“I AM HAPPY WITH MY CURRENT JOB. BUT, I AM LOOKING FOR A CHANGE NOW”: >> Happy people don’t quit. So, let’s get to the point. Not happy with the boss? Not happy with the pay? Not happy with the opportunities? To paint a wrong picture will only raise unnecessary questions and not enable us to judge the candidate correctly.
“MY APPRAISAL IS DUE NEXT MONTH”: >> This is a widely used negotiation tactic and this statement does not ‘empower’ the candidate in anyway. We don’t base our offer on the expected appraisal, but on our assessment of the individual. So, we usually tell them, “If it’s true, let’s meet after a month, since you’ve anyway waited for so long.”
Saagarika Ghoshal,
DIRECTOR – HR,MCC IN: “I WAS A TOP PERFORMER”: >> Even if you were not the best at your previous organisation, candidates tend to positionthemselves favourably using statements like ‘was the employee of the month’ or ‘was among best performers in the team’. They tend to falsely create an impression of being sought-after in the market toincrease their own value.
“MY PERFECTIONISM IS MY BIGGEST WEAKNESS”: >> Some candidates when asked about their developmental areas tend to position their disguised strengths as weaknesses – rarely will you find candidates being really open about their areas of improvement. Most fear being represented unfavourably in front of the recruiter.
“I ALWAYS WANTED TO WORK FOR YOUR COMPANY”: >> When candidates are asked why they would want to join a certain organisation, they tend to over-exaggerate their level of interest and desire, even if they have spent only ten minutes reading about the industry/organisation.
Venkatraman Girish,
>> They say so to get an extra credit for work experience, which willeventually impact their pay. Sometimes, the organisation quoted is fictitious or the experience forged. Some candidates are under the impression
that the recruiters will not verify the facts. Sometimes, a contractual assignment or an intern position gets exaggerated and is stated as actual work experience.
“I AM STILL EMPLOYED”: >> This is indeed a popular lie as some do lie about being still employed whenactually they have put in their papers or already been relieved by the organisation. This could be because the candidate could have left on a bad note or was asked to leave.
Jayanthi Vaidyanathan,
“I HAVE ALL THE SKILLS NEEDED FOR THE JOB”: >> Applicants exaggerate or misrepresent their skills in order to increase their chances of selection. Applicants misquote the extent to which a particular skill was utilised onthe-job. They do so to enhance their chances and also to switch to newer niche skills for which they may not be an outright match.
“I HAVE HANDLED SEVERAL PROJECTS SINGLE-HANDEDLY”: >> Applicants lie about their share of contribution to group/team projects. Often, they would combine their peer’s work to make it appear that they have a better repertoire of skills or say they delivered or led an initiative, which may not be their own in entirety.
Ajay Trehan,
“REFERENCES WILL BE PROVIDED ON REQUEST”: >> Evidently, incorrect references will give positive feedback and if these ‘reporting managers’ and ‘references’ are trusted and believed, the hire may go very wrong.
“I WAS ON A SABBATICAL”: >> People tend to hide an employment gap by either manipulating the tenure of existing employments or state it as a gap taken for personal/health reasons. This is most relevant for jobs they may have chosen to join but did not succeed in doing so or did not stay long enough.
Bobby Kuriakose,
“I CONTRIBUTE TO THE SOCIETY”: >> Though this is intended at knowing more about their value systems, they come up with vague answers.
“I HAVE PLANS TO STAY LONGER WITH THE COMPANY”: >> It’s very amusing to hear from Gen X and Gen Y members that they plan to pursue a long-term career with the organisation. They try to impress by saying they envision a long-term stint. But that is not possible in the truest sense.

Source :The Times of India.
Date : 29/05/2013
Writer : Vikram S Gaikwad

Irda allows insurers to set up business abroad Life and general insurers with minimum net worth of Rs.500 cr and Rs.250 cr, respectively, can apply for setting up of foreign business

New Delhi: Insurance regulator Irda has allowed insurers with sound financial health and a minimum of three years of operations to set up business in other countries.
Companies had been for long seeking permission from the Insurance Regulatory and Development Authority (Irda) to open foreign insurance companies, as well as branch offices abroad to exploit markets overseas.
Irda has issued guidelines for Indian companies to set up life, general or reinsurance business abroad.
As per the norms, life and general insurance companies with a minimum net worth of Rs.500 crore and Rs.250 crore, respectively, can apply for setting up of foreign business.
In the case of reinsurance companies, the net worth should be Rs.750 crore.
“The registered Indian insurance company should have been in operations for at least 3 years,” the guidelines said.
An insurer desirous of setting up foreign company or branch should have earned profits for the three years out of the past five years, it said.
Seeking to safeguard the interest of domestic policyholders, Irda further said the insurer setting up overseas business will not be allowed to utilize the fund of domestic policyholder.
“The Indian insurance company shall have in place appropriate arrangements to ensure that the policyholder’s liabilities that arise for foreign operations are adequately ring-fenced in order to protect the Indian policyholder,” the guidelines said.
There are 52 companies in life, general insurance and reinsurance business in India. Most of them have foreign partners.
An insurance company desirous of setting up foreign insurance company (including branch office) “should not suffer from any adverse report of the authority on its track record of regulatory compliances, for 3 years out of the last 5 years from the date of application,” the Irda added.
The guidelines also said the Indian insurers should formulate an ‘Investment Policy´ to suit the scale, nature and area of operations of the foreign branch offices.
As per the Irda, a ‘foreign insurance company means a company registered outside India whose paid-up capital is subscribed to by an Indian insurance company.
It shall include a foreign subsidiary company wherein the Indian insurance company has a holding of more than 50 of its paid-up capital or is in a position to control the composition of its board of directors. It shall also include a branch office of the Indian insurance company, Irda added.

Source :Live Mint.
Date : 27/05/2013

UK banks cut 189,000 jobs as employment sinks to 9-year low Banks under pressure from investors to reduce fixed costs as euro zone crisis crimps income from investment banking

London: Britain’s four biggest banks will have eliminated about 189,000 jobs by the end of this year from their peak staffing levels, bringing employment to a nine-year low amid a dearth of revenue. More cuts may follow.
Royal Bank of Scotland Group Plc, HSBC Holdings Plc, Lloyds Banking Group Plc and Barclays Plc will employ about 606,000 people worldwide by the end of 2013, according to data compiled by Bloomberg. That’s 24% below the peak of 795,000 in 2008 and the least since 2004, when they employed 594,000 globally.
The firms are under pressure from investors to reduce fixed costs as Europe’s sovereign debt crisis crimps income from investment banking as loans sour in the region. The four firms posted £108 billion ($164 billion) of revenue for 2012, 13% less than in 2008. Costs as a proportion of revenue increased over the period.
The continuing cost-cutting announcements you’ve been getting reflect an incredibly difficult revenue environment and that’s new, said Simon Maughan, an analyst at Olivetree Securities Ltd in London. The big bulky mass layoffs, such as they were, are probably gone, but that’s not to say staff numbers wont drift lower because it’s a struggle to grow the top line.
Employee costs
Total employee costs including salaries, bonuses and pensions for the banks, fell 1% to about £37 billion in 2012 from 2008 after Barclays expanded its investment bank with the acquisition of the North American business of Lehman Brothers Holdings Inc. That compares with about £25 billion in 2004.
The reduction in workforce is driven by three things: economic decline, investment banking not producing as much income as it did and banks reducing the wage bill to hit profit targets promised to shareholders, said Ismail Erturk, a senior lecturer on banking at Manchester Business School.
Banks would be better off training staff in consumer divisions to explain the products they are selling, said Erturk. That would help avoid costly scandals such as mis-selling of loan insurance, he said. UK banks have set aside more than £13 billion to compensate customers sold the coverage.
Instead of cutting the number of people in branches, retail banks need better-trained people who can give good advice, Erturk said. We need a better-qualified workforce who can explain the products and calculations better, even basic things like fees, charges and rates.
Asset sales
In addition to firings, asset sales have contributed to the job reductions, with people transferred to other companies. Assets on the balance sheets of the big four banks have declined by £1.7 trillion since 2008.
HSBC, Europe’s biggest bank, has eliminated $4 billion of expenses after selling or closing down 52 businesses since Stuart Gulliver succeeded Michael Geoghegan as chief executive officer in 2011. Earlier this month, it pledged to reduce costs by as much as $3 billion over the next three years and said it may cut a further 14,000 jobs by 2016. From 2008 to the end of 2013, the lender will have cut about 59,000 jobs.
RBS, Britain’s biggest government-owned bank, will have erased about 78,000 jobs since its bailout in 2008 by the end of 2013. The bank has been selling and closing operations as it struggles to revive earnings to enable the government to reduce its 81% stake.
Shrink bank
The bank eradicated about 14,000 jobs with the sale of a stake in Direct Line Insurance Group Plc in March. Under pressure from regulators to increase capital, CEO Stephen Hester said the company will continue with its plan to shrink its investment bank.
The banks’ efforts to control costs alongside pledges to moderate banker pay have appealed to some investors, with the six-member FTSE 350 Banks Index rising 12% this year.
Bank share prices are going up as the banks cut costs, said Sandy Chen, a banking analyst at Cenkos Securities Plc in London. As income levels have come down, you have the justification that maybe you should pay less and employ fewer people.
Standard Chartered Plc, which gets most of its profit from Asia, has bucked the trend to add 560 people in the first quarter, targeting as much as 2,000 hires this year. Employment at the London-based bank has doubled to 89,000 in 2012 from 33,000 in 2004.
Officials at the five banks declined to comment.
Online banking
Barclays will eliminate 3,700 jobs this year to remove £1.7 billion of annual costs, CEO Antony Jenkins said in February. Jenkins has told investors the company may trim its workforce by almost a third over the next decade as automation and online banking lessen the need for staff, two people familiar with the conversations said in March. Including the 2013 target, it will have cut 20,800 jobs since 2008.
Jenkins, 51, who replaced Robert Diamond as CEO in August, is seeking to rein in pay and boost profits to restore investor confidence in the wake of interest-rate manipulation and mis- selling scandals. Barclays in April pledged to abide by the recommendations made in a review by Rothschild vice chairman Anthony Salz in April, which was critical of past compensation at the bank.
Lloyds, Britain’s biggest mortgage lender, will have cut about 31,000 jobs since the bank received a £20 billion government bailout in 2008 including 2,340 announced this year. CEO Antonio Horta-Osorio this month said he expects to have turned around the bank as soon as next year as the government tries to reduce its 39% stake.

Source :Live Mint.
Date : 28/05/2013

Lloyd’s Report Highlights Solar Storm Threat as Emerging Risk

“A large solar storm could leave tens of millions of people in North America without electrical power for several months, if not years, potentially costing trillions of dollars,” according to Lloyd’s latest emerging risks report: “Solar Storm Risk to the North American Electric Grid.”

The report, which is being launched at the Electric Infrastructure Security Summit in London, was produced in co-operation with U.S.-based Atmospheric Environmental Research. It notes that while large geomagnetic storms are relatively rare, they “can create a massive surge of current, potentially overloading the electric grid system and damaging expensive, and critical, transformers.”
According to the report, a large solar storm in 1989 triggered the collapse of Quebec’s electrical power grid, leaving six million Canadians without power for nine hours. A smaller storm in 2003 caused blackouts in Sweden as well as damage to transformers in South Africa (transformers at that latitude were previously thought to be immune from such damage).

There have been even bigger and potentially more disruptive events in the past, and this sort could be repeated.

The report describes the Carrington Event of 1859, which is widely regarded as the most extreme space weather event on record. Such an event today would affect between 20-40 million people in the U.S. with power cuts lasting from several weeks to one to two years. The economic costs would be “catastrophic,” according to Lloyd’s – estimated at between $0.6 and $2.6 trillion.

Fortunately, Lloyd’s says, a Carrington-level extreme geomagnetic storm is rare, with historical records suggesting a return period of 50 years for Quebec-level storms, and 150 years for very extreme storms, such as the Carrington Event.

“However, far weaker storms still pose a significant risk. Ageing power infrastructure and increasing reliance on electricity make the world more vulnerable, especially at times of heightened solar activity – 2013 is a solar maximum, the peak of the sun’s eleven year cycle of activity,” the report says.

If such an event occurred it might cause damage to only a small number of transformers. However, if it were to happen in the densely populated U.S. Atlantic coast,” the Lloyd’s report says it would be of particular concern. “Physical and technological risk factors along the East Coast – such as magnetic latitude, distance to the coast and ground conductivity – make it a high risk for power outages, although the Midwest and the Gulf Coast states are also at risk,” the report warns.

Given the chaos a major power outage could bring, the power industry, policymakers and insurers need to evaluate preparatory and mitigation measures, the report says.

The warnings are being heeded. The Lloyd’s report indicates that governments are “waking up to the risk and taking the threat of geomagnetic storms seriously.” In April the White House Office of Science and Technology Policy released a report assessing U.S. capacity to monitor and forecast space weather, while the UK added space weather to its National Risk Register in 2012.

“Most space satellites that can provide warnings of incoming geomagnetic storms are past their mission lives and replacements will soon be needed,” according to the report. “Power infrastructure can also be hardened against geomagnetically induced currents in regions with the highest risk of outage. While these measures come at a cost, prevention is much more cost effective than paying for huge damages caused by a severe storm.”

Any fallout from a solar storm, particularly one that hits North America, would inevitably affect the insurance industry. It would cause sustained power outages, which could expose insurers to significant business interruption claims, “although exactly how cover for such an event would respond is uncertain, the report says.

Business interruption is likely to be only one aspect of potential insurance exposure. “A space weather event could disrupt supply chains, lead to wide scale cancellation of major events and conceivably result in liability claims if employee or public safety was compromised, or if directors failed to take necessary steps to limit damage,” the report says.

Lloyd’s warns that a major event would have wider implications for the insurance industry and society in general, potentially causing widespread disruption to infrastructure, social unrest and disruption to financial markets.

Extreme solar weather would also be a direct threat to power companies and their insurers, according to John Chambers, deputy active underwriter at Aegis London, a specialist insurer of power companies.

He said that insurers and risk managers have made “some progress” in identifying geographical areas and types of equipment that could be more susceptible to loss. However, the lack of recent claims has meant that the issue is lower down the agenda for insurers than perhaps it should be and has made it harder for risk managers to get the appropriate capex budgets for risk mitigation.

“Specialist power insurers should be looking at wordings and the use of sub-limits and stand-alone coverage, although they are open to engaging with other bodies to look at ways of improving resilience and managing risk,” Chambers said.

Neil Smith, manager of emerging risks and research at Lloyd’s, hopes the report will serve as a blueprint to help insurers and others consider how they might mitigate the risks of solar weather.

“Geomagnetic storms present a huge potential risk with important implications for both insurers and society,” he said. “Insurers need to evaluate the potential impact of geomagnetic storms on the market, as well as work with governments and energy companies on ways to mitigate the risk at a society level.”

Source :Lloyd’s of London.
Date : 23/05/2013

Marsh offers D&O coverage for international organizations

Marsh Inc. has launched a directors and officers liability insurance program for international organizations.

Called Marsh Delta D&O, the service offers coverage on a single-claim basis instead of an aggregate limit, the broker said Monday in a statement.

Limits up to £100 million ($151.7 million) are offered, and the product includes more than 100 enhancements to most standard market forms. The coverage includes protection against personal liability from nonpayment of corporate taxes demanded during the policy period; reasonable fees, costs and expenses associated with an investigation; and an additional limit for environmental violations on top of the overall limit.

“Today, directors are making management decisions in the context of a challenging economic climate, evolving regulation and heightened regulatory scrutiny,” Leslie Kurshan, a senior vice president in the financial and professional practice, said in the statement. “Many are increasingly worried that decisions made today, based on current information, could be attacked later with the benefit of hindsight. For directors, this means the potential for civil, regulatory and criminal liability.”

The program is available to private, private equity-owned and publicly traded U.K. and international businesses outside the FTSE 100 or geographical equivalent, which includes organizations that have Level 1 American Depository Receipt programs.

It is not available to companies that are domiciled in the U.S., directly listed on U.S. exchanges or have Level 2 or 3 ADR programs.

Source :The Business Insurance.
Date : 20/05/2013

America’s Improved Giant The insurer has done a good job of rehabilitating itself. Can it stand on its own feet?

AMERICANS are often asked by politicians if they are better off now than they were four years ago. Anyone involved with American International Group (AIG), an insurance company felled by the financial crisis, can safely answer “yes” to that question. In just four years it has freed itself from a $182 billion bail-out; gone from being publicly owned back to the private sector (the Treasury sold the last of its stake in December); and turned itself into a leaner, simpler business. Now that it has successfully shaken off government ownership, AIG’s next task is to prove its worth as a stand-alone, listed company.

That AIG is around at all is remarkable. By piling into what would emerge as the most rotten part of the financial system (insuring investors against losses on securities linked to American subprime mortgages) during the credit bubble, it ended up owing billions of dollars to those holding the other side of its bets. Ben Bernanke, the Federal Reserve’s chairman, famously derided AIG as a hedge-fund attached to a large and stable insurance company.
Today’s AIG is different. The buccaneering financial-products unit, whose need for collateral caused the government to intervene in September 2008, is all but shuttered. Many of AIG’s prized units have been sold to help finance its rescue, notably Alico and AIA, both non-US life-insurance businesses with bright prospects. An aircraft-leasing arm is in the process of being flogged.

The transition back to private ownership has been pretty smooth. Much of the credit for the transformation falls to Bob Benmosche, a former boss of MetLife, an insurance rival, who was pulled out of a retirement spent cultivating grapes in Croatia to take the reins in August 2009. Known for his blunt, speak-your-mind approach (a month into the job, he said he was avoiding “those crazies down in Washington”), he has helped turn a demoralised group with a radioactive brand into a company with a renewed sense of self.

The happy ending to this corporate fairy tale is still some years away, however. What remains of AIG is hardly a world-beating company. Return on equity, at 5%, is just about the lowest of its American peers. Margins are lousy at both the general-insurance division (known as property-casualty, which insures homes, cars and the like) and the life-insurance bit (which offers bank-like savings products).
Mr Benmosche claims AIG now has the right structure and positioning to thrive. “We had to cut some branches off the tree, but the tree is still there and it’s a big trunk,” he says. Even after the cuts, AIG has some 62,000 staff (down from 116,000) in 90 countries. Despite the wild swings of the recent past, it is still America’s largest insurer by market capitalisation (see chart).

With less management time spent fire-fighting and negotiating with politicians, more attention is being lavished on the nuts and bolts of running each unit. The goal is to reach a 10% return on equity by 2015, thus matching its rivals. Mr Benmosche relishes detailing the humdrum measures AIG is taking to get there: consolidating data centres to cut costs, tweaking the product mix towards more profitable lines, offering more tailored pricing by crunching customer data more intelligently. This is a world away from dabbling in credit derivatives, he implies.

Both sides of AIG’s business need nourishing. The general-insurance arm currently pays out slightly more in claims than it receives in premiums, once costs are factored in. Profits come from investing the cash float it holds to pay out claims as they arise, which is not the most lucrative business when interest rates (and thus returns) are at rock bottom. Chronic underinvestment in IT systems has left it trailing rivals—stories abound of AIG units bidding against each other for contracts. Bad luck hasn’t helped. Hurricane Sandy will have dented fourth-quarter profits to the tune of $2 billion before tax, the most of any American insurer (it also flooded AIG’s Wall Street offices).

The good news is that insurance prices in America are rising, and that AIG’s higher-margin international franchise (despite asset disposals, half of the firm’s general-insurance sales are made abroad) is growing fast. More controversially, the company is also cutting reinsurance coverage, which is how insurers offload their own risks. This will juice margins but could lead to AIG shouldering larger one-off losses.

The impact of low interest rates is even greater for its life-insurance and retirement-planning business, which makes up the other half of the group’s earnings. Many of its life products offer customers fixed returns on premiums paid. AIG has limited flexibility to lower the rates it extended in frothier times. In common with rivals, it is now changing its focus towards products which are less sensitive to interest rates. But lower returns and a still-soft economy also has the effect of dampening interest from consumers, who appear keener to squirrel away money into savings products when they feel rich. Profits in this area of the business are expected to be flat for the foreseeable future.

Bits of AIG continue to baffle outsiders. It still holds $158 billion of credit derivatives on its books, a small slice of its pre-crisis $1.8 trillion portfolio but still nearly three times its market capitalisation. The firm also holds more sub-investment-grade securities on its balance-sheet than any of its life-insurance rivals, according to J.P. Morgan. Much of this exposure comes from mortgage-backed securities taken over by the government during the crisis and subsequently repurchased by AIG.

“We have a detailed understanding of these assets,” says Mr Benmosche. Maybe so. His most obvious successor (Mr Benmosche is 68 years old and was diagnosed in 2010 with an unspecified cancer) is Peter Hancock, who now heads the general-insurance division but is famed in financial circles for having pioneered credit derivatives at J.P. Morgan two decades ago. But however well AIG understands itself, many analysts quietly admit that parts of the group’s finances are still hazy to them.

Investors are nonetheless bullish on the shares. That is partly because they trade at just over half AIG’s book value, whereas other insurers are trading closer to or above book value. Investors like the regular recent payouts of excess cash to shareholders, although the firm’s focus is now expected to be on paying down debt to maintain its A- credit rating. Huge accounting losses during the crisis will lower AIG’s tax bill for the next few years, bolstering profits. And although some fret about a tighter regulatory regime, with the Fed likely to impose bank-like “stress tests” from 2014, others see stricter supervisory oversight as a reassuring plus given the group’s recent history.

AIG certainly has a new-found air of confidence. A recent ad campaign featured its employees thanking America for the bail-out, implying that this unpleasant episode is now firmly in its past. The firm has reverted to selling general insurance under the AIG brand, having opted for the generic “Chartis” at the height of the crisis. By any measure, this has been a remarkable comeback. But it will be sealed only when the insurance company that those Washington crazies deemed fit to salvage shows it can compete with rivals who did not benefit from taxpayer largesse.

Source :The Economist.
Date : 2/02/2013

Claim game The calculations behind the insurance of athletes

WHEN Alex Rodríguez, baseball’s highest-paid player, announced last month that he needed hip surgery, it wasn’t just the New York Yankees that groaned. The biggest share of the resulting financial pain may well be felt by Team Scotti, the lead insurer on his ten-year, $275m contract. If Mr Rodríguez can recover by midsummer, the firm will escape unharmed since most policies do not pay out until a player has been sidelined for at least a few months. But if his injury drags on, it could make it harder for teams to get coverage—and thus harder for athletes to extract similarly lucrative contracts in the future.

As salaries in professional sports have soared over the past few decades, so has the price tag associated with the risks inherent in such strenuous physical activity. Athletes in sports like golf and tennis often buy their own insurance, though those with recurring conditions have trouble getting coverage. But sports teams that offer guaranteed contracts face huge losses if stars are injured, even only temporarily. As a result, the economics of the business are now shaped by insurance markets just as they are by TV contracts or ticket sales.
To secure affordable rates for temporary coverage, North America’s National Basketball Association (NBA) and National Hockey League (NHL) set up leaguewide insurance plans. By pooling risk, insurers are able to project claims better and can be confident they are not just covering the most injury-prone. The NBA’s policy, run by the BWD Group, costs a modest 4% of salaries, though it is obligatory only for a club’s top five players and has limited exclusions for pre-existing conditions.

Such a scheme is possible only in a highly regulated system like the NBA’s, which caps individual contracts and requires teams to spend at least $49m a year on salaries. In contrast, stars in sports like European football can earn far more than any single insurer is willing to cover. Moreover, clubs with small fan bases tend to avoid big contracts, and thus have no desire to join a leaguewide plan. That forces teams to rely on one-off policies, which charge higher premiums, are riddled with exclusions and rarely last over three years.

One big risk for insurers is moral hazard. Players insured against a career-ending injury may have little incentive to make a comeback if they have already received a payout; clubs with temporary disability policies have an incentive to keep a player sidelined until he is fully healthy. Jeff Moorad, a former boss of baseball’s San Diego Padres, recalls a debate over Chris Young, a pitcher recovering from a shoulder injury in 2010. “As a matter of principle, we didn’t stand in his way, and he came back and contributed,” he says. “But the accounting department much preferred that he stay on the disabled list.”

The bigger hazard may be underestimating the chances of pricey athletes getting hurt. According to Jonathan Thomas, an underwriter at the Watkins syndicate at Lloyd’s of London, investors disillusioned by the 2008 financial crisis have flocked into insurance, causing too much capital to chase too few policies. “Multi-year policies and reducing rates are a pretty lethal cocktail,” he says. “The coverage [teams] can get, given the largesse that they give to young men with comparatively little investigation, is extraordinary.”

Source :The Economist.
Date : 26/01/2013