Welcome to Mind Matters week of 6 June 2022

Global (Re) Insurance News

Investors, Including Allianz and Swiss Re, Urge U.N. to Create Plan for Farm Emissions

Investors managing $14 trillion have urged the United Nations to create a global plan to make the agriculture sector sustainable and curb one of the biggest sources of climate-damaging emissions, a letter seen by Reuters showed.

Food production accounts for around a third of global greenhouse gas emissions and is the main threat to 86% of the world’s species at risk of extinction, the group said, while cattle ranching is responsible for three quarters of Amazon rain forest loss.

Three minute 30 second read. Try and work out what is better as an emission; methane or carbon dioxide. Note that insurers and investors are persistent in driving for lower emissions. 

Climate risk is financial risk

Should businesses worry about climate risk because doing so is good for their bottom line, or because their responsibilities ought to go beyond mere financial returns to shareholders? What if expanding one’s lens to include environmental, social, and corporate governance turns out to be good for business? What if not?

A four minute read from Science. Which bank is cited in the article and why is the writer concerned about its approach to bury its head in the sand?

Geopolitical conflict and insurance 

EU Poised to Approve Sanctions Against Russia, Covering Oil, Banks and Insurance

European Union ambassadors are set to approve a sixth package of sanctions over Moscow’s invasion of Ukraine, banning most Russian oil imports by year-end and restricting Russia’s ability to ship crude to countries worldwide.

The sanctions would forbid the purchase of crude oil from Russia delivered to member states by sea in six months and refined petroleum products in eight months, according to a draft document seen by Bloomberg.

Although I see the power of (insurance) sanctions to inflict hardship on Russia, Putin is unlikely to back off and more likely to reinforce his view of the West. The hardship in turn is felt much wider than Russia. Three minute read. What are your thoughts?

Iran’s Seizure of 2 Greek Oil Tankers Adds Risk to Key Shipping Route

Iran’s seizure of two Greek oil tankers in the Persian Gulf raises the risk of further interruptions to shipments from a region that’s a vital source of global energy supplies.

On Friday, the Islamic Revolutionary Guard Corps diverted two Greek tankers, each loaded with about 1 million barrels of oil, into Iranian territorial waters — an apparent tit-for-tat for a vessel that the European country seized.

Greece is the world’s largest oil tanker-owning nation, making any spat with Iran potentially serious for the global market. Likewise, about one fifth of daily crude supply passes through the Strait of Hormuz, the narrow waterway separating the Persian Gulf from the Indian Ocean and crude buyers all over the world.

Just to show how global oil supplies are linked to more than the Russia -Ukraine war. Two minute 30 second read. 

Weird Rainfall Patterns in Europe Blamed on Climate Change

Emissions of planet-warming greenhouse gases caused by human activities are directly responsible for long-term dry conditions in the Mediterranean basin and the increasing rainfall over the rest of Europe during winter, according to a study by the UK’s Met Office.

More studies linking human behaviour with climate change and reminding us of its unpredictability. Three minute read. 

Local insurance news

Four life insurers pay out R52bn for 2021, suicide claims spike

Over the past two weeks, Liberty, Discovery Life, Momentum Life and Old Mutual released their claims statistics for 2021, revealing that the four insurers paid consumers a collective R52-billion for the 2021 financial year.

A three minute read bringing you the trends experienced across the sector. Identify where the need lies to improve the claims history. 

Discovery Life’s individual life cover pay-outs jump 173% in 2021

Discovery Life paid claims to the value of R11.79 billion last year, of which R9.1bn was for more than 10 000 individual life claims – an 89% increase in the value of individual claims compared to 2020, according to its annual claims review.

Four minute read. Note the increase in mental health illnesses claims which is in keeping with other insurers' experiences. 

KZN floods are the biggest natural catastrophe in Santam’s history

Santam’s current “best estimate” of its gross exposure to the KwaZulu-Natal floods in April is R3.2 billion. However, reinsurance cover will limit the net impact to about R500 million, it said in a trading update.

South Africa’s biggest short-term insurer said that, based on its internal modelling, April’s floods were a “one in 25-year event” and were “by far” the largest natural catastrophe in its 104-year history.

A two minute 30 second read.

Managing risk in an age of extreme weather……towards calibrating and predicting volatility

Insurance is a globalised industry. To date, the local insurance industry has generally not resorted to passing weather-related losses on to policyholders in the form of premium increases. Beyond normal inflation and standard operational increases, the costs of a decade of volatile weather have, on the whole, been absorbed and managed by South Africa’s well-capitalised risk sector. Going forward, however, if historically large floods in Germany, wildfires in California and Australia and droughts in Japan become the norm, increased global reinsurance costs will inevitably drive up the cost of cover in South Africa.

A well written article by Ron Richman Chief Actuary at Old Mutual Insure. Five minute read. Richman insists that none of the risks can be answered or managed without a calibrated, integrated, and predictive global climate and local weather risk model.

Cryptocurrency current debates 

Kokkie Kooyman: Most cryptos will fail

In an interview with Citywire South Africa, Kooyman said that he has followed the advice of Berkshire Hathaway chairman Warren Buffett that rising interest rates would lead to a sharp fall in crypto values.

‘But perhaps even Buffett would not have predicted the fall in cryptocurrency Luna from $85 to 0.0002c in a few days last month. Even the blue chip of crypto, Bitcoin, had fallen from more than $67,000 in November to barely $30,000 on 30 May.’

A three minute read to curb your desire to invest in crypto!

Business Talk – Harry Scherzer on crypto-arbitrage trading with Future Forex

In this episode of Business Talk, Scherzer talks about Future Forex – which is an authorized FSP specific to currency transfer services.

He explains how Future Forex generates huge returns for its clients through cryptocurrency arbitrage trading, the risks involved in this form of trading, and how Future Forex substantially limits these risks.

A short description (two minutes 30 second read) of the interview which is followed on video (YouTube). A different angle on investing in crypto. 

Crypto Renaissance? Experts Say Renewed Interest in Digital Tokens is Sparking Insurance Conversations

Experts say there’s been a resurgence of interest in cryptocurrency during the pandemic, and along with it, growing demand for insurance in the space.

“I think with the past couple years, there has been a resurgence and an immense focus on crypto, especially in the past year,” said Rachel Jenkins, leading customer success manager at Founder Shield, on this episode of The Insuring Cyber Podcast. “I think it has a lot to do with COVID … I just think that people have had a lot more time on their hands, so they’ve been on the computer more.”

You can read the article (top takeaways of three minutes) or you can listen to the podcast/ interview. It is good to get a broad view of cryptocurrency as it is set to stay despite its dramatic highs and lows. It is a 24 min 45 second podcast. 

Investing: can it can be separated from any geopolitical event or climate change?

SA ‘finding a space’ for investors, says Finance Minister Godongwana, but list of risks growing

South Africa has some unique prospects as an investor destination, but it will need to manage a growing number of risks, says Finance Minister Enoch Godongwana. “We have constructed a narrative which is finding some space within the investor community,” Godongwana said on the sidelines of the African Development Bank’s (AfDB’s) annual meetings in Accra on Friday 27 May 2022. 

This is despite the conflict in Ukraine, which is expected to push up inflation considerably, and which has seen fuel prices rise to record highs, with another one in the offing this week. 

On the other hand, Russia is no longer an option for investors in emerging markets, with financial sanctions from the West making it an “uninvestable” destination. 

A three minute 30 second read.  There is good and bad news - some of which we are already experiencing. 

How construction is turning from carbon culprit to building better

Engineers, construction firms, building materials suppliers and infrastructure operators are busy shoring up the planet’s resilience against climate change.

Fix the Future tracks the investments of the world’s best fund managers to find the companies changing the future. The Fix the Future database of companies exposed to climate defence – and the top fund managers that are backing them – contains just over 170 businesses involved in protecting societies and the planet. 

A great eight minute read on how construction is building better for a better future.  

Noise and bias in your investment portfolio

Bad decisions caused by both bias and noise are rampant in the market.

In Daniel Kahneman’s book, Noise: A Flaw in Human Judgement, Kahneman uses a particularly effective metaphor to illustrate the ways humans make bad decisions. Using the results from a gun range, his main thesis distinguishes between errors caused by bias versus errors caused by noise.

Any article that uses concepts that Daniel Kahneman has created through research and observation is worth a read. Once again, a sound case is made for using New Age Alpha’s developed system which focuses exclusively on the risk of human behaviour in investing. A four and half minute read.

How Regulation 28 amendment changes the game

Government has given investors more options and an incentive to continue using retirement products.

The recent amendment to Regulation 28, which sets certain limits for retirement funds on how to invest, has far-reaching effects on investors. The main change was an increase in the maximum offshore exposure from 30% to 45%. This can impact their retirement savings for the better.

This a reminder of the amendments as a precursor to the article below which speaks about how much money could leave the country if investors take full advantage of the maximum allowed. A four minute read. 

Up to R800bn may exit SA after change to offshore asset rules

Asset managers warn amendments to the asset allocation limits of local pension funds could result in huge outflows

Two of SA’s biggest financial services firms have warned that amendments to the asset allocation limits of local pension funds could result in as much as R600bn-R800bn in outflows from the country’s asset pool over the next three to five years.

While local asset managers welcomed finance minister Enoch Godongwana’s 2022 budget speech announcement that changes to regulation 28 of the Pension Funds Act would allow insurance, retirement and savings funds to invest 45% of assets offshore, they have warned of possible unintended consequences...

This article is from Business Live and you will need a subscription to access the full report. Your institution or faculty may well have a subscription. However, it is still very interesting to think about the possible unintended consequences of the regulation. 

Eight financial planning tips for graduates

Starting your financial planning journey the right way is critical to your future financial success.

Below are the eight tips which the writer Craig Torr - from Crue Invest (Pty) Ltd  shows how you can have the edge to ensure the right direction for success. 

1. Banking and budgeting
2. Saving and investing 
3. Emergency Cash
4. Debt and credit history
5. Risk Protection 
6. Financial and legal documentation
7. Employment
8. Your online profile 

A six minute read which is well worth it!

AI and analytics in finance and insurance 

Data analytics helps Discovery crack whip on fraudulent claims

Gareth Friedlander, deputy CEO of Discovery Life, noted data-driven tech has played an important role in enabling a client-centric approach to innovation and optimising the claims processes.

The insurance industry is in the midst of a big tech shake-up, as companies across the globe accelerate the use of emerging tech to streamline services and future-proof their business to better compete with incoming digital-native players.

A case for leveraging innovative technology and data analytics to crackdown on fraud and ensure quick turnaround times in insurance claims processes. Three minute 30 second read. 

About you

Don’t Get Lost in the Noise: A Guide to Self-Leadership

Today’s leaders and high achievers are not just managing others; they’re leading themselves, writes Professional Coach Marsha Egan. They have a vision for themselves—not just for their businesses or for the people they lead. They have goals and action plans. They set weekly priorities that work toward their overall life plans. They choose how to spend their time and don’t allow time to manage them. And they take care of their bodies and minds so that they can nurture others. In this hustle-bustle world, the key to survival is making time to survive and thrive, Egan notes. If we don’t, we’ll get lost in the noise.

Please read this article first published in 2018 by Carrier Management - leading insurance magazine in America. A five minute read. 

Sage advice 

Painter Mariam Paré, who specializes in making paintings by mouth after suffering a spinal cord injury, offers some advice to her younger self:

"If I could talk to myself twenty years ago, I would tell myself to focus on my strengths, and not on my weaknesses; on the things I could do and not the things I couldn’t do; to strive to excel and hone those skills to the point of excellence. That this was the best strategy to secure my future. I would say to myself that the only real obstacles you have are those you create for yourself."

Source: In the Company of Women