As the UK plunged into recession and attempted to pull itself out again, the insurance world experienced similarly tumultuous ups and downs this year. We take a look back at the final 12 months of the noughties
January: A fresh start of sorts
The new year struck an optimistic chord amid the economic gloom as the USA swore in its first black president, Barack Obama. Experts predicted the new presidency would herald an overhaul of the US regulatory framework for financial services. Meanwhile back home, entrepreneur Tom Duggan backed a £23.5m management buy-out (MBO) of Hastings Direct and Advantage.
Exclusive Insurance Times research revealed that, despite their threats, insurers had not yet cut commissions. The survey showed the market continued to be divided on rates, with 22% predicting the market would harden by 2010 and one in five expecting it by the fourth quarter of 2009. Swinton strengthened its presence on the high street after buying 91 Equity-branded shops from Insurance Australia Group. Willis sued five former employees for breaching restrictive covenant agreements after they defected to rival London broker Alston Gayler. Elsewhere, private equity house Gresham revealed plans to create the market’s next consolidator.
February: The eye of the storm
The rumour mill went into overdrive this month. The woes of Fortis UK continued to deepen as the future of its Benelux parent bank looked increasingly uncertain. Buyers began to stalk the insurer and there was widespread speculation that chief executive Barry Smith was attempting to gather funds for an MBO – rumours that were staunchly denied. Meanwhile, beleaguered Irish insurer Quinn was forced to hold talks with brokers after months of speculations about its financial stability. Swiss Re became the latest victim of the crunch, reporting a £500m loss. Aon UK put the squeeze on insurers, demanding a 1% increase in broking charges on fee-based business, while Allianz poached six senior underwriters from AIG UK to form its new professional indemnity team.
The market’s stormy climate was mirrored in the weather. Insurers faced the prospect of dealing with double the amount of claims for minor car collisions as the UK was hit by the worst snow storms in 18 years.
March: How the mighty fall
It was revealed that AIG was to be no more in the UK as the insurer became incorporated into new parent company AIU Holdings. The news came after AIG’s parent company posted the biggest loss in American corporate history: $61.7bn (£38bn) for the fourth quarter of 2008. The insurer confirmed it was considering new names and reviewing its brand. AXA’s Philippe Maso revealed he would consider selling broker Bluefin for the right price.
Meanwhile, questions loomed over the future of managing general agents (MGAs) after Aviva and AXA withdrew support from several.
But despite insurers’ snubs, the consolidators continued to back the model. Giles revealed ambitious plans to rebrand Ink Underwriting, setting it a target of £300m gross written premium within three years. Marsh launched Probroker, a network for small brokers, while Oval announced plans to launch an agency. Insurers and brokers joined a Home Office summit with home secretary Jacqui Smith to combat low take-up of home insurance among Britain’s poorest families.
April: The big squeeze
As the downturn tightened its grip on balance sheets, Aon was forced to cut contributions to employees’ pensions to protect its business. After months of wrangling, it was revealed that Solvency II, the new regulatory framework governing insurers’ capital adequacy, would finally see the light of day. Brussels bureaucrats gave the nod to the landmark legislation, due to be implemented in 2012. Meanwhile, questions hung over the future of Jelf Group after the departure of Bruce Carnegie-Brown, managing director of 3i QPE (an investment arm of parent company 3i, which holds a major stake in the consolidator).
May: Actions speak louder
Brokers called on insurers to halt dual pricing and bring renewal prices in line with those offered to new business as the soft market continued. The ABI launched a campaign to help vulnerable people in the North West to buy contents insurance after it emerged the region had the highest levels of unprotected homes in the UK.
Towergate chief executive Andy Homer revealed plans to slash one in ten of its 3,500 staff over the next two years. Elsewhere, HBOS whistleblower Paul Moore accused the FSA and former HBOS directors of withholding details of evidence from a parliamentary inquiry into the banking crisis. AXA continued its cull of network partnerships, pulling capacity from the motorcycle panel of broker Carole Nash in a disagreement over market share. The rollercoaster saga of Quinn continued as the insurer posted a €58m (£52m) loss. But chief executive Colin Morgan blasted critical rivals in a letter to its brokers, which defended its proactive claims model as benefitting policyholders, claimants and the firm.
June: Building back up
Fortis bucked the trend of insurers shunning MGAs with a five-year deal to be the sole capacity provider of broker Kerry London’s new MGA. Managing director Mark Cliff, who headed up AXA’s relationship with Primary Group before joining Fortis, said that smaller insurers would be able to benefit from the business model. Giles posted a £10.7m loss after tax as a result of consolidation costs, while Towergate directors invested £10m of their own money in the firm to aid the refinancing of its debt. But it was not all bad news for the consolidators, as Aviva sought to rebuild its relationships with major players such as Towergate and Jelf.
Meanwhile, business secretary Peter Mandelson widened the government’s £5bn trade credit scheme to allow more firms to buy top-up cover. Finally, the FSA banned insurers from hiking mortgage payment protection insurance premiums in response to the financial crisis.
July: Let’s go to work
Striking a Reservoir Dogs-style pose on the cover of Insurance Times, LV= showed it meant business after swiping 150 staff from RBS Insurance. In an exclusive interview, the GI management team outlined plans to become one of the UK’s top five motor insurers by 2012. As the motor market continued to struggle, however, HSBC injected £80m into its motor underwriting business in a bid to attract buyers. The renewed appetite for MGAs showed no sign of fading as Cooper Gay launched an agency focusing on the construction and engineering sector.
Meanwhile, writing for Insurance Times, Lord Peter Mandelson highlighted the initiatives that had been set up to assist trade credit insurance firms. In another exclusive, Lloyd’s chairman Lord Levene and chief executive Richard Ward revealed that no regional broker had yet entered the London market; nine months after amendments to the law would have allowed them to do so.
August: Green shoots?
The market appeared to be finally turning after the latest data from Acturis showed that average commercial premiums had risen in the previous quarter. In one of the industry’s worst-kept secrets, former Primary boss Jonathan Davey confirmed that his company, technology provider SSP, was launching an MGA. Broker Network senior director Mark Wood quit the firm but he pledged to stay in the sector. German giant Munich Re reported a drop in half-year profits to €1.12bn (£1bn) from €1.41bn in the same period in 2008.
New Aon chief Rob Brown outlined plans to shake up senior management in an expensive reshuffle. In a new twist in the credit hire tale, AA/Saga launched an in-house credit hire firm in a bid to save millions of pounds. Meanwhile, brokers faced an increase in the cost of their own professional indemnity insurance following a rise in negligence claims throughout the financial crisis.
September: Kitson takes a detour
Aviva’s head of sales and marketing, John Kitson, signalled the end of an era when he announced that he was set to leave the insurer in the new year to “take a rest and go fishing”. Tributes poured in from the broking community for a man widely viewed as the insurer’s “mouthpiece to brokers”. Loss specialist ETWB was forced to review expansion plans as insurers such as RSA and Allianz brought their claims in-house in a bid to cut costs.
Failed Gibraltar-based insurer Aldgate faced a regulatory probe after leaving customers with outstanding claims. In a defiant move, Quinn refused to bow to industry pressure to return to a credit rating agency until it could be assured of an ‘A’ rating. Chief executive Colin Morgan revealed the controversial insurer would continue to expand in the UK in its largest lines of construction and personal motor, as well as move into new areas, such as leisure and retail.
October: A dramatic exit
The shock departure of Igal Mayer from the helm of Aviva’s UK business left the insurance community reeling. After a turbulent two years, which featured numerous bust-ups with brokers, Mayer left to head up the insurer’s US and Canadian operations. It was also announced that the GI business would merge with Aviva’s life arm under current chief executive Mark Hodges. Some brokers cheered Mayer’s departure, with one calling it “excellent news for the market”. In the meantime, the consolidator landscape shifted as the UK’s biggest brokers sought recession-proof strategies. Towergate confirmed flotation was possible before 2011, while Bluefin said it was open for business after seeing off three failed rival bids for major accounts acquired as part of the SBJ buy-out last year. Giles was in the market for a transformational deal and Oval was preparing for acquisitions. Jelf confirmed backer 3i was reviewing its 28% stake.
November: Déjà vu
The on again, off again sale of RBS Insurance was back on the table. The government ordered RBS to sell its lucrative insurance arm within four years, following another bail-out, worth £25.5bn. European giants Allianz, Zurich and Generali were expected to return to the bidding, along with with private equity firms CVC Partners, BC Partners and Apollo Management. Elsewhere, Aviva pitted itself against Allianz, Zurich and RSA by launching a new division to scoop big-ticket accounts. Kerry London became entangled in a fierce legal battle with rival Miles Smith over alleged poaching of confidential client information from the business. It emerged that Jelf faced £12.5m in payouts to vendors of broking businesses bought by the company in 2007.
Meanwhile, insurers faced up to paying £100m in claims after floods devastated parts of northern England, leading to increased calls for the government to put in preventative measures against flood damage.
December: Endings and beginnings
Aviva’s new general insurance boss, David McMillan, pledged to play a part in driving up rates in 2010. Brokability and Brett & Randall founder Stuart Randall stepped down as chief executive of both, following an MBO. Oval agreed to sell two brokers back to the original vendors in an “amicable split”, while GMAC appointed Christian Plumer as new chief financial officer to its UK motor insurer Provident in preparation for a likely sale. Chubb scooped the coveted gong for General Insurer of the Year at the Insurance Times Awards, with Aviva and Hiscox highly commended. RK Harrison won National Broker of the Year, while former Aon boss Dennis Mahoney scooped the Industry Achiever of the Year award. It was an eventful occasion to cap off a truly eventful year. IT