A leading Lloyd's broker has called on Markel International to rethink its new 60-day payment deadline for business placed in the London market.
Markel International is thought to be the first London market insurer to tighten its payment deadlines, a principle endorsed by the London Market Principles 2001 document published last year.
However, Charles Manchester, managing director of Lloyd's broker Dickson Manchester, said he feared the move could prove too inflexible.
He said: “I agree that insurers should be paid more promptly but there is a danger of throwing the baby out with the bathwater.”
Manchester explained: “The problem is that we are entering a hard market phase and there will be fewer providers of capacity around, meaning those remaining will be more able to dictate terms.”
He went on to warn: “Shorter payment periods could severely reduce the amount of business being placed by smaller provincial brokers into the London market.”
And, in reference to Markel International he said: “Any insurer that seeks to impose such standards should think again. It makes much more sense that insurers should approach each case individually.”
Manchester acknowledged that some London Market brokers have been taking extended credit terms to earn interest on overdue accounts.
But he said that there was a danger that reduced payment terms could lead to the cancellation of policies.
He said: “Sixty days is too tight a period for business that comes into the London Market through more than one broker.”
Jeremy Cooke, chief operating officer of Markel International, said the issue of terms of trade and payment of premiums was highly emotive.
However, he stated: “In principle, we would like to see the market move to a position where, on direct open market business placed either at Lloyd's or in the company market, we could expect to be paid within 60 days.”
He added that for Markel to have some control over those brokers who do not to intend to abide by its 60-day terms, it needed to have a cancellation clause if it did not receive prompt payment.