Brokers give their views on the challenges faced by the UK leisure insurance sector and how they compare to those in Ireland
Brokers have warned that the UK leisure insurance market is hardening amid increased claims payouts.
The state of the UK’s leisure insurance market, which can cover everything from B&Bs to sports stadiums, was put in the spotlight after AXA XL pulled out of working with MGA LeisureInsure in Ireland.
AXA XL cited “well-documented market dynamics” as why it stopped providing capacity for the risk in Ireland.
Lawrence Shortland, head of property and casualty for Citynet, said that court payouts in Ireland for personal injury claims were out of control.
Citynet has its own Irish division and Shortland provided reassurance that UK payouts are nowhere near the levels seen in Ireland – which he estimates are sometimes four to five times greater than they would be in the UK.
However, he did recognise there is a gentler hardening in the UK market that underwriters would like to see continue over the next couple of years.
“Claims is still very much an issue in the UK,” he said. “Although the awards here do seem more controlled, even the most mundane of leisure risks can end up with some quite significant claims on them.
“Compared to what they were writing in the past the likes of Aviva and Allianz have become more restrictive in what they will now write.
“That’s why we are seeing more coming in through the London market being placed by wholesale brokers like ourselves.”
Hardening market
For the higher-risk leisure business, such as activity centres and trampoline parks, Shortland said there was a particular hardening.
This, he said, was also enabled by several major insurers exiting casualty risks generally, including Tokio Marine Kiln and AmTrust.
And with leisure risks in particular, he said some had lost their appetite for the risk due to how wide and varied the claims can be.
He added: “Often when you are dealing with late night incidents where there is alcohol involved the courts are still finding favourably in terms of anyone who has been injured no matter how out of control they may have been.
“The UK has been much more controlled for many years compared to Ireland, but there are still significant awards going out.”
Craig Morgan, head of sports leisure and entertainment at Geo Specialty, said that the UK leisure market had shifted in the last five years.
“Five years ago there were several underwriters with a broad appetite encompassing soft plays, travelling fairgrounds, and pubs and clubs,” he said.
“Factors such as the Ogden rate changes and less experienced owners buying premises have caused that to shift.”
Today he said insurers and MGAs are specialising, with each having a specific set of requirements and risk appetite.
He said ‘leisure’ is no longer looked at as a single class.
“The persistently soft market, driven by web trading, is showing early signs of hardening because of this,” Morgan said. “This could be good news for brokers as their ability to represent clients and navigate between specialist underwriters comes to the fore.”
To minimise the risk for the underwriter across all classes of leisure business, Julian Boughton, chief executive of Alan & Thomas, said the broker has a more important role than ever before.
Risk management
Against a backdrop of increasing claims payouts, Boughton said brokers must ensure all clients have a risk management programme in place.
“With any leisure risk, with slips, trips and falls there is public liability elements of the risk,” he said.
“It’s key the client has a view around risk management, and if they haven’t got a view, it’s about what the broker can do to help them put a plan together that manages the risk.”
He said this is increasingly what underwriters are looking for.
Should a client refuse to implement recommended risk management measures, Boughton said Alan & Thomas would not take on that business.
Boughton added: “If a client doesn’t work to improve a risk with a loss ratio spiralling out of control then that’s not someone we can work with going forward and we wouldn’t advocate it to an insurer.”
Nevertheless, he said there had been an uptick in claims across the lower-level leisure risks that Alan & Thomas had been writing, and that there was a gentle hardening of rates particularly on property.
“We’re seeing a few more slips, trips and falls,” he said. “Some of the liability estimates are increasing albeit not significantly.
“There’s an awareness that we are becoming more litigious as a society. Court awards are going upwards rather than downwards, so when it comes to an injury and a claimant decides to engage with a third party, be it a solicitor or whatever it may be, then they are advising them to go for maximum compensation.”
But he said the market remains profitable for underwriters, and, providing things remain stable, he agreed with Shortland that it should continue to be for the foreseeable future.
“It’s still a healthy market, and certainly in London there are a number of insurers and MGAs still writing that business profitably,” Shortland said.
“They don’t want to see any softening of rates or any new players coming into the market, and I expect them to gently look to try and push rates up over the next few years.”
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