The current economic gloom creates an interesting environment for insurers. It is unusual for UK insurers to fail and this is largely due to the solvency margins that have been enforced by Government and the FSA over a period of years. This means that the UK is very safe place for people to insure their business and property.
One of the problems that the industry will face over the coming months will however be one of stability. The investments that insurers have used to maintain solvency levels have traditionally been regarded as very safe vehicles. However as he financial crisis has begun to bite one of the interesting features has been that these traditional safe investments have come under attack and this is having an effect on how they are rated by rating agencies.
Evidence of an insurer’s financial rating is key components that brokers should use in assessing and recommending cover. An insurance broker has a duty of care to their clients in selecting and recommending an insurer. In most cases brokers will look for what an insurer who has an A credit rating.
In recent times there has been an abundance of such companies to choose from, however if the current package of measures that have been put forward to save the Euro are unsuccessful, then a situation could arise whereby the gold plated A rating becomes much more elusive and exclusive. This could present an issue for brokers as the absence of a credit rating could leave them vulnerable to allegations of a breach of duty of care.
Like most brokers PI Expert has a policy wherever possible of recommending A Rated insurers. This is an essential not just for our client’s peace of mind and the professionalism that we bring to the deal, but also for our own Professional Indemnity cover.
Increasingly Professional indemnity Insurers who cover general insurance brokers are asking about the security of the markets used when granting cover and this is something that brokers will need to bear in mind over the coming months and years as the marketplace becomes more turbulent.