It should become clearer by early this month whether the new German terror pool Extremus has a future...It should become clearer by early this month whether the new German terror pool Extremus has a future, after talks planned for late January with large potential customers.
Few large German companies have bought cover from Extremus, which is backed by EUR3bn of commercial reinsurance, topped by EUR10bn of reinsurance from the German government. Extremus, which will cede all its premiums, was set up after German insurers excluded terrorism risks above EUR25m following 11 September 2001.
However, Extremus's shareholders, which include AIG, Allianz, Munich Re and Swiss Re, said they would shut it down if it did not produce annual premiums of EUR500-550m.
Dr Bruno Gas, chief executive of Extremus, said that by mid-January premiums were lower than expected. "We need more time," he said.
He said that last September's renewal talks with large industrial companies had been delayed until December. "The big companies have not decided yet," he added. Further talks about premiums and conditions were scheduled for the end of January.
Johannes Richter, chief executive of the association of German captive brokers BfV, said that members welcomed the response to terrorist risk but were concerned about the limitations of coverage, prices and territorial restrictions. "Many risk managers came to the conclusion that their individual company is not exposed to such a risk, especially in Germany," he said.
He added: "Our major complaint is still the inability or unwillingness of insurers to provide coverage for all our worldwide business." Dr Gas said Extremus could not cover overseas risks because the government's reinsurance is limited to Germany: "It is not possible for us to satisfy them."
Objections to the commissions to be paid by Extremus (originally 3% then 5%) have led to commissions of 3-9%, depending on the size of premium.
Dr Gas said that Extremus has changed its original decision to focus on large buyers. "There are a lot of contracts, especially with companies of smaller size," he said. "I think the rate of insurance of smaller companies could in the long run be bigger than we expected. Now we see it is better to have them."
Mr Fischer added: "We have to wait and see whether Extremus will 'fly'; we do think that we will have a clearer picture within the next six months." Click here for a pdf of this story
With great sadness we confirm that Sir David Rowland, our former Chairman from 1993 to 1997, has passed away. He played a critical role in safeguarding the future of the Lloyd’s market through perhaps its most difficult period.— Lloyd's (@LloydsofLondon) February 18, 2019
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