We have been contacted by a number of brokers asking for advice regarding the utilisation of unrated insurers and the message they should be delivering to their clients.

Miles Smith specialises in difficult high risk business for the UK broking community.  We pride ourselves on dealing with ‘A’ rated insurers and Lloyd’s paper to provide solutions for a great variety of industries.  Particular attention is given to long-tail liability business in view of our specialisation in “industrial disease risks”.  Many of our insurers are called upon 25 years after inception of a contract of insurance, to meet their liabilities on Employers’ Liability under the statutory of provisions, so we have a keen understanding of why this topic is so important to you.

In recent years, under the Passporting Regulations, many non-UK domiciled insurers have been given permission to write these classes, as well as the shorter-tail business for the UK broking community.  The net result of this has often been failed insurer after failed insurer, many featuring the same structure and underwriting personalities year after year.  The Regulator, Local Authorities and Government, together with our own Trade Bodies, are becoming increasingly agitated by this appalling outcome for the UK Plc.

“Brokers may be held to account if they select unrated insurers – they will need to illustrate that they fully understand the financials and structure of these organisations in order to justify the recommendation of them to customers.  Sadly, I conclude that, ‘You are judged by the company you keep!’ Brokers who fail to have adequate provisions or rules in place to safeguard their company render their own company assets and personal wealth at risk, as well as those of their customers.”

Paul Chainey – Chief Executive Officer Miles Smith Insurance Group

We will endeavour to keep you abreast of any changes that may impact the way in which you conduct this area of your business. The media have highlighted this issue in a number of articles please below for some of this information.

Passported insurer ERIC stops writing business

Insurance Times 6th February 2014 – by Elinor Zuke 

Unrated Icelandic insurer European Risk Insurance Company (ERIC) has stopped writing new business, renewals and or increased cover, Insurance Times has learned.

ERIC specialised in liability insurance, including employers’ liability, public and products liability and property owners’ liability in the UK from its Southend-on-Sea office…

Insurance times: passported insurer Eric stops writing business

Unrated insurers pose legal danger

Insurance Times 5th February 2014 – by Matt Scott and Elinor Zuke

Unrated insurers often offer brokers cheap premium for their hard-pressed clients. But using unrated firms could be in breach of a broker’s duty of care.

Insurance Times has learned that brokers may be unwittingly exposing themselves to potentially costly lawsuits by placing business with insurers without financial ratings.

Although Biba does not state a formal position on whether brokers should use unrated insurers, brokers are being influenced by the last legal advice the trade body book…

White, now Biba chief executive, said in 2011: “We took legal opinions a few years ago about how a broker gets on if he is dealing with an unrated insurer and the legal opinion was that using an unrated insurer and the intermediary’s duty of care in law are not compatible bedfellows.

“We don’t have a position, but the legal position is quite clear. You have a duty to your customer and you have to ask yourself, if the insurer has not got a rating, how am I exercising my duty of care? The legal thinking is that you are not.”

Article from 05/02/2014 issue of the Insurance Times

IBSC to issue guidance on unrated insurers

Insurance Times 5th February 2014 – by Matt Scott

New professionalism council will publish the guidelines in April.

The Insurance Brokers Standards Council (IBSC) is set to issue guidance to brokers on the use of unrated insurers.

IBSC chairman and Seventeen Group managing director Paul AnscombeInsurance Times that the new professionalism council was seeking legal advice on insurer security.

“The IBSC will be focusing on giving guidance to brokers around the complex issues of insurer security,” Anscombe said. “We are specifically taking advice from our legal, financial and regulatory advisers and, as practising brokers ourselves, we will ensure that our guidelines are realistic and practical. Ultimately it is about how best we can serve, inform and protect our clients”…

Insurance times: IBSC to issue guidance on unrated insurers

Can brokers rely on unrated insurers?

Insurance Times 14th January 2014 – by Matt Scott

Insurance Times examines the risks and benefits of dealing with unrated insurers.

Unrated insurers can be a headache for brokers.

On one hand they present a riskier form of cover and there are many examples of unrated insurers collapsing or hastily withdrawing from the UK market. This leaves customers in the lurch and brokers fighting to get claims paid or scrambling to find alternative cover at short notice.

On the other hand, they provide capacity for risks that are difficult to place or that brokers may struggle to find cover for on the open market at an affordable rate.

But the question brokers have to ask themselves is do unrated insurers offer a service that is in the best interest of customers? And is the cover they provide secure enough to deliver when it matters most?…

Insurance times: Can brokers rely on unrated insurers?

The unrated insurer dilemma

Insurance Times 25th June 2013 – by Saxon East

Unrated insurer Balva has collapsed. So why exactly do brokers place business with unrated insurers?

Unrated insurers have become a hot topic of debate in the UK insurance market, especially after the collapse of Latvian insurer Balva. But what are the arguments for and against using unrated insurers?

Insurance times: The unrated insurers dilema

*All articles taken from the Insurance Times website and as such, subscription may be necessary to view

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