The massive retailer has had a lot of trouble finding cover this year and says it is disillusioned with the insurance industry in general
Company Name: John Lewis plc
Address: 171 Victoria Street, London SW1E 5NN
Phone Number: 0207 592 5123
Email:
paul_clift@johnlewis.co.uk
Website:
www.johnlewis.co.uk
What does John Lewis Partnership do?
Broad based retailing - department stores and supermarkets, incorporating telephone and web-based sales channels, and manufacturing of textiles.
Turnover in last financial year: Approaching £5bn
Number of staff: 59,000
Who makes the decisions? Paul Clift, head of risk management
Wholesale Broker: None
Retail Broker: None, although we have used Marsh this year in a strategic role
How were these partners chosen?
We were confident that Marsh had a good understanding of issues affecting the retailing business sector and a good knowledge of relevant insurance markets.
Types of Insurance purchased:
Property/business interruption (BI): all risks, including terrorism
Combined liabilities (including motor fleet)
Professional indemnity
Directors' and officers'
Yachts
Personal accident
Combined liabilities are reinsured to the John Lewis captive
What have your experiences been of insurance over the past year?
A year ago we experienced a dramatic increase in costs, and shortage of BI capacity when we renewed in January. The capacity crisis increased the number of insurers providing cover from 1 to 37 and the scale of the premium increases was wholly disproportionate to either our business characteristics or to our past insured loss profile. We were very unhappy to find ourselves prey to insurers' opportunism. Terrorism exclusions were widened, but despite the Pool Re extension to all risks being welcome, it came at a very heavy additional cost, and left us exposed to the 'non political' gap in cover.
We were protected to a large extent from the extremes of capacity shortage in the liability field by our captive arrangements, but to keep capping costs to acceptable levels event deductibles carried by the captive increased ten-fold and the combined aggregate limit rose by 175%.
Other significant issues that assumed prominence were composite panels, bulk aerosol storage, and combustible waste management. These issues became increasingly relevant throughout the year and were the subject of conditional terms approaching our January 2003 renewal.
Market conditions at January 2003 remained harsh, with very little competitive appetite returning to the BI market. Initial terms offered represented a 60% increase on last year at the primary level, although higher layers appeared content with near expiring terms.
We had the good fortune to be approached by a white knight, which led to disengagement from an 80-year relationship with the previous primary carrier but significant savings were achieved and allowing for internal funding of a substantially increased deductible renewal was secured at broadly expiring terms.
Aggregate limits were again an issue for the liability covers, with insurers pushing attachment levels significantly upwards whilst demanding price increases (continuing towards the goal of providing less cover at higher cost).
As a business that believes in building long-term trusting relationships with its commercial partners we have learned some hard lessons in the past 15 months.
