Daily briefing: Wednesday - the first to fall

Today’s news that Wilmslow Financial Services went bust owing £50m in claims liabilities illustrates how the payment protection insurance (PPI) chickens are coming to roost.

The Cheshire-based company went into administration in May following the British Banking Association’s announcement that it would not press ahead with its judicial review of the FSA’s handling of PPI claims. It is the only significant PPI-related default to hit the scheme since the high street banks threw in the towel.

With the firm holding assets of less than £1m, the company’s claims liabilities look set to land on the doorstep of the FSCS’ SBO2 sub-class, which is paid for by a levy on all general insurance intermediaries.

The crystallisation of Wilmslow’s liabilities shows the reason for the tenfold increase in brokers’ levies imposed by the FSCS over the past two years.

But it will also underline the manifest unfairness of the FSCS situation in the eyes of brokers.

Wilmslow was the PPI provider arm of a loan broking business and hence had no relationship with the day-to-day business of general insurance broking.

This sorry state of affairs just underlines why it is so important that the FSCS is reformed to reduce the levy on general insurance brokers.

To give your backing to Insurance Times’ Fair Fees campaign, which marks its first anniversary this week, sign up to our petition.

Markerstudy struggles

Filings by Markerstudy, revealed exclusively on insurancetimes.co.uk this morning, show that the company strengthened its reserves by £11m in 2009.

The exercise, which the company says was prompted by the need to pay for prior years claims, follows last years Insurance Times report that Markerstudy’s own actuary EMB believed that the firm was under-reserved by up to £4.25m in 2008.

Yesterday’s Ernst and Young motor report shows that the firm’s net combined ratio has slipped by around 20% in 2009 from just over 90% in 2008.

This represents a slightly bigger deterioration than that suffered by the rest of the Gibralter motor market.

But the company’s total net combined ratio is still better than that of 120.6% for the Gibralter market as a whole.

Both the filings and the Ernst & Young report shows that Markerstudy, like the rest of the motor market, is struggling with surging claims inflation.

Reform, including the ban on referral fees backed by prime minister David Cameron, clearly cannot come fast enough for the ailing motor market.