Standard Life action may be start of recession backlash
London’s Commercial Court has ordered 11 insurers to pay a £102m professional indemnity claim brought by life insurer Standard Life, in a possible sign that financial downturn-related professional liability claims are starting to bite.
The 11-strong group is led by ACE European Group and Liberty Mutual Insurance Europe, and includes the UK divisions of several other big names, such as Axis Specialty Europe, Catlin Insurance Company UK and Chartis Insurance UK.
The claim centres on Standard Life’s Pension Sterling Fund, which lost 5% of its value after its investments in asset-backed securities tanked following the collapse of US investment bank Lehman Brothers in September 2008.
The fund was intended to be ‘safe’ and Standard Life had to pump in £102m to protect the fund’s 97,000 policyholders. Standard Life then sought to recoup the money it had injected into the fund from the professional indemnity policy.
Many industry observers have been fearful of a surge of financial crisis-related professional liability claims, in particular from directors’ and officers’ liability policies, since the downturn struck in 2008. But so far, this has not happened.
While rates in certain lines have increased, competition in professional liability has kept rates low, leading some insurers, including Lloyd’s insurer Beazley, to pull back.