Wow! – what happened there?

In spite of wide spread alarm in the months leading up to the October 2011 renewal it seems that nothing properly prepares us for the surprises thrown up in this most widely commented on of mass market renewals.
The inactivity post the Charles Rivers Associates review and report and the ensuing consultation period looked likely to give rise to some significant headaches; with established Insurers rumoured to be prepared to scale back, or in one or two cases to withdraw their participation.  This coupled with the new entrants which had been widely tipped to enter the market withdrawing, on the basis that the lack of changes, meant that Insurers would continue to operate on a far from level playing field. 
As it turns out the headline figures would make a casual observer ask – what all the fuss had been about!
However if we take a closer look, the swan’s feet are actually paddling rather hard.  The market did have new entrants, although they were not the ones which we had anticipated.  The new arrivals were First Title Insurance plc, Enterprise Insurance Company plc and European Risk Insurance Company (ERIC), which has already come under some close scrutiny. 
This gave rise to the extraordinary recent proclamation by an SRA spokesman, that their measures to change the market had been vindicated.  It may of course be that in trying to rationalise the activity that we are on a hiding to nothing and that for once logic does not play any part in this market and to that extent the SRA may be right.  From an Insurers perspective I suspect some naivety, some writing for income and some activity which I would rather reserve judgement on would answer the question better.  The market did also have some withdrawals, i.e. Aspen Insurance, Lemma, SIMIA and A G Dore but in fairness these were no longer significant players.
And in the past few years one of the widely commented on barometers of appetite or otherwise for Solicitors PI Insurance, i.e. the Assigned Risks Pool went from a heady 266 firms in 2010 down to a rather unexpected 38 firms for this year. 
The table below shows the overall participations and compares these with the figures from the previous renewal.
2011/12 Participation 2010/11 Participation
Rank  Insurer Percentage Value (£) Percentage       Value (£)

1 XL Insurance Ltd 18.288       46.76m 13.33         28.47m    

2 International Insurance 12.514 32m 14.41% 30.78m

        Company of Hannover 

3 QBE International 11.782 30.13m 8.22% 17.55m

        Insurance Limited

4 Travelers Insurance 11.602 29.67m 11.04% 23.50m

        Co Ltd

5 Zurich Professional 9.411 24.06m 12.90% 27.5m


6 Chartis Insurance 8.87 22.68m 18.06% 38.56m

        (UK) Ltd (formerly AIG) 

7 Allianz Global      5.773 14.76m 6.41% 13.2m

        Corporate & Specialty AG

8 Barbican Syndicate 3.495 8.94m 0.24% 0.50m

        1955 C/O Libra 

9 Alpha Insurance  3.333 8.60m 0.86% 1.82m

10 Aviva Insurance    3.333 8.52m 4.24% 9.056m

        Limited (prev Norwich Union)

11 E R I C 3.26 8.34m N/A
12 QBE / D A 386 1.714 4.38m 0.52% 1.10m

13 W. R. Berkley      1.467 3.75m 1.83% 3.88m

        Insurance (Europe) Limited 

14 Liberty Mutual      1.333 3.41m 1% 1.35m

        Insurance Europe Limited

15 Enterprise 1.145 2.93m N/A
16 First Title 1.075 2.75m N/A

17 Royal & SunAlliance   1.073 2.74m 2.24% 4.78m

        Insurance PLC

18 Chubb Insurance 0.342 0.88m 0.47% 0.99m

         Company of Europe SE

19 Pembroke Syndicate 0.159 0.41m 0.44% 0.93m


Winners / Losers
A number of comments become immediately worthwhile.
First — although the headline figure shows £40m or so more premium this year than last, this hides the fact that for the last few years the level of premium reported in these returns has not been an accurate reflection, which gave rise to a review of the way returns are reported earlier in the year on behalf of Capita, the Managers of the Assigned Risks Pool.  It highlighted a number of activities by Insurers, which were questionable in terms of how they declared their income for the primary Insurance policies.  It is not necessary to go into the details of the findings, but suffice it to say that the report suggested the 2010/11 figure was likely to have been under reported by around £50m.  The rules to the Qualifying Insurers were subsequently restated to prevent this ‘mishap’ occurring in the future. 
Last years largest Insurer by value Chartis — deliberately looked to downscale their involvement, due primarily to their heavily publicised issues with the 2/3 partner firms which they had insured for a number of years.  It seems that they may, having strategically commenced repositioning their book this year, have an appetite for new business next year.
This year’s new leader is now XL Insurance which only entered the market in 2009 and now has a very significant hold.  It will be interesting to see how their participation runs in the future as their book becomes more mature, i.e. as the reported circumstances start to translate in to claims. 
Hannover, one of the other accelerated movers over the last couple of years, again since their arrival in 2009, now seems to have stabilised, with the rumour that new business growth this year was not encouraged from Head Office!
Of the new Insurers First Title plc, were much heralded, but have only written around 1% of the total which is significantly less than anticipated.  E R I C on the other hand seems to have fared significantly better.  It will be interesting to see whether this may prove to be the catalyst for the SRA to become more involved in looking at the financial strength of the Qualifying Insurers. 
With much publicised concerns about the renewal process from the beginning of 2011 through to June 2011, many practices were keen to get their proposal forms, complete them and get their terms and if manageable move on.  The reality was that proposal forms from many of the Insurers were later than normal and then many of the Insurers advised that they would not be quoting until at least 1 August, blaming additional strategy work or their actuaries’ final ratings, but whatever the reason it made an already nervy customer base even more concerned.  There were some very late terms issued, but as can be seen from the ARP figures most practices did find a home. 
So what can we expect next year?  As we move closer to the October 2013 disbandment of the ARP, an Insurer which has a firm on their books which fails to find Insurance in that renewal will be stuck with the 6 year run-off for that firm.  The firm will no longer be able to trade.  So we can expect a continuing focus on the financials of firms. 
I think we can expect the regulator to be forced pay more attention to the financial standing of the Qualifying Insurers.
We are expecting to see some interesting discussions on some of the new arrangements for Alternative Business Structures (ABS) particularly relating to wording and coverage issues. 
We know that there are other Insurers waiting to get involved in this market their entrance, whether this year or at some stage in a couple of years time, will be down to a number of factors: the prevailing economic climate; whether they can find a niche which will allow them to offer something to one of the market areas where there are less claims; and, whether there are opportunities around the ABS structures.  
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