Expert View: The Changing of the Guard

The UK insurance industry has proved itself to be very robust. It has survived Reconstruction and Renewal, the large losses of the late 1990s/early 2000s, the bank collapses of 2009 and, over the last ten years, the longest soft market in memory. And now Brexit – whatever that means. One thing is for sure – the market will adapt and survive and come out stronger.

We have greater experience in the UK of a wider expanse of risk than anywhere else in the world. We have an excellent educator in the CII as led by Sian Fisher. The time will come when everyone will have to be CII qualified to work as a broker and underwriter. The vision of Lloyd’s led by Inga Beale is changing to adapt to wider horizons, to guarantee London remains the global hub of international underwriting.

Our regulation constitutes some of the best in the world. Yes it is expensive. No, it isn’t always commensurate with what is needed in the UK. However, it is a rock upon which we can build our insurance industry. Solvency II has hopefully guaranteed a sure underwriting capital base.

This process of change is already occurring – we are involved daily in more redundancy programmes as insurance firms cut costs. Not because it makes their business better or because of Brexit - it is just that they have to. And yet M&A continues apace – much of it funded by US VC monies. And with the dollar movement, the UK is looking better value for the foreseeable future.

Brexit has already helped - the dollar exchange rate has moved considerably in London’s favour. But this is a one-year benefit. Brexit has caused concern that financial services firms may relocate to Europe. The upside of that is there is more space and rents are coming down.

We, at EC3, are seeing a new MGA enquiry every two weeks. They lower insurer costs, and add independent experience. Turnkey operators have been around for many years – there are now some six or seven. There is much spare underwriting capacity out there supporting this growth and the MGAA has now some 110 MGA members. This trend will continue.

The Insurance Act may well prove to be our best piece of insurance consumer legislation. The placing of risks will just have to be done more precisely – and customer expectations should be easier to meet.

Lawyers sadly don’t innovate quickly enough. Clients only talk to lawyers if they have to. Law firms need to become more responsive to what is happening in the market. Margins are tight for many businesses – they can’t afford £600 per hour. The legal profession needs to improve and develop. EC3\Legal is still a start up after four years, and now we have EC3 Insurance Consulting. But others such as Fenchurch Law are creating waves too. Still others will break away from the bigger firms to do the same, and support the insurance industry through its changes.

Brexit is not what I wanted – but if it catalyses positive change, then it is to be embraced.