Black Swans, back-pay and big fails

This time last week we noted an interesting opinion piece from the Insurance Insider musing on the dilemma facing Lloyd’s and how best it might allow its members to make hay while the sunshine of hardening rates and possible new capital warmed their backs. Less than a week later and the same publication reports that the corporation has sent letters to 18 syndicates (c.20% of the market) identifying them as under performing, warning that their future business plans will face greater scrutiny. It seems the underlying problems that have concerned Lloyd’s performance management directorate, and seen the end of 7 syndicates in the two years, remain.

In perhaps more positive news from Lime Street this week, Lloyd’s shared three possible recovery plans from Covid-19 and the global economic shock the pandemic visited upon us. These were widely reported and showed how insurance could ‘support global recovery and resilience’. The three options were; ‘Restart’ - a potential non-damage business interruption solution for future waves of Covid-19; ‘Recover Re’ – an after the event insurance product framework, which could provide cover for non-damage business interruption over the long-term; and (the winner of the best named plan) ‘Black Swan Re’ - a reinsurance framework for government and industry partnership.

Another less welcome sign of things possibly to come, was highlighted by Insurance Times as it reported on a survey this week which concluded that financially stressed customers pose a greater risk of exaggerated claims and insurance fraud. Whilst the data came from last November, the concerns of increase fraudulent activity have been heightened as the financial impact of the pandemic has hit home. Interestingly, it also claimed that “some people don’t claim because they’ve got busy lives and they’re affluent enough & can’t be bothered basically.” (Really?!)

This wasn’t the only survey making the news this week; Full Circle’s own survey of MGAA members – the Association announced Mike Keating as their new MD this week - was reported in the UK insurance press. The survey pointed to a return of face to face meetings and far fewer Zoom calls than we’ve recently become accustomed to. As our own Alex Wise put it; “whilst no one doubts the importance of relationships and networks in the insurance market, turning our backs on what necessity has shown can be done, would be a mistake.”

Whilst this hankering for doing what we’ve always done perhaps doesn’t come entirely as a shock to some, the fact that almost three quarters of MGAs surveyed said they had taken some form of action to help alleviate financial pressure for policyholders might. If you do want to read more about the survey follow the link.

If you’re looking for signs that the insurance industry is returning to normal, Aon put a financial stake in the ground this week with the news that it has ended its temporary staff salary reductions. It went further, saying that staff would be repaid in full plus 5% of the withheld amount. If did add that some salary reductions for senior directors would remain in place.

And finally, if like me, you don’t mind a bit of schadenfreude on a Friday afternoon to make you feel better about the week just gone… Following the demise of unrated Danish insurer Gefion, Insurance Times had a cheery look back at the five biggest insurance disasters of the last 20 years – link here.