Aug 2018

Issue 134

NEWS AT J. B. BODA 3

ON “WRITE” SIDE 4-5

Money laundering and terrorist financing prevention 4-5

NATIONAL 6-8

Third Party Insurance Mandatory, Says Supreme Court 6

Protect your car this monsoon with these motor insurance riders 6-7

IRDAI Wants To Reduce Conditions Excluded From Health Insurance 8

INTERNATIONAL 9-10

Glance at the players' insurable value : Croatia vs. France – The Final Match 9

New regions, lines of business crucial to cat bond evolution 10

J. B. BODA GROUP SERVICES 11

CONTENTS PAGE NOS.

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Late Shri. Jagmohandas Bhagwandas Boda

101st Birth Anniversary of our Founder Chairman – Saturday 9th June 2018

NEWS AT J. B. BODA

Insurance Brokers – pan India meet 4th & 5th July 2018

Seminar in Kuala Lumpur for Nepal Insurance market – 27th to 29th May 2018

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ON “WRITE” SIDE

Money laundering and terrorist financing prevention

The chief compliance officers from Taiwan’s leading life insurers shared their insights on

managing high-risk investment-linked products and establishing sound record-keeping

practices, as well as improving suspicious transaction reporting (STR) practices at a

conference staged in the second week of July 2018 by the Insurance Anti-Fraud Institute

(IAFI).

During the conference, Mr Kung Tu-chih, the chief compliance officer of Cathay Life

Insurance Company, reminded the listeners of prevalent compliance weaknesses mentioned

in the already published mutual evaluation reports of 45 other countries, including a lack of

dedication towards money laundering prevention among the top brass at life insurance

companies.

Mutual evaluation reports also mentioned a difference in the definition of ultimate

beneficiary and the conditions that warrants an STR filing between life insurers and the Asia

Pacific Group on Money Laundering (APG). The outcome is that the amount of STRs being

submitted are far lower than what is considered normal for the scale of a country’s insurance

market.

Most notably, mutual evaluation reports point out that some insurers still lack a sound real

time transaction monitoring system, while some companies have not subscribed to

international PEP databases, which has led to an over-reliance on customers’ declarations.

The APG is an inter-governmental organisation focused on ensuring that its members

effectively implement the international standards against money laundering, terrorist

financing and proliferation financing related to weapons of mass destruction.

Life insurers are regarded as being highly vulnerable to money laundering, because the

products they sell are paid for in both local and foreign currencies. In particular, investment-

linked products often require substantial premium payments upfront, creating a vulnerability

when the policies are cancelled by bad actors looking to receive laundered money.

Offshore insurance units (OIUs) set up by life insurers are especially vulnerable, as they

receive payments in a foreign currency, he said, adding that risks increase when sales are

processed online or by contract-sales agencies, which creates an opportunity to conduct

anonymous transactions.

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To bolster compliance, OIUs must enhance due diligence for higher-risk clients, such as

politically exposed persons (PEPs), for example by recording clients’ statements on the

purpose and source of funding on each purchase.

Potential clients should also be checked against international business and money laundering

databases. Companies checking for suspicious beneficiaries should keep in mind that the

adult children of PEPs might not always show up in international databases. Some

companies have turned away and reported clients who were purchasing insurance products

that exceeded their income and refused to provide an explanation.

Records

Mr Lin Shang-chen, chief compliance officer at Taiwan Life Insurance, advised companies to

make sure that their computer systems meet compliance requirements.

Financial institutions are required to keep records of all domestic and international

transactions, as well as client due diligence, for at least five years, Mr Lin said, citing

Financial Action Task Force on Money Laundering guidelines.

The records must be sufficient for a reconstruction of individual transactions, as they could

be called upon as evidence in the prosecution of criminal activity, adding that all transactions

must be recorded no matter their level of risk. The records must also be readily accessible.

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NATIONAL

Third Party Insurance Mandatory, Says Supreme Court

Third party insurance for two-wheelers and four-wheelers was always mandatory. But from

September, 2018 onward, all new two-wheeler and four-wheeler customers will have to shell

out more money and have to pay third party insurance premium for 3 years for cars and for 5

years for two-wheelers. Earlier, the rule was that one year worth of premium would be paid

towards third party insurance and then it would be renewed annually. The apex court said this

while referring to the recommendations of the Supreme Court Committee on Road Safety and

observed that over one lakh people were dying in India every year in road accidents.

The Supreme Court appointed committee was headed by former apex court judge, justice KS

Radhakrishnan and urged the Supreme Court to make third party insurance mandatory for a

longer period of time rather than having it for just one year. The reason behind the same was to

ensure that victims of road accident could get compensation and all the insurance firms should

look at it from a human point of view rather than a commercial point of view.

The committee also pointed out that there are over 18 crore vehicles plying on Indian roads

and only about one third of the total, which is 6 crore vehicles, have third party insurance. This

resulted in road accident victims not getting compensation as more than two-thirds of the

vehicle do not have third party cover.

The committee appointed by the Supreme Court also had lengthy and detailed discussions with

the Ministry of Road Transport and Highways (MoRTH) along with the Insurance Regulatory

Development Authority (IRDA) and the Department of Finance on this as well. The counsel

appearing for IRDA said that third party insurance should not be made mandatory and the

authorities are looking into it and that IRDA will need a period of 8 months to decide upon the

same.

Protect your car this monsoon with these motor insurance riders

Before the onset of rains, car owners get their vehicles monsoon ready by checking the engine,

oil, tyres, etc. Along with these safety checks, one can also consider some add-on motor

insurance riders that can help if your vehicle is stranded due to engine fault or if water enters

the engine and damages it.

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Common monsoon-related problems

A general problem that motorists face during the monsoons is getting stuck in a waterlogged

area. These situations can lead to water seepage into the engine causing a hydrostatic lock.

Common riders to protect your car

In order to protect your vehicle in monsoon, one can purchase add-on covers. Most important

covers especially keeping the monsoons in mind.

Engine protection cover: A standard motor insurance policy does not cover damages to the

engine by water intake. This cover provides coverage against damage to the car’s engine due

to water ingression leading to hydrostatic lock. It also covers cases like leakage of lubricating

oil and damage to the gearbox.

Roadside assistance: This rider becomes the most useful if you are stranded due to a break-

down of your car in the middle of the road. The insurer will provide you with emergency

roadside assistance services on a 24 x 7 basis.

Zero or nil depreciation: This rider offers complete coverage against the depreciation in the

value of car parts. This saves the car owner a lot of money in case the car gets damaged by

paying the entire cost. It is also called depreciation shield and ensures that the age of the

vehicle would not affect the claim amount paid for spare parts.

Accessories cover: This cover is useful in case the vehicle is submerged in water or there is

water ingression in the cabin leading to damage of car equipment and accessories like LCD,

TV, car seat covers and other luxurious car accessories. This add-on cover will help in covering

the cost of the same.

Return to invoice: This add-on is useful in case the car is damaged fully and beyond repair, for

instance, in case of a tree-fall. This add-on will reimburse the difference between the ex-

showroom price and the IDV (Insured Declared Value) of the car along with the registration

fees, road tax, and insurance amount in the event of a total loss or theft. This add-on is useful if

the vehicle is declared unfit for further repairs and usage.

Common exclusion

The most common condition during the monsoons where an insurer refuses to pay the claim

amount is for engine failure or hydrostatic lock or damage to car’s engine. This is also the most

disputed claim, as it becomes difficult to ascertain whether adequate steps were taken to avert

such a situation or not.

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IRDAI Wants To Reduce Conditions Excluded From Health Insurance

The insurance regulator seeks to reduce and standardise the number of health conditions and

medical procedures excluded from health insurance policies.

The Insurance Regulatory and Development Authority of India, in an order uploaded on its

website, said it has formed a working group to examine the issue. The panel—chaired by

Suresh Mathur, executive director (health) at IRDAI, and comprising representatives of

insurers—will submit its suggestions in eight weeks.

The insurers should be given the option to modify premium pricing based on the exclusions

provided at the time of underwriting the business. Most health insurance plans exclude pre-

existing diseases, cosmetic and dental surgeries, pregnancy, vaccination, intentional injuries,

HIV and alternative treatments such as homeopathy and ayurveda. In February 2018, the Delhi

High Court ruled that insurers can’t exclude genetic disorders and congenital anomalies,

calling it a “violation of citizens’ right to health”.

The regulator now wants to standardise exclusions in health policies. The objectives of the

group set up by it include:

a. Rationalise the exclusions by minimising the number to enhance the scope of health

insurance coverage granted.

b. Remove exclusions that disallow coverage “with respect to new modalities of treatments

and technologically advanced medical treatments”.

c. Study the scope of allowing exclusions specific to individuals and diseases at the time of

underwriting business.

d. Provide a uniform framework for standalone health and general insurers to incorporate

exclusions in their policies.

e. Standardise the language used by companies to list their exclusions.

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INTERNATIONAL

Glance at the players' insurable value : Croatia vs. France – The Final Match

Insurable value of the players of Croatia

Insurable value of the players of France

Player Post Age Current Club Value in millions USD

Danijel Subasic Goalkeeper 33 Monaco 5.28

Sime Vrsaljko Defender 26 Atlético de Madrid 29.34

Dejan Lovren Defender 29 Liverpool 23.47

Domagoj Vida Defender 29 Besiktas 8.22

Ivan Strinic Defender 31 Sampdoria Gênes 4.69

Ante Rebic Striker 24 Eintracht Francfort 11.74

Luka Modric Midfielder 32 Real Madrid 29.34

Marcelo Brozovic Midfielder 25 Inter Milan 31.69

Ivan RAKITIC Midfielder 30 FC Barcelone 58.68

Ivan Perisic Midfielder 29 Inter Milan 46.94

Mario Mandzukic Striker 32 Juventus Turin 21.12

Total of the eleven players 270.52

Total of the team 620.00

Player Post Age Current Club Value in millions USD

Hugo Lloris Goalkeeper 31 Tottenham 29.34

Benjamin Pavard Defender 22 VfB Stuttgart 35.21

Raphaël Varane Defender 25 Real Madrid 82.15

Samuel Umtiti Defender 24 FC Barcelone 70.42

Lucas Hernandez Defender 22 Atlético de Madrid 41.08

Paul Pogba Midfielder 25 Manchester United 105.62

N'Golo Kanté Midfielder 29 Chelsea 70.42

Blaise Matuidi Midfielder 31 Juventus Turin 35.21

Kylian Mbappé Striker 19 Paris-SG 140.83

Antoine Griezmann Striker 27 Atlético de Madrid 117.36

Olivier Giroud Striker 31 Chelsea 21.12

Total of the eleven players 748.76

Total of the team 1890.00

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New regions, lines of business crucial to cat bond evolution

Excluding cat bond lites, private deals and transactions focused on lines outside of property,

catastrophe bond issuance in the first-half of 2018 totalled roughly $7.4 billion, which is down

from the huge $8.8 billion recorded in H1 2017, but nevertheless impressive.

According to the PCS report, $4.8 billion of the $7.4 billion of H1 2018 issuance covered

North American perils, which is from 17 out of a total 24 transactions. Of this, seven

transactions, or $2.1 billion of issuance utilised a PCS trigger, but despite the decline, PCS use

still featured in more than 40% of North American H1 2018 activity, as measured by capital

raised.

In order to smooth out those sorts of breathers over time, the market will need more sponsors

to enter, rather than issuance being dominated by veteran sponsors that up their commitment to

the space on an annual basis.

New regions and lines of business will be crucial to that stage of cat bond market evolution,

particularly in the specialty lines. Diversification does more than bring new risk to market – it

fundamentally changes the growth pattern.

The exposures are there; but just need to continue to increase market penetration. The use of

industry loss index tools, even for industry-wide loss benchmarking, is an important start to

this process. The PCS global specialty lines suite of index tools was launched specifically to

help insurers, reinsurers, and ILS funds gain more access to original risk.

For the ILS market to make a major difference in cyber, two factors need to be considered. The

first is affirmative cyber. Increased market penetration will cause cyber books to grow. For

that, a pure-play standalone cyber index is crucial. PCS Global Cyber has been live for around

nine months and has doubled the number of events in the database since launching last

September 2017. And the market is already looking at ways to deploy capacity on this basis.

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J. B. BODA GROUP

J. B. BODA - First on Protection – 7 Decades of Transformation.

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