Tokio Marine Kiln Insurance - what happened? Brokers give their verdict

Tokio Marine Kiln Insurance “was trading in fiercely competitive segments of the market where you really need a USP [unique selling point] and some serious scale to make it work,” was the verdict of Aston Lark chief executive Peter Blanc.

Tokio Marine Kiln yesterday said it was running off its UK insurance book from next month to focus on its Lloyd’s business.

“Clients have a plethora of choice in this market though so this won’t affect the market overall - the business will be happily absorbed by others, Blanc told Insurance Times, adding that it was “a real shame as we hate to see quality markets disappear”.

The run-off will see TMK losing out on a reported £165m in annual premium, media sources reported.

TMKI’s most recent filings with Companies House suggested it had been facing a tough underwriting environment for some time. It posted an underwriting loss of £16.3m in 2017, and a £7.6m loss the year before.

Commenting on the news, Brokerbility executive chairman Ashwin Mistry said it was most likely that “the numbers feted the decision”. He suggested that generally there is a lack of sound judgment going into some of the areas of cover at the moment. ”These poor numbers didn’t just materialise overnight. There must have been capacity provided in certain areas and aspects of the market that resulted in these adverse figures,” he told Insurance Times.

Providing capacity

The wider question, said Mistry, is why are capacity providers going into areas where mainstream players are either shy of or choosing not to. ”Is it because they have enough data and actuarial experience to suggest that these areas are either under-funded or need a lot of work, or are they just not doing it because other capacity providers or unrated markets are coming into that space and vacating it?”

He added that markets need to look at some of the heavier ends of risk and come to an agreement where they will provide capacity for the right intermediaries, and support those that have been finding getting insurance difficult at an affordable price.

Mistry highlighted construction professional indemnity and professional liability as areas of cover that are of particular cause for concern at the moment, but others could also follow. 

The Tokio Marine Kiln move also raises the prospect of rate rises. When some of the fringe or secondary markets pull out, hardening markets are a potential effect - which Mistry admits are needed. The problem with this is the impact of rates rising too sharply and quickly, he added.

Lockyers chief executive Jon Newall said that although the TMKI move did not effect it directly, a lot of business will have to be re-brokered, which will present an opportunity for some.

A TMK spokesperson said: “The decision to put our UK insurance company into run off, while difficult, is absolutely the right thing to do. Focusing on complex, specialist risk through our Lloyd’s operation plays to our strengths and experience and underpins our future ambitions.”