With a big gun like Aviva selling foreign units and Groupama shedding its UK operation, it’s clear that capital adequacy seems to be uppermost in insurers’ minds

The year 2012 will be remembered by many brokers for the importance of insurers having financial strength.

Aviva is selling off foreign units and cutting costs to help beef up solvency; Groupama UK was sold on the cheap to Ageas to help its troubled parent shore up its capital adequacy; and earlier this month, Gibraltar-based insurer Lemma Europe collapsed and left up to 6,000 policyholders in the UK having to claim compensation through the Financial Services Compensation Scheme.

Now this week we learn that Spanish insurer Mapfre has been stripped of its top-tier rating, weakened by the embattled Spanish sovereign.

In response, many brokers have rearranged their committees and bodies that keep a check on the financial strength of insurers. It’s a wise move. Nobody wants to be left standing naked when the tide goes out.

  • Who will be the next Biba chief executive? There will be no shortage of candidates to replace current boss Eric Galbraith when he steps down next year.

    It will be interesting to see what direction the new person at the helm takes. Could there be closer working ties with the ABI? Is there scope to make more noise at Westminster and Brussels?

    These are surely the sort of questions that potential candidates will be mulling over when the selection process begins.
  • Direct Line Group’s flotation got off to a good start, helped by interest from retail investors. That’s good news. But it also heaps pressure on the management to keep up the good performance.

    If the stock goes south, the story could end up something like this: a bailed-out bank spins off a taxpayer-owned insurance company onto the stock market that then tanks, despite support from the general public. Meanwhile, the management continue to pocket juicy bonuses. Ouch.