In the latest twist in the battle to secure damages for late claims payment under UK law, London insurance market bodies have withdrawn an amendment to exempt large risks from planned legislation but may look to reinstate a suggested carve out for reinsurance.
The reinsurance exemption would directly affect those companies that reinsure their captive or access that market for catastrophe-level exposures.
As reported in CRE, representatives of the London insurance market oppose and want to tone down a proposed law change that would see policyholders around the world entitled to damages for late payment of valid insurance claims in the UK.
The new law would apply to all policies taken out in the UK, including those of European risk managers in the London market.
Despite differences of opinion, both sides of the risk transfer divide are working together to find a suitable solution for all parties.
The latest development in the saga this week saw the Lloyd’s Market Association (LMA) and the International Underwriting Association (IUA), which represent the interest of the Lloyd’s and wider London market, withdraw an amendment to the UK’s Enterprise Bill that is set to introduce the law change.
The amendment proposed that part of the bill that says policyholders can claim damages if an insurance settlement is not paid in a reasonable time should not apply to contracts of insurance for large risks, as defined by the Solvency II Directive.
This would define ‘large risks’ as policies for firms with a balance sheet of £4.4m and a turnover of £9m. This raised eyebrows because it would mean that many SMEs, as well as large companies, would be exempt from the claims protection provision.
This large risk amendment was put forward by the London market representative bodies, but was withdrawn following the bill’s reading in the UK’s House of Lords. We have been told that the market may put forward further proposals that would exempt reinsurance from the damages for late claims payment provision.
This carve out was also part of the large risk amendment and still remains potentially on the table.
Speaking to CRE on behalf of the his association, IUA and the London company market, David Gittings, the LMA’s CEO, said, however, that insurers remain in ‘very constructive dialogue’ with insurance buyer representatives and are ‘still hopeful of finding a mutually agreeable solution’.
Bruce Hepburn, CEO of insurance governance expert Mactavish, said yesterday that his firm and Airmic now have ‘very good dialogue’ with London market representatives on this issue.
