Insurance Market Update – December 2020
As 2020 draws to a close we thought we’d summarise some of the significant situations in the insurance market currently.
FCA Test Case on Business Interruption
All evidence has now been presented to the Supreme Court, and the judgement is currently being worked on. No definite timescales have been set for the judgement being given, but it seems most likely this will be in the New Year. As soon as we have news on this we will be in contact with all clients who will be affected by the Supreme Court’s decision.
The Insurance Market
Prior to the pandemic there were already signs of the insurance market hardening (insurer capacity diminishing leading to increases in premiums), particularly affecting Professional Indemnity and Directors’ and Officers’ Liability. The pandemic has significantly accelerated this hardening, and we are seeing rate increases and cover restrictions being applied across all insurance classes. In many cases there will be no avoiding this market impact, but our strong recommendation is that the renewal process is started earlier (which we are doing for all clients behind the scenes), and that clients provide updated risk information as soon as they possibly can to ensure we have sufficient time to get the best terms from the market. With the vast majority of insurance company staff still home-working referral processes have notably slowed, leading to renewal terms taking significantly longer to prepare. An early start is the best approach to avoid these delays becoming problematic.
Brexit
We are less than a month from the end of the Brexit transition period. Whilst the impact on most clients’ insurance will not be significant, there are a number of areas that may require attention:
- Motor insurance. If you are taking a vehicle into the EU on business or pleasure you will need a Green Card to demonstrate to the authorities that you have the legally required motor insurance. As insurers are doubtless going to be bombarded with requests for Green Cards we strongly recommend giving us as much notice as possible if you will require one.
- Subsidiary companies domiciled within the EU. UK insurers will no longer be able to cover European subsidiaries for certain insurances from the UK. In most cases this can be addressed by the insurers’ European subsidiaries, set up for the purpose, but cover should no longer be deemed to be automatic. If you have European subsidiaries (or plan to establish any) that need to be covered these should be highlighted to us ASAP.
Cyber Insurance
There has been a marked increase in Cyber crime since the pandemic began, including an attack in the last few days against a cyber security company. These attacks target businesses of all sizes, and everyone should consider their organisation at risk. Cyber Insurance is currently very competitive, with cover available from as little as a few hundred pounds. If you do not have the cover in place and would like to explore it please let us know.
Directors’ and Officers’/Management Liability
The Directors’ and Officers’ Liability market was already seeing significant premium increases and cover restrictions prior to the pandemic, and the general hardening of the market has accelerated this process. It is worth noting that the pre-pandemic increases were caused by increases in claims payments by insurers, and a potentially significant economic downturn is likely to increase claims numbers. Some insurers are already indicating premium increases of as much as 100%. The fact that claims are on the increase should give any businesses without this cover cause to give it serious consideration. Please let us know if you would like to discuss this.
Personal Guarantee Insurance
This is a relatively new insurance class, and can protect personal assets directly against personal guarantees being called upon. As we are seeing a number of business owners asked to provide personal guarantees to banks and other lenders, please let us know if it would be of interest.
We hope you find this update useful and if we can be of any assistance please do get in touch.