In the news...

EL cover must go, says ABI
The insurance industry has told government that the current framework for employers' liability (EL) in the UK is unsustainable.

At a meeting between the Association of British Insurers (ABI) and the Treasury earlier this week, insurers warned that a combination of spiralling workplace accident and disease claims, allied with the current hard market, is threatening the economic prosperity of UK businesses.

Royal & SunAlliance (R&SA) technical manager Phil Bell, who was at the meeting, said: "We have seen a number of businesses go under because they can't get employers' liability (EL) insurance."

The problem is that EL is an unattractive line of business, added Bell.

"I would challenge anyone to put any of their own money up for EL cover," he said.

Bell added that the continuing success of the no-win, no-fee system, as exemplified by Lords ruling on Callery v Gray, was the biggest reason that the current regime must change.

ABI head of general insurance John Parker added: "We put the view that the current EL system is not sustainable."

Parker warned the industry should not expect immediate action. "It is unrealistic for a government to tackle this issue mid-term. We think it would be suitable for the next term."

Bell said the government is taking the situation seriously. "The Treasury is not just fact-finding for the sake of it."

Among the key changes insurers are looking for is a change in EL legislation. "We would want to see the exclusion of industrial disease from any future legislation," Bell said.

Center Parcs could cost £75m
A row over a massive fire at Center Parcs in Elveden Forest earlier this year could end up costing Marsh up to £75m.

The row stems from a disagreement about a risk survey completed by Marsh's Birmingham office. It is claimed the survey did not disclose problems with the centre's roof linings and partition walls.

AXA Corporate Insurance, the lead insurer on the risk, is understood to have reserved the right to void its policy.

Brokers sign PWC deal
Brokers have grudgingly accepted Pricewaterhouse Coopers' (PWC) deal on the return of commissions and premiums, with approximately 90% of the 800-plus brokers involved agreeing to participate.

Those that did not sign up now face a tough choice: pay up all time-on-risk gross premiums and 100% return commissions on return premiums in a lump sum, or face legal action for the recovery of the money.

Liquidator Dan Schwarzmann will now consult the broker representative group with which PWC negotiated the deal to agree the wording of the contract that participating brokers will sign.

The contract will be distributed in two weeks' time and must be returned by 15 August.

New Zenith company
Zenith has launched a commercial underwriting company called Zenith Commercial. The company acquired the commercial business account of the Folgate Insurance Company from which 35 staff will transfer. The new company will mainly underwrite property.

Property owners denied cash
Property owners are being refused investment by banks because of an impasse between the insurance industry and the Treasury over terrorism cover.

According to market sources, banks and other investors are becoming nervous of backing businesses while terrorism cover is uncertain.

Meanwhile, the Treasury and the Association of British Insurers (ABI) said they had no significant developments to report in their terrorism discussions.

This is despite sources saying there is movement behind the scenes, with all parties agreeing to keep it confidential until a complete deal can be announced.

Earlier this year, most insurance companies limited the heads of cover within policies to £100,000 for terrorism claims, although some risks can still be placed in Lloyd's.

Large commercial property brokers said the Treasury promised a solution to the market gap by early March but, instead, issued a challenge to the insurance industry to prove it needed help.

Although rumours that a solution for property and business interruption risks was near - these have been circulating since April - the brokers said they had nothing concrete to tell clients.

"If we have banks lending hundreds of millions of pounds to our clients, there is a valid reason as to why they're unhappy with the current situation," one commercial property specialist said.

"I'm getting more and more commercial lenders inquiring as to what the situation is over terrorism cover.

"The lenders are uneasy lending millions of pounds to commercial enterprises if they're not fully covered for terrorism."

Liability set to flood back
New liability cover is set to flood back on to the market in the last quarter to mop up some of the best rates ever experienced.

Andreas Loucaides unveiled Professional Risks Insurance - a new insurance company that achieved a £130m float on the AIM in June. It will start underwriting in September.

Former QBE boss Bob Grant is hatching a plan to launch a $500m insurance and reinsurance company later this year. Meanwhile Euclidian has completed a £50m quota share deal with a Berkshire Hathaway subsidiary and Wellington launched its £200m reinsurance arm.