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Theresa May to spend aid money on insurance against disasters in Africa

PM tells G20 that plan is to spend £30m over four years on private insurance policies to reduce need for humanitarian aid

Theresa May is planning to spend tens of millions of pounds of aid funding on buying premiums with British insurance companies to help cover the costs of natural disasters in African countries, such as severe drought.

The prime minister believes that buying up private insurance policies in the UK, in a break from more traditional forms of aid spending, could reduce the need for expensive direct humanitarian support in the future.

A senior Downing Street official said the plan was to spend £30m over four years on the initiative, after which the companies would be able to continue working directly with African countries, opening up the opportunity to make a profit.

Oxfam’s senior policy adviser, Max Lawson, said that “harnessing the resources of the insurance industry is an interesting idea”, but said it must be judged on any benefits for poor countries and not the City of London.

The prime minister could face a backlash from critics of Britain’s aid budget in the UK, who believe that more should be done to help uninsured people at home facing flooding or other crises.

May laid out the plans at the G20 summit in Hamburg as part of a £200m package that aims to boost economic growth within African countries in order to make them less dependent on aid.

“We must not forget that progress in Africa benefits the UK at home. Our international aid work is helping to build Britain’s trading partners of the future, creating real alternatives to mass migration, and enhancing our security,” she said.

May added that it was also about a “moral responsibility” to meet the humanitarian needs of the poorest people on the planet, adding: “This is the future of aid, delivering value for money for the taxpayer.”

The prime minister was trying to echo Angela Merkel, the German chancellor, who has made her Compact with Africa the centrepiece of the two-day summit, rivalling Tony Blair’s drop the debt theme at the G8 in Gleaneagles, Scotland in 2005.

The aim is to boost private investment in a select group of African countries in the hope that they can act as the pioneers of a wider growth drive across the continent.

The German initiative warns: “By 2050 an estimated 2.5 billion people will live on the continent, almost twice as many as there are now. By 2030, approximately 440 million people will be looking for work.” Yet African economic growth has been slowing, partly due to a fall in commodity prices.

The German government argued: “Only $130bn (£100bn) a year would be enough to expand African infrastructure – roughly equivalent to the total amount of public aid for the continent.”

The Merkel plan has a self-serving element, since Germany is concerned that unless Africa, with its fast-growing youthful population, finds new jobs, many of the new generation will follow the path of hundreds of thousands of Africans struggling across the Mediterranean into Italy.

May also warned that 20m jobs needed to be created in Africa every year until 2035 to absorb new entrants into the labour force, arguing that failure to provide work meant “destabilising migratory patterns will persist – with extremist causes and criminality more likely to thrive”.

The package includes the new London Centre for Global Disaster Protection, which will aim to “use world-leading UK expertise and innovation to help developing countries strengthen disaster planning and use insurance to provide more cost-effective, rapid and reliable finance in emergencies, such as the severe drought in east Africa”.

Downing Street added: “This will reduce the need for expensive humanitarian aid, reassure private investors and help people rebuild their lives. Insurance protection built through this centre could provide £2bn when crises hit to ensure that the high costs of disasters aren’t borne by people or businesses, trapping them in cycles of poverty.”

The government said a further £60m was about building up a “robust and transparent financial sector” to attract more investment. “This paves the way for a strong partnership with the City of London, creating more opportunities for London to become the finance hub for Africa.”

Max Lawson of Oxfam said stimulating growth could help the fight against poverty. “But it is important to recognise that growing economies will not automatically provide people with enough food to eat or life-saving medicines – especially as Africa is home to some of the most unequal countries on Earth. We urge the government to set out in practical terms how it will ensure those who most need our help will reap the benefits of this initiative.”

He also stressed the need to tackle climate change.

Labour MP Stephen Doughty agreed that global warming threatened the lives of millions, but called the prime minister weak in the face of Donald Trump’s withdrawal from the Paris agreement. “She has no intention to stand up to the US president’s selfish agenda on climate change and global poverty,” he said.

Doughty welcomed support for development in African economies, but said it must not be at the expense of investment in strong public health and education systems.

What will happen to the European Health Insurance Card (EHIC) after Brexit?

For Britons travelling on the continent, a European Health Insurance Card (EHIC) – which affords travellers state provided necessary medical treatment in the host country – has long been a default item to take on holiday.

They cover temporary stays in European Economic Area (EEA) countries, plus Switzerland, and over 27 million people have one, according to the Department of Health.

Patients are effectively treated as a resident of the country in question, either at a reduced cost or for free by the state healthcare system, with the home nation picking up the tab.

However, the future of this benefit has been thrown into doubt by the vote to leave the European Union.

Nothing will happen to the EHIC when Article 50 is triggered, as it merely starts the process of leaving the European Union.

One of the major factors in deciding whether the EHIC will remain available to British citizens is whether there is a separation from the EEA,  as the card is not an EU initiative.

There are countries, such as Norway and Iceland, who are EEA members but not EU members and accept the EHIC. The UK could feasibly adopt this model.

Swiss horn players, and flags
There has been speculation the UK could follow the Swiss model  CREDIT: PIERRE ALBOUY/REUTERS

However, Gemma Sonfield, head of travel insurance at comparison website, said: “One of the Leave campaign’s major arguments centred on immigration and border control. As the EEA allows for the free movement of people around the EU’s 28 member states, it is also feasible that Brexit will sever ties with the EEA as well, in which case the EHIC would likely cease to exist.”

Ms Sonfield highlighted Switzerland as an exception that is neither an EU or EEA member, but accepts the EHIC as part of the single market.

“There has been speculation as to whether the UK could follow the Swiss model,” she said.

The knock on effect to insurance costs could be significant in the event that the EHIC becomes unavailable for British citizens. Insurers would have to take into consideration that they would be footing the bill for all medical treatment, rather than having a proportion dealt with through the EHIC system.

Ms Sonfield added: “The card provides such good health protection that some insurers now insist you have to have an EHIC to take out a policy, and many will even waive your excess if you do have one.”

A Government spokesman said: “The rights and entitlements that will apply following the UK’s exit are subject to the wider negotiation on our future relationship with the EU.

“At every step of these negotiations we will work to ensure the best possible outcome for the people of the United Kingdom, including those travelling to and living in EU countries.”

Report Calls out $361M of Euro Insurer Assets in Expanding Coal Concerns

A climate activist group is calling out a handful of European insurers for having significant holdings in fossil fuels despite pledges by the companies to be more climate friendly.

A report released today alleges that Allianz, Generali, Munich Re, Swiss Re and Zurich continue to hold at least $361 million of assets collectively in companies that are planning to develop 97,000 megawatts of new coal power plants.

Unfriend Coal, a coalition of climate activists, put out a sort of “put your money where your mouth is” report examining the climate and coal policies of the insurers ahead of half-year media reports due this month from Allianz (Aug. 4), Swiss Re (Aug. 4), Munich Re (Aug. 9) and Zurich (Aug. 10).

The release of the report is timed to put the information in the hands of financial journalists and analysts just ahead of when the carriers are reaching out to the media and public to talk about their financial results for the first half of the year, according to one of the authors of the report.

“Coal investments and climate risk have financial implications for insurers,” said Peter Bosshard, coordinator of the Unfriend Coal coalition and director of the finance program for the Sunrise Project. The Sunrise Project is an Australian group that’s part of the coalition, which includes Friends of the Earth France, Greenpeace Switzerland, Re:Common (Italy) and Urgewald (Germany).

The report is part of a broad movement on myriad fronts to get the financial industry away from coal and fossil fuel investments.

The G20s Financial Stability Board last year issued recommendations for companies to disclose how they manage risks to their business from climate change and greenhouse gas emission cuts.

There are also efforts in the U.S. to get insurers to disclose their investments in coal from some state regulators, who say that coal and fossil fuels are at risk of being stranded due to regulatory trends and falling prices for alternative fuels. However, those efforts haven’t gone unchallenged.

The $361 million of investments highlighted in the report are in coal companies that are expanding their capacity – that figure does not include investments in coal companies that aren’t expanding, Bosshard said.

Only investments in expanding coal concerns were examined because investing in this expansion undermines the goal of the Paris agreement, which is to curtail greenhouse gases and reduce reliance on dirty fuels, he said.

The $361 million in assets held by Allianz, Generali, Munich Re, Swiss Re and Zurich in companies that are planning to capacity are in 20 countries, including China, India, Indonesia, Vietnam and Poland.

“If completed these projects would make it impossible for the world to achieve the goals of the Paris Agreement,” Unfriend Coal states in its report.

On its face, the report appears goes counter to the popular notion that European insurers are ahead of their counterparts when it comes to divesting in fossil fuels and environmentally conscious investing.

Others who have compiled reports on investments in fossil fuels have lauded European insurers for being more progressive on climate change than their U.S. counterparts. And unlike many European insurers, the U.S. PC industry mostly reacted with silence to President Donald Trump’s decision to withdraw the country from the Paris climate change accord.

Bosshard said the report shouldn’t be taken as an indication that European insurers are falling behind.

“We see the European insurers as leaders in this field,” Bosshard said. “They have taken action, we recognize that. But their effort is not yet consistent. There are a lot of gaps and contradictions.”

Ceres, a sustainability advocate that also produces reports on climate change and the insurance industry, applauded the authors of the report and encouraged further assessments that take into account both energy transition and physical impact risk of climate change.

“Many of the world’s largest insurers remain potentially highly exposed to climate change risk, and its negative effects on companies’ assets and liabilities,” said Cynthia McHale, director of the Ceres insurance program. “Scenario analysis can be particularly helpful to companies when assessing climate change, as outcomes are highly uncertain and they will play out over a long period of time.”

Many of the insurers being called out not only have significant investments in coal, but they continue to underwrite new coal power plants, according to the report.

While Allianz, Munich Re and Swiss Re are in the process of divesting their assets from the coal sector, so far only France’s AXA has also stopped underwriting coal companies in which it no longer invests. AXA is also the only carrier divesting third-party assets which it manages from the coal sector, according to the report.

The group couldn’t offer specific underwriting data to expand on its allegations.

The report also calls out Zurich and Generali for taking little to no action to distance themselves from coal.

“Zurich so far hasn’t taken any active policy on coal,” said Bosshard, who believes the carrier could divest easily since it has so little of its overall investment in coal.

Zurich’s coal holdings make up less than 0.5 percent of its total bond portfolio, according to the report.

However small the percentage, the total of Zurich holdings in coal appear to be large. The company currently holds bonds of at least $164.7 million in coal companies, and its portfolio includes major exposure to coal mining and power companies with a bad environmental track record like Duke Energy, Glencore and BHP Billiton, according to the report.

A spokeswoman from Zurich offered the following emailed statement when asked for a comment for this article:

“Zurich’s exposure to coal is very limited both on the insurance business and investment sides. With regard to fossil fuels and the energy sector in general, we continue to act responsibly in both our investments and insurance for this sector. Rather than systematically exclude certain assets or business sectors, it is better to engage with customers to understand their business and operations, and work together to ensure responsible and sustainable business practices are in place.”

The spokeswoman also noted that Zurich has nearly $2 billion invested in green bonds to date. In addition to its green bond investing practices, the carrier has also been called out for other environmentally friendly measures it has taken. That includes its new 783,800-square-foot corporate campus in a Chicago suburb, which has garnered high recognition for its environmental design and building sustainability.

Spokespersons for Munich Re, Swiss Re, Generali and Allianz were all reached out to for comment. Those queries were not immediately returned.

Allianz was a main focus of the report for continuing to manage large coal assets for third parties through its investment funds, making Allianz is the most active investor in the expansion of global coal capacity, according to authors of the report.

The report shows that Allianz is holding $241 million in equity and bonds of coal companies that are still expanding.

Bosshard acknowledged that Allianz has taken big steps to divest from coal, but he said the company still has large investments funds at play in the coal sector.

“They take pride in having divested their own resources, but they’re really offering a platform to keep this industry alive,” he said.

Swiss Re is another company that has taken great strides to rid itself of coal investments, but the company continues to invest in tar sands in Canada and in pipelines like Keystone, TransMountain and Dakota Access, according to the report.

Unfriend Coal is evidently not done with pressing the insurance industry to be more environmentally friendly.

The group is currently working on a scorecard on investing in and underwriting fossil fuels that will rank 25 of the world’s leading insurers, which it plans to publish in November, according to Bosshard.

Court allows Democratic states to defend Obamacare payments

A U.S. appeals court on Tuesday allowed Democratic state attorneys general to defend subsidy payments to insurance companies under the Obamacare health-care law, a critical part of funding for the statute that President Donald Trump has threatened to cut off.

The U.S. Court of Appeals for the District of Columbia Circuit granted a motion filed by the 16 attorneys general, led by California’s Xavier Becerra and New York’s Eric Schneiderman.

President Donald Trump, frustrated that he and fellow Republicans in Congress have been unable to keep campaign promises to repeal and replace Obamacare, has threatened to stop making the so-called cost-sharing subsidy, or CSR, payments.

“The President is working with his staff and his cabinet to consider the issues raised by the CSR payments, a White House statement said.

The subsidies help cover out-of-pocket medical expenses for low-income Americans.

The case, which dates back to the administration of President Barack Obama, was filed by the Republican-led House of Representatives against the federal government in an effort to block the subsidy payments to insurers for the individual plans created by the Affordable Care Act, popularly known as Obamacare.

The court’s order allows Democrats who back the law to have a say in the legal fight, giving them the power to block a settlement or appeal a ruling blocking the payments. They can also file briefs and their lawyers can participate in oral arguments.

“The court’s decision is good news for the hundreds of thousands of New York families that rely on these subsidies for their health care. It’s disturbingly clear that President Trump and his administration are willing to treat them as political pawns,” Schneiderman said in a statement.

If Donald Trump won’t defend these vital subsidies for American families, then we will,” Becerra said.

The order issued by the three-judge panel, all Obama appointees, said the states had shown “a substantial risk that an injunction requiring termination of the payments at issue here … would lead directly and imminently to an increase in insurance prices, which in turn will increase the number of uninsured individuals for whom the states will have to provide health care.”

“In addition, state-funded hospitals will suffer financially when they are unable to recoup costs from uninsured, indigent patients for whom federal law requires them to provide medical care,” the court order said.

Nicholas Bagley, a professor at the University of Michigan Law School, said the decision was a “big deal” because it makes it difficult for the Trump administration to settle the case.

“Allowing the states to intervene will increase the pressure on the administration to keep making the cost-sharing payments,” he said, noting that the administration could still stop making the payments.

Trump has repeatedly threatened to withhold the payments to insurers, which amount to about $7 billion this year, and referred to them as a “bailout.”

The attorneys general cited in their May court filing Trump’s own words vowing to let Obamacare “explode” as part of the reasoning for their intervention.

The case is currently on hold at the request of both sides. The expectation had been that the case would be dismissed because the Republican-controlled Congress was poised to repeal the Obamacare law. But that effort failed last week, meaning the court case has taken on renewed importance.

U.S. health insurer Anthem is pulling back from 16 of 19 pricing regions in California where it offered Obamacare options this year in part due to uncertainty over the payments, state officials said on Tuesday.

Promise over profits in India

India’s only private reinsurer is considering quitting the business less than a year after new regulations came into force to help nurture domestic reinsurance capability.

ITI Reinsurance, which is backed by Sudhir Valia’s Fortune Financial Services, has complained that unfair regulations have prevented it from writing any business since it won a licence in December last year.

“We are willing to surrender our licence if the division of obligatory cession continues to be skewed and other regulations are not suitably changed,” Valia told Indian national news agency IANS.

On the face of it, domestic reinsurers were given preferential status under the new regulations, which stipulate that domestic reinsurers are offered all cessions first, before they are offered to the newly established branches of foreign reinsurers.

But in practice, state-owned GIC Re remains the only domestic reinsurer writing any business due to a stipulation that Indian reinsurers are only entitled to a right of first refusal after three years of stable credit ratings.

“The regulation is not only illogical but also anti-competitive,” D Varadarajan, a Supreme Court advocate representing ITI, told IANS.

This is not a new complaint. Local brokers argued at the time that this treatment was “regressive, anti-policyholder and anti-competitive”.

In a January letter they wrote: “[Insurance Brokers Association of India] is of the strong view that for a more balanced and policyholder-centric interpretation in line with principal objectives of the regulation, the reinsurance order of preference regulations should be at least deferred for six months till the implications of the same are debated from a policyholder perspective.”

For its part, ITI complains that it is unfair that it was asked to put up Rs5 billion of capital — more than double the Rs2 billion stipulated under the regulation for reinsurers — but still cannot do business.

“How can a new company like ours have a credit rating for three years?” asked R Raghavan, ITI’s chief operating officer.

The first global reinsurers approved to open branches were Hannover Re, Munich Re, Reinsurance Group of America, Scor and Swiss Re. Lloyd’s, XL Catlin and Gen Re followed. While these foreign reinsurance branches are currently higher up the pecking order than ITI in India, GIC Re is still the dominant player.

Most foreign branches were open in time for the April renewals, but the soft market conditions resulted in significant pressure on pricing.

However, the prize for India’s foreign reinsurance contingent is the underlying growth of the country’s insurance industry, where premiums are growing by as much as 30%, driven by agriculture, motor and health. Even so, non-life insurance penetration is still just 0.49% and represents what foreign reinsurers hope is a golden goose.

That remains to be seen, but for ITI the moment of reckoning may come even sooner.


Promise over profits in India