Weekly briefing: 29 July- 4 August - Fight the good fight

Ben Dyson: Commercial gets costly

In the not-too-distant past, personal lines was the bad apple in the UK general insurance bunch. Rising bodily injury claims in the motor book and weather losses in the homeowners’ segment - mixed with a good dose of aggregator-fuelled competition - helped push many combined ratios above the 100% mark.

Judging by the first-half results published today, commercial lines is UK insurers’ new bugbear - and for much the same reasons as personal lines. In general, insurers have fixed their personal lines problems with re-underwriting and rate increases, but commercial lines rates remain stubbornly low, so when losses hit, there is little cushion. Plus the commercial areas have not been immune to either last winter's severe freeze or bodily injury claims inflation.

RSA made a first-half personal lines underwriting profit of £27m, but a commercial loss of £19m. It was much the same story at Aviva, which recorded a personal lines underwriting profit of £67m but a commercial lines loss of £12m. Interestingly, a year ago the reverse was true for Aviva. In the first half of 2010, personal lines broke even after £30m of motor losses, while commercial business made an underwriting profit of £27m.

The one exception among those that reported today is AXA UK. This is simply because, at this stage, it’s impossible to tell how its commercial book fared relative to its personal lines book because the company has not disclosed that level of detail.

AXA could argue that this is because it is the UK subsidiary of a large European financial services group. However, that never seems to stop Allianz or Ageas, which both provide detailed breakdowns at interim and full-year stages.

Saxon East: Covea eyes the aggregators

Covea are on the march in the UK and they’re taking no prisoners. The French mutual giant – parent of MMA, Swinton and Provident – revealed this week that Debra Williams, former Tesco Compare chief executive, will head up their new aggregator.

Williams is an experienced leader, and she should do a good job. Covea plans to spend £30m on the new aggregator and, apparentely, they still have firepower for more acquisitions.

The big question is whether there is enough room for another aggregator. It will take years before Covea sees a return on investment, although Swinton and Provident should both benefit greatly from having their products on the aggregator. It’s a high-risk, high-reward strategy. Only time will tell if it works.

David Blackman: FSA targets smaller brokers

Buried away in the FSA’s latest newsletter for smaller wholesale insurance intermediaries is a reference to a self-assessment exercise it has carried out to on compliance with its client money rules.

This shows continued widespread failings in the way that many of the brokers that carried out the survey handled client money. The City regulator warns that it will visit firms about which it has “significant concerns”.

The resounding feedback from a straw poll of compliance experts shows that this is not just an issue for wholesalers, but for retail brokers as well.

And it illustrates how seriously the FSA, in its new incarnation as the Financial Conduct Authority, will be taking this issue. Next year is likely to see the FSA introduce a new fee earmarked for supporting the Client Asset Unit, which looks after the issue.

The hardening line on client money is all part of a more intrusive style of regulation, which it seems the sector is going to have to learn to live with post-financial crisis.

Sam Barker: Broker sues former employee

This week, we revealed a classic restrictive covenant legal battle between Alan Boswell Insurance Brokers and one of its former employees.

A High Court writ seen by Insurance Times outlines how Alan Boswell is suing Richard Beevor for allegedly copying a client database and then persuading clients to join a rival firm.

Account executive Beevor said he wanted a lifestyle change and to leave the industry after more than 10 years at Alan Boswell. Beevor, who dealt with around 333 clients that brought in £400,000 of commission a year, handed in his notice on 9 May 2011, and was put on gardening leave until 1 August.

However, during that time, the writ claims Beevor began working for Norwich-based Drayton Insurance Services and used a database copied from Alan Boswell to contact old clients and persuade them to move over.

Alan Boswell took out an injunction on 6 July demanding that Beevor hand over the old client lists or any other documents he was holding.

It won’t know the full details of any losses until Beevor does just that.

Danny Walkinshaw: Kerry London keeps on scrapping

It has been a tough couple of years for City-based broker Kerry London. The firm, owned by businessman Joe Kelliher, suffered during the recession because of the pain felt by many of its mostly construction-based clients. It has also had to deal with the exit of some key directors and the loss of some big accounts, such as Workspace Group and Laing O’Rourke.

The company recently underwent a restructure and rebranding exercise, which judging by its latest accounts revealed by Insurance Times this week, has started to stabilise the ship ever-so slightly. Its after-tax loss of £599,781 in 2009 reduced 50% to £298,429 in 2010. But a fall in turnover of £755,000 dragged the company from a 2009 operating profit to a loss of £179,998 last year.

Kerry London still has a long way to go in terms of transformation. Until rates in the commercial insurance market start to turn and conditions improve, the broker will have to keep on scrapping and hope that more ghosts similar to those of the past couple of years don’t come back to haunt it.