MCE’s Gibraltar insurance arm is putting business into run-off. What does that mean for the Rushden-based company?
With a love of fast motorbikes, MCE staff have spent many weekends watching bikers taking bends at hair-raising speeds during one of their sponsored events.
It’s a contrast to the calmer weekday routine of dealing with insurance policyholders at their Rushden headquarters, amid the picturesque fields of Northamptonshire.
But like the bikers they love, staff have been living in the fast lane these last few days as the business took an action-packed change of course.
The Gibraltar MGA’s bike and private vehicle arm, which has been such a huge part of the business since its incorporation nine years ago, is being put into run-off, with Sabre Insurance taking over renewals and new business on motorcycles on the insurer side.
MCE will now focus solely - once again - on its core broking operation, which had been exclusively placing business into its MGA.
From the outside, this strategic shift leaves a number of unanswered questions.
Why was the decision made to exit the MGA? What will happen to MCE’s private vehicle customers? How will MCE cope with a such a big shift in strategic direction?
Gibraltar and Solvency II
The drama officially kicked off at the beginning of November 2021, when MCE posted a notice on its website stating that it would no longer place new business and renewals with its Gibraltar MGA from 5 November. It was seeking an alternative provider.
A few days before that announcement, the Gibraltar regulator had issued its own new restrictions on MCE doing business in The Rock.
Explaining the decision and the Gibraltar regulator’s notice, MCE chief executive Julian Edwards told Insurance Times that Solvency II had weighed heavily on the firm.
”For a very small insurer, the regulatory burden under Solvency II is incredibly onerous. The cessation was placed due to solvency calculations on the back of MCE’s own actuarial review,” he said.
”The business is solvent. MCE UK, the broking arm, is working tirelessly to support that position, to ensure that customers and claimants receive [a] high level [of service] from us during the run-off period. It’s at the forefront of every decision we make.”
Another issue to consider is MCE’s pricing and claims.
A note from analysts Berenberg said the stopping of new business and renewals to MCE’s MGA was ”primarily due to the mishandling and pricing of personal injury claims, which developed adversely”.
However, Edwards said the run-off decision was made so that MCE could focus on its core strengths.
With Sabre onboard as a partner that can excel at underwriting and pricing, it allows MCE to concentrate on distribution.
Edwards continued: ”During the course of 2021, MCE completed a digital transformation. We understood what our strengths are - the building of motorcycle products, distribution and marketing.”
Sabre Insurance’s chief executive Geoff Carter agreed.
He said: ”We think MCE [has] really good skills on distribution, like in damage and salvage. [It is] really good on own damage, damage to the cycle or hit to a third party. [MCE has] got really good skills and we’re looking forward to working with [the company].”
Sabre deal details
The Sabre deal raises a challenge for MCE. Sabre will reprice MCE’s book, raising the net rate.
Such a move has the potential to bleed the motorcycle book. If prices end up being too high for customers, they might leave for a cheaper rival.
Realising this risk, Edwards plans to offset this with a ”zero commission” strategy, which he stressed will lead to consistent prices for motorcycle customers.
He said MCE has the balance sheet to support this strategy. Furthermore, a number of revenues outside the core policy will flow into the business, such as salvage, which could generate £15m in revenue next year.
MCE is not involved with add-ons or dual pricing practices, according to Edwards, meaning the potential worst impacts from the FCA’s upcoming pricing reform are mitigated.
The business does collect premium finance, but Edwards is not anticipating any issues here.
Tying up loose ends
Another loose end recently tied up by MCE is its outstanding private vehicle book written out of Gibraltar.
In a recently-struck deal, confirmed in November 2021, MCE will transfer private vehicle renewal and new business to broker Adrian Flux.
Edwards said Adrian Flux are the “benchmark” here and that MCE’s strengths will combine well with its business.
The final question is around MCE’s staff. How will the strategic reshuffle impact them?
There will be some restructuring, Edwards explained, based around the Gibraltar arm.
A team of three staff currently remains in Gibraltar. Other employees have been redeployed in the business or services have been transferred to insurance management, fiduciary and financial advisory group Robus, which MCE has appointed as insurance manager.
Back in the UK, Edwards praised staff for shifting the turnaround of the business so quickly.
“The mountains that the MCE team have moved over the last seven days is incredible,” he said. ”The team are keeping the customer, policyholder or claimant right at the forefront and I’m incredibly grateful for the job they have done.”