise efficiency, speed and complexity. Attacks have ranged from virtual kidnapping, using deepfake voice generation to demand large ransoms, to password cracking using advanced algorithms. Moreover, AI technologies can analyse datasets to understand employee behaviours and communication patterns, which can be used to create personalised emails and messages, which include specific details about the person and make it more likely for them to fall victim to these scams.

As a result, 58% of security leaders expect a different set of cyber risks in the upcoming five years, with 46% putting AI and machine learning as the top themes in the most significant cyber risks, according to the 2023 Global Chief Information Security Officer Survey.

It is not just individuals and businesses that will be affected by AI cyber-breaches, but governments as well. The South African general election is set to take place this year, alongside major elections across Africa and the globe including the US, UK, India, Russia and South Korea. AI-driven disinformation campaigns and cyber-attacks on governments are, therefore, likely to increase in 2024, as geopolitical tensions continue to rise.

The growing cyber threat caused by AI has in fact helped boost the cyber insurance sector. Globally, the cyber insurance market is expected to increase from 145 billion ZAR to 520 billion ZAR by 2025. Furthermore, according to market research, the South African cyber insurance market is expected to see growth of 45.5% during the period 2019 to 2025.

Accurate coverage for clients

Insurance brokers will, however, need to adapt and develop new strategies in response to the growing use of AI in cyber-attacks, to ensure they continue to effectively cover clients against these risks. Given that traditional risk assessment models are less likely to sufficiently deal with these rapidly evolving attacks, collaboration with cybersecurity experts will be essential, helping brokers develop bespoke and tailored solutions. This may involve developing policies which cover not just the immediate losses but the longer-term consequences including data reconstruction, restoring the system, legal implications and reputational management.

Of course, there is good news with respect to AI as it no doubt will, and in some cases already is, being used for good in the context of cybersecurity – where it can aid in the identification and indeed prediction of threats with the enhanced ability it brings in analysing large swathes of data for distortions in patterns. AI is also expected to assist in the implementation of security measures and its use is already being explored to assist in the breach response process. 

For now, though, the South African insurance sector can work with cybersecurity experts to educate their clients on preventative measures, including hosting risk management workshops and training sessions for employees, promoting sufficient cybersecurity policies and implementing threat detection and response mechanisms. 

Collaboration can also extend to working with insurtech firms which focus on AI-driven risk management solutions, providing insurance brokers with access to the latest technologies, data analytics tools, real-time intelligence and insurance products specifically focused on dealing with AI-driven cyber threats.

You can read the original article on the FA News website

Insurance brokers need to do a lot to adapt to the changing industry and capitalise on the opportunities that present themselves.

The insurance sector in Asia is transforming at a rapid rate, presenting a range of challenges and opportunities for insurance brokers. As we reach the end of 2023 and look ahead to the upcoming year, the Asian insurance industry will need to adapt and respond to emerging risks within the region. Insurance brokers, in particular, must be able to differentiate themselves in an increasingly competitive market, with new market entrants like AI driven insurtechs, social media and SaaS driven sales and aiming to take more market share.

Emerging markets in Asia are set to play a vital role in global growth. Following the recent reopening of China’s economy from lockdowns last December, China is expected to be one of only a handful of countries recording higher growth in 2023 than in 2022, at around 5.4%. If we look at the insurance industry specifically, non-life premiums in emerging Asia are expected to grow by 6.2% in 2024. In comparison, insurance premiums globally are forecasted to increase by only 1.7% over 2024.

One of the most important areas insurance brokers will need to focus on in 2024 will be climate-related risks. Globally, in 2021, natural disasters led to economic losses of $270bn, however, only $111bn was covered by insurers. When we look at Asia in particular, from 2010 to 2021, the Asian Development Bank found that people in the region were displaced over 225m times due to natural disasters, which was 75% of the global total. Furthermore, by 2050, between 600m and 1bn people in Asia will be living in areas with a non-zero yearly probability of lethal heat waves. This compares with a global total of 700m to 1.2bn.

Rising temperatures, rising floods

In Bangladesh, India and Pakistan, for instance, average temperatures are projected to rise by two to four degrees Celsius by 2050. If we look at Japan, by 2050, the average flood depth could rise 1.7 times by 2050, yet the infrastructure damage from that event would be 2.2 to 2.4 times higher. Moreover, in the Chinese province of Henan, the flooding that occurred in 2021 led to an overall loss of $16.5bn, and only 10% of losses were insured. The continent as a whole saw losses of $50bn in 2021, of which only $9bn was insured, demonstrating the serious insurance gap the region faces.

It is therefore clear that in 2024 governments across Asia will need to address their insurance gap and ensure that communities and people are sufficiently protected against severe climate-related events. From the perspective of brokers, it is essential that they offer their clients in the region innovative solutions to address the growing risk of climate-related events on people, communities and businesses.

Parametric insurance will undoubtably play an important role in providing these solutions in Asia, acting as truly disruptive insurance product, ensuring communities recover from disasters and build up resilience to help mitigate the impact of future extreme weather events. It offers predetermined payouts based on measurable parameters, including weather data.

The key benefits of parametric insurance lie with its speed. Policies provide quick payouts in the event of a natural disaster as soon as the parameter is met. The recent rise of parametric insurance across the continent has therefore ensured that some vulnerable communities are quickly and fairly paid out after catastrophes. As parametric payments do not require loss adjusting on the ground, loss settlements can be made rapidly by insurers to remote locations. If there has been a drought or extreme rainfall in a region within Asia, and the product is triggered, the money can be with the client almost straight away, meaning there is very little time difference between the event and paying the client. With the increase in climate-related risks, it is essential brokers are able to provide this type of insurance in the coming years.

New threats to face

Looking at the threats that businesses in the region face, the key risk that brokers must be looking at is cyber. With the digital economy of Southeast Asia rising by 17% annually, far higher than the US and Europe at 7% and 10% respectively, the threat of cyber attacks is greater now than it has ever been. These types of breaches can lead to enormous damages for firms of all sizes, including disruption, lost revenue and costly litigation.

In 2022, Asia faced the most cyber attacks of any region, contributing to 31% of attacks globally. At the heart of this is cyberespionage, with nearly half of successful cyber attacks leading to sensitive information being at risk. In April, earlier this year, Fullerton India, an Indian lending organisation, faced a serious ransomware attack, with hackers releasing over 600GB of vital information and data belonging to the business and its clients onto the dark web. Attacks such as this are likely to rise in 2024 and businesses in the region will be looking to protect themselves effectively from such attacks.

Brokers face a particular challenge when insuring against cyber-attacks, as the fact that this type of insurance has rapidly grown in such a short space of time, means there is currently very little standardisation across insurers or markets. Brokers must therefore ensure that they are aware of the differences in coverages of the range of cyber insurers operating in Asia. Brokers can, however, leverage this in their favour as clients will need them to fully understand developments in the market and what the impact of their cyber policies will be. Furthermore, with the media increasingly reporting on the cyber threats, there will be a rise in enquires in this area, reducing the need for brokers to pitch cyber insurance and allowing them to focus on understanding the market and variety of coverages being offered in the sector.

With the Asian insurance industry currently growing rapidly, in 2024 there will be huge opportunities for insurance brokers. The increase in climate-related events and natural disasters combined with risks that come with the digital transformation extending across the continent will require brokers to find innovative solutions. In Asia, where insurance literacy ranges extensively, insurance brokers can continue to be the key experts which individuals, businesses and communities rely on for protection to the emerging risks which are likely to become ever more commonplace in 2024.

You can read the original article on the Asia Insurance Review website