The motor market could be slowly moving in the right direction but it's way too late for HSBC Insurance, which was finally officially dropped by HSBC today
Almost two years on since HSBC decided to stop underwriting motor business, the bank today ended its association with troubled HSBC Insurance UK by selling it to run-off specialist Syndicate Holding Corp for £68.5m.
It will no doubt come as a huge relief to HSBC to have got rid of a business that ultimately caused a lot of pain.
The troubles at HSBC Insurance UK made for a tumultuous time for the bank and its staff. The rumblings of upheaval began in 2008 when it was thought that the business, formerly known as Corinthian Insurance, was being lined up for a sale by HSBC in the middle of the credit crunch.
The signs that something was in the pipeline were correct as in 2009 a number of management changes included the exit of chief executive Martyn Capewell and talk of a buy-out surfaced once again.
Shortly after it emerged that HSBC had injected £80m into the business as it desperately sought a sale. The recapitalisation came amid fears of under-reserving, but this was denied. Weeks later and following more speculation that bidders including Neil Utley had tried to tie up a deal, HSBC announced the inevitable – that it would cease underwriting motor business.
Last year, we reported more woe, as the insurer’s accounts revealed how HSBC bosses had to plough in another £103.5m during its run-off, on top of the cash previously pumped in. The insurer racked up an overall loss of £178m in 2009.
As well as financial crisis and the poor state of the motor market – HSBC Insurance UK was badly hit by claims inflation – the management of the business will no doubt come in for some flack too. HSBC has since sold its broking business, HSBC Insurance Brokers, to Marsh. The bank will continue to offer motor insurance through the HSBC, first direct and M&S Money brands using select third-party insurers, but it appears to be putting its love affair with insurance well and truly in the past.
The tide could slowly be turning in the motor insurance market. Rates increased just 2.7% in Q2, the smallest quarterly increase for nearly two year, said the Confused.com/Towers Watson price index today. It is still too early to say if the huge hikes last year will be enough to return insurers to profitability in this market. But with insurers battling for market share in a competitive market, any sudden moves could have a huge effect on pricing.
No comments yet