report and market update - gallagher insurance, risk ...cpri market update for july 2015...

ARTHUR J. GALLAGHER AJGINTERNATIONAL.COM LONDON CPRI MARKET UPDATE FOR JULY 2015 1

CREDIT AND POLITICAL RISK INSURANCE (CPRI)JULY 2015

REPORT AND MARKET UPDATE

LONDON CPRI MARKET UPDATE FOR JULY 2015 AJGINTERNATIONAL.COM ARTHUR J. GALLAGHER 2

Founded by Arthur Gallagher in Chicago in 1927, Arthur J. Gallagher & Co has grown to become one of the largest insurance brokerage and risk management companies in the world. With significant reach internationally, the group employs over 20,000 people and its global network provides services in more than 140 countries.

Outside the US, we use the brand name Arthur J. Gallagher.

ARTHUR J. GALLAGHER AJGINTERNATIONAL.COM LONDON CPRI MARKET UPDATE FOR JULY 2015

CONTENTS

Review 2Commercial Market Overview 4Available Market Capacity 7Total Capacity Available by Tenor – July 2015 8Available Market Capacity Comparison 9Trade Credit Insurance 10Main Trade Credit Insurers 10Emerging Markets Country Risk Ratings 11Kidnap and Ransom Insurance Fact Sheet 14Terrorism Report 2015 15Contacts 16


CPRI MARKET UPDATE FOR JULY 2015

“Political risk has returned with a vengeance.” Lionel Barber, FT Editor, 20th March 2015

The Arthur J. Gallagher Market Update for July 2015 summarises the changes in line structure and tenors available from commercial political risk insurers since our last report in January 2015. The summary reflects the outcome of reinsurance negotiations where renewals have been completed in the intervening period, as well as the arrival of any new insurers who have gained approval for their business plans and obtained sufficient capital allocations. Additionally, any changes to credit agencies’ rating of the insurers are detailed herein.

With few changes to Insurers’ line sizes there has been a minor increase in market capacity since the previous January edition. “Seven years on from the onset of the global financial crisis, the world is recovering, but only slowly,” (Ibid.) Political unrest is prevalent the world over, some of which is highlighted below.

The jihadist group ISIS has declared the establishment of a ‘caliphate’ – an Islamic state – stretching from Aleppo in Syria to the province of Diyala in Iraq. Without Sunni support, the new Iraqi government headed by Haider Abadi is unlikely to be able to restore federal government control over northern Iraq. In Syria, prospects for a diplomatic solution to the war are poor. President Bashar al-Assad’s forces have suffered significant territorial losses to the increasingly co-ordinated Sunni insurgents in 2015. In addition to the on-going civil war and US and EU sanctions somewhat restricting trade with the Syrian government, Syria’s legal system impedes wider flows of foreign investment.

In Libya, political stability will continue to be undermined by oil sector disruption perpetrated by rival armed groups fighting for control of oil infrastructure, and general insecurity. As such large numbers of refugees from the Middle East and Africa have attempted to cross borders into Europe, often with fatal consequences.

Despite Greece’s well documented, continued failure to honour IMF loan repayments, the Eurozone is on track to experience its best growth in four years. Eurozone GDP growth improved to 0.4% quarter on quarter in Q1 2015, which was the strongest performance since the second quarter of 2011.

The extension of EU sanctions on Russia until January 2016 is likely to escalate regulatory blockages to business activity. One estimate showed that Russia’s Q1 real GDP contracted by 2.2% year on year, with the most affected

industries being: trade, hotels and restaurants, and real estate, indicating private consumption is falling.

Brazil has seen hundreds of thousands of people taking part in anti-government demonstrations, sparked by anger over bribery scandals with the state-run multinational energy corporation, Petrobras, which has been penalised with a USD 17 billion corruption fine. Brazil’s president, Dilma Rouseff, has introduced a five-year USD 65 billion infrastructure package in order to combat recession.

Six months after President Obama eased sanctions on a more than five decade long Cold War stalemate with Cuba, American money, travellers and business executives have entered the island, resulting in a 36% increase in travel between January and May.

In Venezuela expropriation risks will remain high ahead of the pivotal December 2015 parliamentary elections that will test the popularity of President Nicolás Maduro and his ruling (United Socialist party of Venezuela).

Recently (23rd June 2015), oil prices have risen by more than USD 10 from the low levels experienced in the last six months, with the US benchmark West Texas Intermediate (WTI) currently priced at USD 60.11 a barrel on the New York Mercantile Exchange.

A Tripartite Free Trade Area (TFTA) agreement was signed last week by officials of three of Africa’s existing trade blocs - the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA) – with the intention of reducing internal duties and to harmonise trade regulations. The ‘unified’ market incorporating 26 of Africa’s 54 countries would comprise 600 million people and have a combined GDP of around USD 1 trillion.


In China rising debt levels and serious overcapacity in housing and manufacturing are likely to limit short-term economic growth. The central bank will probably maintain a conservative monetary policy stance, constraining the investment financing environment. Recent reductions in global energy prices are not sufficient to significantly stimulate growth, although exports should improve in 2015 due to strong recoveries in North America and, to a lesser extent, Western Europe.

Lower crude prices and existing sanctions on Iran’s oil exports, along with unwillingness to cut social spending, increase Iran’s incentives for a

final deal on its nuclear programme to secure sanctions relief. However, a deal with the US challenges the Islamic Republic’s legitimacy, founded upon religiously motivated anti-Western ideals. The hardline faction and the Islamic Revolution Guards Corps (IRGC) seem to believe that self-reliance, isolation and ideological consistency are more important for the regime’s survival.

Significant CPRI market changes are summarised below:

ACE

ACE has opened an office in Japan, Hiroya Takagi has joined as Manager, Political Risk & Credit, Japan. Takagi-san has previously worked at Euler Hermes in Japan as Commercial Underwriting Manager.

Aspen

Carolyn Thomas has moved to Aspen’s Bermuda office to write credit and political risk as at 1st April 2015. The insurer is Aspen Bermuda Ltd. Tenor, limits, sub classes and financial strength rating mirror those of Aspen insurance UK Ltd. She will focus on business originating in the Americas.

Canopius

Lijana Baubyte, a Credit Risk Analyst from Liberty, has joined Canopius.

Chaucer

Chaucer has increased its maximum tenors by two years and can now right up to 7 years for CEND, CF and CR risks.

Fidelis

Richard Brindle has started a new company Fidelis and is joined by Richard Coulson. Line size and tenors to be finalised.

Liberty

Liberty has strengthened its Country and Credit Risk Management team with the recruitment of Christian Crivari in London and Siew Choon in Singapore.

XL Catlin

Joe Blenkinsopp has been appointed Chief Underwriting Officer and Global Head of the combined team effective 24th June 2015.

The acquisition of Catlin by XL, exceeding USD 4 billion in value, has dominated the Lloyd’s market.


Insurer:

‘Company Markets’

Project Risks (CEN) Trade Risks Political (CF) Trade Risks Commercial (CR)

Rating(s)

Total max per risk (USD)

Max Tenor (years)


Max Tenor (years)


Max Tenor (years)

ACE European Group Ltd.

100,000,000 15 80,000,000 15 30,000,000 5 AA [S&P]

AIG 150,000,000 15 150,000,000 15 100,000,000 5 A+ [S&P]

Aspen 100,000,000 15 100,000,000 15 100,000,000 8 A [S&P]

Atradius 112,000,000 7 112,000,000 7 112,000,000 7 A [A.M. Best]

Axis 50,000,000 7 50,000,000 7 35,000,000 7 A+ [S&P]

C V Starr 50,000,000 10 50,000,000 0 10,000,000 1 A [A.M. Best]

Coface 70,000,000 10 70,000,000 7 70,000,000 7 AA- [Fitch]

Euler Hermes 125,000,000 8 125,000,000 8 125,000,000 8 AA- [S&P]

FCIA 25,000,000 7 80,000,000 7 80,000,000 7 A+ [S&P]

Garant 34,000,000 7 34,000,000 7 34,000,000 7 A- [Fitch and A.M. Best]

Houston Casualty 50,000,000 7 50,000,000 7 50,000,000 5 AA [S&P/Fitch]

Ironshore 40,000,000 7 40,000,000 7 40,000,000 7 A [A.M. Best]

Lancashire Insurance Ltd.

200,000,000 10 75,000,000 10 0 0 A-[S&P]

AWAC (LAU) 20,000,000 5 20,000,000 5 20,000,000 5 A [A.M. Best]

Liberty Mutual Insurance Europe

Ltd.

50,000,000 15 50,000,000 10 50,000,000 7 A [S&P]

Markel International Insurance Company

0 0 50,000,000 7 150,000,000 5 A [S&P/Fitch]

Montpelier Re 25,000,000 7 25,000,000 7 25,000,000 7 A- [S&P/Fitch]

Sovereign 80,000,000 15 80,000,000 15 0 0 AA [S&P/Fitch]

Swiss Re Corporate Solution Ltd.

75,000,000 10 75,000,000 10 200,000,000 5 AA-[S&P]

XL Catlin 190,000,000 12 165,000,000 12 115,000,000 12 A+ [S&P/Fitch]

Zurich 150,000,000 15 150,000,000 15 75,000,000 5 AA- [S&P/Fitch]

Total: ‘Company Markets’

July 2015

1,696,000,000 5% 1,631,000,000 1% 1,421,000,000 1%

Total: Jan 2015 1,618,000,000 1,615,000,000 1,405,000,000

COMMERCIAL MARKET OVERVIEW


COMMERCIAL MARKET OVERVIEW

Insurer:

‘Lloyd’s Markets’

[All Lloyd’s Markets rated A+ by S&P]

Project Risks

(CEN)

Trade Risks Political

(CF)

Trade Risks Commercial

(CR)


Max Tenor (years)


Max Tenor (years)


Max Tenor (years)

Acappella Lloyd’s Syn 2014

10,000,000 7 10,000,000 7 7,500,000 5

ACE Global Markets

Lloyd’s Syn 2488

100,000,000 15 80,000,000 15 30,000,000 5

AmlinLloyd’s Syn 2001

20,000,000 5 20,000,000 5 2,500,000 3

AntaresLloyd’s Syn 1274

25,000,000 10 25,000,000 10 15,000,000 5

ANV Lloyd’s Syn 1861

17,500,000 7 15,000,000 7 3,000,000 1

ArgoLloyd’s Syn 1200

20,000,000 5 20,000,000 5 20,000,000 3

ArkLloyd’s Syn 4020

15,000,000 7 15,000,000 7 0 0

AscotLloyd’s Syn 1414

25,000,000 7.5 25,000,000 7.5 5,000,000 3

AspenLloyd’s Syn 4711

50,000,000 15 50,000,000 15 50,000,000 8

BeazleyLloyd’s Syn 623/2623

50,000,000 7 50,000,000 7 30,000,000 7

BRITLloyd’s Syn 2987

30,000,000 10 30,000,000 8 30,000,000 8

CanopiusLloyd’s Syn 4444

25,000,000 7 25,000,000 7 12,500,000 7

Channel Lloyd’s Syn 2015

45,000,000 10 45,000,000 10 25,000,000 7

ChaucerLloyd’s Syn 1084

30,000,000 7 30,000,000 7 15,000,000 7

C V Starr Lloyd’s Syn 1919

50,000,000 10 50,000,000 10 10,000,000 5

HardyLloyd’s Syn 382

15,000,000 5 15,000,000 5 10,000,000 5

Hiscox Lloyd’s Syn 33

25,000,000 10 25,000,000 5 25,000,000 5

ANV 5820 (Jubilee)

Lloyd’s Syn 5820

15,000,000 7 15,000,000 7 15,000,000 7

KilnLloyd’s Syn 510

60,000,000 5 40,000,000 5 40,000,000 5


Insurer:

‘Lloyd’s Markets’

[All Lloyd’s Markets rated A+ by S&P]

Project Risks

(CEN)

Trade Risks Political

(CF)

Trade Risks Commercial

(CR)


Max Tenor (years)


Max Tenor (years)


Max Tenor (years)

Liberty Syn Mgmt

Lloyd’s Syn 4472

50,000,000 15 50,000,000 10 50,000,000 7

MarketformLloyd’s Syn 2468

40,000,000 10 40,000,000 10 40,000,000 10

MAPLloyd’s Syn 2791

20,000,000 3 20,000,000 3 0 0

Markel International

Lloyd’s Syn 3000

0 0 50,000,000 7 70,000,000 5

Montpelier Re Lloyd’s Syn 5151

25,000,000 7 25,000,000 7 25,000,000 7

NovaeLloyd’s Syn 2007

30,000,000 7 30,000,000 7 30,000,000 7

Nexus CIFSLloyd’s Syn

4472/2001/1955

0 0 15,000,000 5 15,000,000 5

O’FarrellLloyd’s Syn 1036

20,000,000 5 20,000,000 5 0 0

PembrokeLloyd’s Syn 4000

15,000,000 7 15,000,000 7 12,500,000 7

TalbotLloyd’s Syn 1183

40,000,000 7 40,000,000 7 20,000,000 7

TorusLloyd’s Syn 1301

5,000,000 3 0 0 0 0

WR BerkleyLloyd’s Syn 1967

7,500,000 5 5,000,000 5 0 0

XL CatlinLloyd’s Syn 1209/2003

190,000,000 10 165,000,000 12 115,000,000 12

Total:

‘Lloyd’s Markets July 2015’

1,070,000,000 3% 1,060,000,000 2% 723,000,000 3%

Total:

Jan 2015

1,035,000,000 1,035,000,000 703,000,000

COMMERCIAL MARKET OVERVIEW continued


(Total possible maximum USD per risk)

Project Risks (CEN) Trade Risks Political (CF) Trade Risks Commercial (CR)

Company 1,696,000,000 1,631,000,000 1,421,000,000

Lloyd’s 1,070,000,000 1,060,000,000 723,000,000

Total 2,226,000,000 5% 2,196,000,000 2% 1,794,000,000 2%

Total: Jan 2015 2,123,000,000 2,155,000,000 1,758,000,000

Notes:Totals do not ‘double count’ the Company and Lloyd’s lines of ACE, Aspen, C V Starr, Liberty, Markel, Montpelier and XL Catlin that can be written via either their Company or Lloyd’s syndicate.

AVAILABLE MARKET CAPACITY – JULY 2015


1,6961,800,000,0001,600,000,0001,400,000,0001,200,000,0001,000,000,000

800,000,000600,000,000400,000,000200,000,000

0

Cap

acit

y

Project Risks (CEN) Trade Risks Political (CF)

Risk Type

Trade Risks Commercial (CR)

CompanyLloyd’s

1,070

1,631

1,060

1,421

723

AVAILABLE MARKET CAPACITY – JULY 2015


TOTAL CAPACITY AVAILABLE BY TENOR – JULY 2015


Max Tenor (years) Project Risks (CEN) Trade Risks Political (CF) Trade Risks Commercial (CR)

15 770,000,000 725,000,000 -10 1,370,000,000 1,150,000,000 155,000,0007 1,980,000,000 1,754,000,000 1,155,000,0005 2,226,000,000 2,110,000,000 1,585,000,0003 2,238,000,000 2,196,000,000 1,794,000,000

(Total possible maximum million USD per risk)

2,2262,196

1,794

3 5 7 10 15

2,500

2,000

1,500

1,000

500

0

Cap

acit

y

Tenor Available (Years)

Project Risks (CEN)Trade Risks Political (CF)Trade Risks Commercial (CR)2,238

2,110

1,585

1,9801,754

1,370

770

1,150

725

1,155

155


AVAILABLE MARKET CAPACITY COMPARISON

(Tot

al p

ossib

le m

axim

um m

illio

n U

SD p

er ri

sk)

Janu

ary

2001

to Ju

ly 2

015

Proje

ct Ri

sks (

CEN

)Se

p 01Jan

02

Jan 03Jan 04

Jan 05Jan 06

Jan 07Ju

l07

Jan 08Ju

l08

Jan 09Ju

l09

Jan 10Ju

l10

Jan 11Ju

l11

Jan 12Ju

l12

Jan 13Ju

l13

Jan 14Ju

l14

Jan 15Ju

l15

Com

pany

580

564

495

495

470

490

515

545

660

855

840

870

920

795

865

985

1,015

1,233

1,285

1,324

1,493

1,608

1,618

1,696

Lloy

d's57

427

427

828

031

833

536

838

842

345

347

856

059

359

363

364

362

274

376

277

891

393

81,0

351,0

70

Total

1,154

837

773

775

788

825

883

933

1,083

1,228

1,238

1,350

1,348

1,223

1,293

1,333

1,382

1,646

1,688

1,742

2,016

2,216

2,123

2,226

Trad

e Risk

s Poli

tical

(CF)

Sep 01

Jan

02Jan 03

Jan 04Jan 05

Jan 06Jan 07

Jul

07Jan 08

Jul

08Jan 09

Jul

09Jan 10

Jul

10Jan 11

Jul

11Jan 12

Jul

12Jan 13

Jul

13Jan 14

Jul

14Jan 15

Jul

15

Com

pany

268

331

318

318

310

405

440

480

530

735

720

750

800

745

865

948

1,085

1,195

1,247

1,291

1,360

1,515

1,615

1,631

Lloy

d's38

918

820

319

523

925

629

733

234

737

738

145

650

251

056

057

054

567

569

570

384

595

21,0

351,0

60

Total

657

519

520

513

549

661

737

812

877

1,052

1,041

1,146

1,157

1,110

1,240

1,268

1,420

1,565

1,607

1,659

1,885

2,022

2,155

2,196

Trad

e Risk

s Co

mm

ercial

(CR)

Sep 01

Jan

02Jan 03

Jan 04Jan 05

Jan 06Jan 07

Jul

07Jan 08

Jul

08Jan 09

Jul

09Jan 10

Jul

10Jan 11

Jul

11Jan 12

Jul

12Jan 13

Jul

13Jan 14

Jul

14Jan 15

Jul

15

Com

pany

--

195

185

175

255

255

300

335

445

420

450

500

505

550

658

820

955

987

1,036

1,080

1,185

1,405

1,405

Lloy

d's-

-73

8779

103

167

190

208

238

251

307

346

341

353

658

338

453

455

457

544

634

703

723

Total

--

268

242

254

358

422

490

543

653

641

727

731

731

768

865

998

1,158

1,177

1,228

1,379

1,559

1,758

1,794


TRADE CREDIT INSURANCE – JULY 2015

The trends identified in our last market update have continued into the first half of 2015. The market has seen a number of large insolvencies resulting in significant claims payment to clients against a backdrop of plentiful capacity and softer pricing. Even as we emerge from recession, credit insurance has a vital role to play in helping businesses protect their cash flow and balance sheet and this risk mitigation role is a key driver for many companies to purchase insurance. It is of course not the only reason - credit insurance provides the underlying security to extend credit to existing customers and to help identify new companies and markets. The role of the insurers in providing country, trade sector and buyer credit information is vital. Credit insurance also enables companies to open up access to bank finance, for example by accelerating payments against trade receivables, trade finance and facilitating supply chain finance.

Arthur J. Gallagher recently attended the GTR UK Trade & Export Finance Conference in Birmingham – a forum that brings together exporters, financiers, government representatives, insurance companies and professional advisers like us. A key conclusion was the need for the credit insurance market to work more closely with the banks and trade financiers to hit the government’s

stretching target of GBP 1 trillion of exports by 2020. This is almost a doubling of the current value of the UK’s exports currently. A tough challenge, but there is an increasing demand from banks and trade financiers for credit insurance solutions to support exporters and importers. The credit insurers, with the help of specialist brokers, have developed solutions in response. These solutions not only enable banks to make funds available to their customers by protecting them from commercial and political credit risk, but also enable them to achieve capital relief within the framework of the Basel III regulations.

These solutions have been available for some time, but the insurers and brokers continue to develop structures and policy wordings to accommodate almost any trade receivable funding scenario. This is the latest stream of innovation in the credit insurance market and one that continues on a growth path.

MAIN TRADE CREDIT INSURERS

Insurer Rating (S&P unless indicated) Ground Up Excess of Loss

Single Risk

ACE AA - x xAIG A+ x x x

Atradius A3 (Moody's) x x xCIFS A+ x x -

Coface AA- (Fitch) x x xCredimundi AA+ (as per ONDD) x x -

Equinox Global A+ (as per Lloyd's) x x -Euler Hermes AA- x x x

FCIA A+ (as per Great American Insurance) x x xHCC AA x x x

Ironshore A (A.M. Best) - x xAWAC A - x x

Liberty Mutual A- - - xLloyd's A+ - x xMarkel A (S&P/Fitch) - x xQBE A+ x x x

XL Catlin A+ - x xZurich AA- x x x


EMERGING MARKETS COUNTRY RISK RATINGS

The following pages analyse the Country Risk Ratings, compiled by IHS Global Insight, of various Emerging Markets. We compare the Overall Risk Ratings and the Political Risk Ratings as at the time of publication of this Market Report, and as at 1st July 2015. These countries have been selected from the International Monetary Fund’s World Economic Outlook for Emerging and Developing Economies.

Risk Rating Risk Description

0.75 – 1.24 Insignificant

1.25 – 1.74 Negligible

1.75 – 1.99 Low

2.00 – 2.49 Moderate

2.50 – 2.99 Medium

3.00 – 3.49 Significant

3.50 – 3.99 High

4.00 – 4.49 Very High

4.50 – 6.99 Extreme

7.00 – 10.00 Very Extreme

Sub-Sahara Africa

Overall Risk at 01 Jan 2015

Overall Risk at 01 July 2015

Political Risk at 01 Jan 2015

Political Risk at 01 July 2015

Burkina Faso 3.53 High 3.00 Significant 3.75 High 2.90 MediumCôte d’Ivoire 3.87 High 2.50 Medium 4.00 Very High 2.10 ModerateDemocratic

Republic of Congo

4.33 Very High 3.90 High 4.25 Very High 3.50 High

Ghana 2.82 Medium 2.60 Medium 2.75 Medium 2.50 MediumKenya 3.39 Significant 2.70 Medium 3.75 High 2.30 ModerateLiberia 3.80 High 3.30 Significant 3.75 High 3.00 SignificantNigeria 4.07 Very High 3.60 High 4.50 Extreme 2.90 Medium

Sierra Leone 3.69 High 2.90 Medium 3.50 High 2.60 MediumSouth Africa 2.57 Medium 2.30 Moderate 2.50 Medium 1.90 Low

Tanzania 3.32 Significant 2.80 Medium 3.00 Significant 1.60 Negligible

Overall Risk Ratings take into account six components: Political, Economic, Legal, Tax, Operational and Security. These ratings are principally measuring stability.

Political Risk Ratings analyse four factors:• Institutional performance• Representation of the population and organised

interests• Internal political consensus• External political consensus


Asia Pacific





Cambodia 3.19 Significant 2.20 Moderate 3.00 Significant 1.40 NegligibleChina 2.90 Medium 2.00 Moderate 2.50 Medium 1.40 LowIndia 2.86 Medium 2.50 Medium 3.00 Significant 2.30 Moderate

Indonesia 2.82 Medium 2.20 Moderate 2.75 Medium 1.70 NegligibleLaos 3.06 Significant 2.20 Moderate 3.00 Significant 1.40 Negligible

Pakistan 3.96 Very High 2.90 Medium 4.50 Extreme 2.80 MediumPapua New

Guinea3.39 Significant 2.50 Medium 3.39 Significant 2.30 Moderate

Philippines 2.68 Medium 2.10 Moderate 2.50 Medium 1.20 InsignificantThailand 2.94 Medium 2.00 Moderate 3.50 High 1.80 LowVietnam 2.97 Medium 1.90 Low 3.25 Significant 1.00 Insignificant

Europe and CIS





Belarus 3.51 High 2.50 Medium 3.50 High 2.70 MediumCzech

Republic 2.04 Moderate 1.30 Negligible 2.25 Moderate 1.50 Negligible

Greece 2.79 Medium 2.40 Moderate 2.75 Medium 2.80 MediumKazakhstan 3.03 Significant 2.30 Moderate 2.75 Medium 1.80 LowKyrgyzstan 3.58 High 3.50 High 3.75 High 3.20 Significant

Poland 1.96 Low 1.40 Negligible 2.00 Moderate 1.40 NegligibleRomania 2.53 Medium 2.00 Moderate 2.25 Medium 2.30 Moderate

Russia 3.07 Significant 2.80 Medium 3.00 Significant 2.30 ModerateSlovakia 1.88 Low 1.30 Negligible 2.00 Moderate 1.20 InsignificantUkraine 3.65 High 3.70 High 4.00 Very High 3.60 High




Latin America and Caribbean





Argentina 3.44 Significant 3.30 Significant 3.25 Significant 2.60 MediumBolivia 3.39 Significant 3.20 Significant 3.25 Significant 2.80 MediumBrazil 2.66 Medium 2.00 Moderate 2.50 Medium 1.60 Negligible

Colombia 2.77 Medium 2.20 Moderate 2.50 Medium 2.30 ModerateDominican Republic

2.85 Medium 2.00 Moderate 3.25 Significant 2.10 Moderate

Ecuador 3.50 High 3.10 Significant 3.25 High 2.50 MediumGuatemala 3.31 Significant 2.60 Medium 3.50 High 3.50 HighNicaragua 3.42 Significant 2.60 Medium 3.50 High 2.20 Moderate

Peru 2.86 Medium 2.10 Moderate 3.25 Significant 2.30 ModerateVenezuela 3.98 High 4.40 Very High 4.00 Significant 3.90 High

Middle East and North Africa





Algeria 3.14 Significant 3.20 Significant 3.50 Significant 2.90 MediumBahrain 2.59 Medium 2.10 Moderate 3.00 Significant 2.00 ModerateEgypt 3.47 Significant 3.40 Significant 3.75 High 3.00 Significant

Kuwait 2.62 Medium 2.10 Moderate 3.25 Significant 2.10 ModerateLebanon 3.30 Significant 3.20 Significant 3.75 High 3.20 Significant

Libya 4.09 Very High 5.70 Extreme 4.25 Very High 7.00 ExtremeSaudi Arabia 2.47 Moderate 2.20 Moderate 2.75 Medium 2.00 Moderate

Tunisia 2.83 Medium 2.30 Moderate 3.00 Significant 2.40 ModerateUnited Arab

Emirates2.13 Moderate 1.30 Negligible 2.00 Moderate 0.90 Insignificant

Yemen 4.10 Very High 5.60 Extreme 4.25 Very High 6.30 Extreme


KIDNAP AND RANSOM INSURANCE FACT SHEET

Special Contingency Insurance

Whilst these policies are known for providing cover for Kidnap and Ransom situations, the cover is far wider and can include Extortion; Products and Extortion; Cyber Extortion Business Interruption; Emergency Political Repatriation; Hijack; Wrongful Detention; Threat; Disappearance; Express Kidnap; Child Abduction; Business Interruption following an incident; Assault and Hostage Crisis.

During the incident the Insured will have access to the Insurer’s response team and, unlike a PA + Travel Policy which is usually capped at USD 50,000, this is for an unlimited amount.

Following an incident Insurers will reimburse financial costs incurred by the insured, including:

Legal Liability; personal accident, including a capital sum for loss of life or limb by the victim; travel and accommodation costs related to the incident; salaries of the victim; medical costs, including psychological counselling; rest and rehabilitation costs.

Further to the previous report the increase in the illegal detention of people by terrorists has shown no sign of easing. Continued political polarisation and criminal activity in Colombia has kept the level of non-traditional incidents such as virtual and express kidnaps at an unusually high level. Likewise, Boko Haram continues to drive the rate of kidnaps in Nigeria. A similar incident to that in Sydney has been seen in Paris, again highlighting the erratic geographical spread of kidnappings.

More specifically, Venezuela’s current economic situation has stimulated a risk of detention to employees of private-sector

retail companies. The significant decline in the oil price has encouraged long queues and a shortage of essential goods.

The government is keen to avoid criticism of failing economic policy; they have recently accused several private retail sector employees of developing a black market, according to the Superintendency of Fair Prices. In the run up to parliamentary elections the government will only intensify its focus on private sector employees, which could further increase the number of detentions.

For more information, please contact Pamela Fox or Jack Taylor.

(Contact information on page 16).


TERRORISM REPORT 2015

Is the current threat from ISIS outside the Middle East real?

In the last month the Islamic State has claimed to have a significant presence in 15 states across the US, ready to carry out attacks. Despite this being of concern, it is believed that ISIS is more concerned with consolidating its actions in Iraq and Syria, whilst simultaneously spreading its operations to Yemen and Libya.

Nevertheless, the emergence of ISIS as one of the most capable jihadi groups across the Middle East and North Africa has prompted the US and UK Governments to express their fears that citizens returning with the necessary training with ISIS will conduct similar attacks on their home soil. Despite the uncertainty surrounding numbers, only a handful have made the journey, of which the majority are known to the intelligence services.

The primary risk ultimately stems from small scale, ‘lone wolf ’, jihadists who do not have a formal connection to an established group. Their anonymity is central to their profile as they bypass early detection. However, it is their poor training which often finds them in the hands of the authorities as they attempt attacks that are beyond their limited capabilities. Often the targets are chosen in close proximity to the attacker’s home and targets include embassies or military bases. However, the Boston Marathon Bombing 2013, the last serious terrorist attack on US soil, illustrates a successful attempt that avoided detection on a ‘soft’ target. Likewise the May 2015 shooting opposing an anti-Islamic event outside Dallas, Texas, further demonstrates the prevalence of lone wolves favouring soft targets.

In the case of the Lindt Café siege in Sydney, prior to the attack Man Haron Monis had been reported to the authorities for a string of offences that did not fit the typical jihadi model. It was only shortly before the attack that he became self-radicalised, highlighting the complexities of early detection.

The Boston Marathon Trial again raises the issue of the relevance of TRIA/TRIPRA. The surviving perpetrator was successfully tried for terrorism and is currently awaiting the date of his execution, whilst the US Government still have not declared the incident as ‘Certified’ under the Act.

For more information, please contact Pamela Fox or Jack Taylor.

(Contact information on page 16).


CONTACTS

LondonMark GubbinsManaging DirectorT +44 (0)20 3425 3194E [email protected]

Political and Project RisksDavid MauleExecutive DirectorT +44 (0)20 7204 6157E [email protected]

David EvansExecutive DirectorT +44 (0)20 7204 6156E [email protected]

Rupert MorganExecutive DirectorT +44 (0)20 3425 3199E [email protected]

Matthew SolleyExecutive DirectorT +44 (0)20 7204 6175E [email protected]

Trade Credit and SuretyRupert MurrayExecutive DirectorT +44 (0)20 7204 8560E [email protected]

Shaun PurringtonExecutive DirectorT +44 (0) 20 7204 8561E [email protected]

Nicola RedwayAssociate DirectorT +44 (0)20 7204 8564E [email protected]

Terrorism and Political ViolencePamela FoxDivisional DirectorT +44 (0)20 3425 3192E [email protected]

Jack TaylorBrokerT +44 (0)20 3425 3144E [email protected]

SingaporeSarah GulstonDivisional Director T +65 6422 7439E [email protected]

Joie TayAssistant Manager T +65 6422 7442E [email protected]

Dawn SeowSenior Account ManagerT +65 6438 1771E [email protected]

SydneyMichael WoodwardNational Practice Leader - Trade CreditT +61 2 9242 2003E [email protected]

Ewan BerkemeierSurety and Financial Products Manager - Trade CreditT +61 2 9242 2045E [email protected]

Gary McNallyCredit and Political Risks DivisionT +61 2 9242 2087E [email protected]

New YorkDon Harkey Managing Director North American Trade Credit and Political Risks T +1 212 994 7027 E [email protected]

Gabe ManskyArea Executive Vice PresidentNorth American Trade Credit and Political Risks T +1 212 994 7068E [email protected]


Arthur J. Gallagher

Walbrook OfficeThe Walbrook Building25 WalbrookLondonEC4N 8AW

Tel: +44 (0) 20 7204 6000Fax: +44 (0) 20 7204 6001

www.ajginternational.com

The information contained in this CPRI Report and Market Update has been compiled by Arthur J. Gallagher (Specialty) from information provided by each insurer. The figures expressed reflect the theoretical maximum possible lines available which are dependent upon many underwriting factors including the nature of the risk, the country of risk and available country capacity at the time which may reduce the amount of capacity actually available and is subject to change without notice. CPRI Report and Market Update does not purport to be comprehensive or to give legal advice. While every effort has been made to ensure accuracy, Arthur J. Gallagher (Specialty) cannot be held liable for any errors, omissions or inaccuracies contained within the document. Readers should not act upon (or refrain from acting upon) information in this document without first taking further specialist or professional advice.

Arthur J. Gallagher (UK) Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: The Walbrook Building, 25 Walbrook, London EC4N 8AW. Registered in England and Wales. Company Number: 1193013. www.ajginternational.com

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