According to an Axis statement, the company will “continue to serve the Australia market through its international wholesale insurance and global reinsurance platforms”.
A spokesperson for the Bermuda-based speciality insurer would not confirm whether the winding down of operations means Axis will no longer provide PI to the Australian planning market or whether there will be premium changes.
According to the firm’s website, Axis also provides PI insurance for accountants, financial planners, insurance brokers, commercial builders and the construction industry.
If Axis were to discontinue PI in Australia, it would be the latest large player to leave this, at times, risky segment of the market.
In August last year, Suncorp’s Vero brand stopped servicing financial advisers, saying that it had concerns about the space.
“A recent product review has determined that the financial planners segment of the professional indemnity market is no longer within our risk appetite,” Suncorp Commercial Insurance’s executive general manager, commercial portfolio and underwriting management, Darren O’Connell said at the time.
In 2008, Dual exited, but AIG remains and Chubb Insurance Company of Australia and XL Caitlin have also taken a punt and offer PI.
According to the Axis statement, the winding down of operations would see a pre-tax reorganisation charge of around US$51 million during the third quarter of 2015, but expected cost savings of about US$30 million on a run-rate basis.
“This charge in the quarter includes staff severance and related costs, the write-off of certain information technology assets, and lease cancellation costs. In addition, the Company recognised an impairment of certain customer-based intangibles following the closure of its retail insurance operations in Australia,” the statement said.
The company has also instituted a number of organisational changes, which will see around 100 positions lost in its corporate and insurance operations.
“Integral to creating shareholder value is a 21st century capital management strategy,” Axis chief executive Albert Benchimol said. “We intend to match risk with the most appropriate form of capital, and access a broad range of capital to complement our own balance sheet.
“This supports the delivery of significant capacity, innovation, and tailored solutions to our clients, provides a valuable product and service to the investment community, and generates stable fee income for the Company.
“We look forward to continuing our success to date in delivering solutions to our clients in partnership with third party capital providers and to carrying forward our track record of managing our shareholders’ capital responsibly, returning excess capital through dividends and share repurchases,” Mr Benchimol said.
Don’t forget the current crop of ASIC upper echelon are Labor appointees, so this would not cause them a single bit of concern.
If anything, serves the ISA/Labor and Unions controlling the super landscape quite well if less IFA’s are out there.
If you were ASIC and had a desire to have as few AFSL’s as possible to supervise, and of those you wanted them all to have deep pockets so they could make quick commercial settlements after expensive enquiries that vilify individuals and not the organisation or its ultimate controllers, wouldn’t removal of PI for a large number of smaller organisations be a good way to achieve your ends but be able to blame someone else?
If you were ASIC you would almost be inclined to cheer Axis on as they walk out the door. Most certainly AMP, NAB, CBA, etc would be celebrating.
This, along with many other PI exits from the Australian landscape can be attributed to the over-governance of consumer protection laws imposed by ASIC plus the pathetic “free meal” tickets handed out to complaining customers by the FOS.
The financial services laws in this country are an absolute joke and do nothing but strangle the fledgling businesses who are trying to make a living in it AND impose much unnecessary costs and hurdles to the consumers who can least afford it!
This is very disturbing news. If any more claims arise against advisers (not a matter of if, but when), then PI insurers will pull up stumps en masse. If you can’t get PI cover (a condition of an AFS licence), you have to hand in your licence, so many good advisers will be forced to quit the industry. This further concentrates financial planning power with the banks and life companies, and the death of independent advice. Is this really the intention of the regulators? Can’t they connect the dots? We should have a national fidelity-style fund with contributions from all industry participants. It is the only logical way to deal with such a patently flawed system.