Another insurer collapses in Gibraltar and, closer to home, the OFT goes tough on the private insurance motor market, and Direct Line is in the spotlight for its top pay packages
In the space of just a month, two Gibraltarian insurers have failed. Now policyholders in the UK are left in limbo wondering whether their claims will ever be paid. It’s a nightmare for brokers and MGAs, who are rightly asking: what is happening in Gibraltar?
They want to know if the regulator, the Financial Services Commission, could have stepped in earlier to stop these calamities. So far the FSC has stuck to the script that external financial difficulties caused these two companies to collapse. But the facts are that Lemma ended 2009 below minimum solvency margin; it then strengthened its capital to finish 2010 and 2011 above the threshold, before collapsing in financial difficulty last month.
This series of events doesn’t look good for the FSC. And the problem for the regulator is that every time one of these insurers collapses, the reputation of Gibraltar is damaged.
OFT makes a referral to the Competition Commission
The Office of Fair Trading’s decision to refer the private insurance motor market to the Competition Commission has been backed overwhelmingly by insurers. It’s interesting that they see this is an opportunity to end some of the costs they are being hit with by credit hire companies.
With the Jackson Reforms also coming into effect in April, and prime minister David Cameron vowing to crack down on whiplash fraud, perhaps regulation and government intervention will finally pay dividends for the private motor insurance market. The industry’s reputation may have taken a hit, but every cloud has a silver lining, and this one is shining very brightly for motor insurers.
Direct Line under fire for top executives’ pay packages
Direct Line chief Paul Geddes is in the spotlight over director remuneration. However, he’s done about as good a job as possible in turning around the UK’s largest motor insurer, and his pay is not out of line with competitors’. Surely this is simply a case of market forces at play?