UK watchdog eyeing London market on contractual cracks in pandemic, corporate insurance gaps from hard market
The London Market will go under the regulator's eye for concerns on contract certainty, claims procedures and availability of select specialist lines which may reflect poorly on the customer-facing culture of the city, a key FCA supervisory official said Thursday (January 27).
“We have seen the market seeking to improve product to meet the changing needs of customers, but there remains underlying concern around the culture of the market which could impact customer outcomes,” Matt Brewis (pictured), FCA director of insurance and conduct specialists, told a Fitch Ratings webinar on the UK insurance business.
“This is an area which has improved significantly in the past couple years, but is an area we continue to look at,” he said.
Pandemic-era concerns over business interruption coverage has opened the broader question of overall contractual certainty, Brewis said.
The complexity of London Market risk products come with equally complex distribution chains, which may have opened the door for contractual certainty to break-down or wear away during the pandemic, Brewis indicated.
“We feel there are likely other types of product in the London Market that potentially have that level of complexity and [for which] that lack of contractual certainty or clarity could exist in the future.” Brewis said to launch his list of supervisory concerns for the coming period.
Claims procedures are under review for similar logic. Business interruption showed “some claims have taken longer than would be ideal” and the regulator will review payment stats and who is working claims processes for best efficiency, he said
Select specialist lines have seen sufficient rate hardening to raise supervisory concern if some businesses haven’t now been priced out of the market, Brewis added. He named professional liability and indemnification plus some high-rise property categories where “we’ve seen some customers unable to find insurance to meet their needs at a reasonable price, an affordable price.”
“This is an issue particularly around insurance which is required by companies to continue to operate” and where “we continue to focus, to discuss with markets and look to find solutions – a focus for the coming year,” he said.
By declared priorities, Brewis’ office will be considerably more geared towards consumer protections in the retail and smaller-scale commercial segments served outside of the London Market. FCA home and motor pricing guidelines, in place since the start of the year, are a better measure of FCA priorities, he suggested.
Brewis will be facing off in the House of Lords against accusations from London Market leaders that a one-size-fits-all regulatory approach is killing off the more complex products and services designed for more sophisticated global multinationals.
Brewis will make his appearance before the Lords within the coming weeks, he indicated.
“From my perspective, my focus as a supervisor is on consumers, my focus is on ensuring customers are treated fairly,” Brewis said.
“Where you have sophisticated business doing business with large sophisticated insurers, as long as the market is working effectively and there is no illegal activity going on, I think they are big enough to deal with it themselves.”
Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
