Monday, 10 July 2017

Elite in run-off

After the announcement this week that Elite Insurance Company has stopped writing new business, ATE Sales Manager Mike Knight, questions where the next market shock might emerge.

It is almost a year since my colleague Paul Hurley wrote a similar post to this, commenting on the demise of AU Insurance Services, after the small ATE specialist was forced into administration. His words then seem almost eerily prophetic now:

 “Whatever pushed AU Insurance Services into administration, it wasn’t the first small ATE provider to fail, and it won’t be the last. But bigger firms could also be finding the current climate difficult…”

The circumstance of AU’s relatively sudden demise and Elite’s apparently measured decision to move the company into run-off are, of course, very different and the causes may be too. Elite certainly isn’t one of the “…smaller, niche businesses with most or all of their eggs in the ATE insurance basket.” that Paul described last August.

None of us can take any pleasure in the troubles faced by one of our more significant and respected competitors. Aside from the personal difficulties that will now face many of Elite’s staff, some of whom we know well, we also have to consider the uncertainty that such a high profile exit will bring to a market that has faced more than its share of challenges in recent years.

Elite is a sizeable business with multiple offices in several countries and an insurance offering that stretches well beyond its ATE and BTE legal expenses policies. So, it is impossible to say to what extent the challenging ATE market has contributed to the company being forced to make this decision.

Nonetheless, it is hard to imagine that the combination of LASPO, increased regulation and even successive insurance premium tax hikes, haven’t played some part, not to mention the uncertainty surrounding EEA passporting rules - under which Gibraltar-domiciled Elite has operated in the UK - as a consequence of Brexit.

Solicitors will be understandably nervous in the wake of such a high profile departure, and many will be wondering “what next?” That, of course, is impossible to predict, but all lawyers offering ATE cover should satisfy themselves that they are at least minimising any risk to their client, and ultimately to their own firm.

That means knowing not just the company they are dealing with but also asking questions about the ultimate underwriter of the policy.

While based and regulated in Gibraltar, Elite had at least stood the test of time and was more transparent than many of its competitors. Last December, the company even went so far as to secure an independent assessment of its financial strength, from a respected ratings agency. The security behind that ‘BBB’ rating may not have averted this outcome, but it should give partners some confidence that Elite’s promise to meet its obligations to policyholders and creditors should be fulfilled.

Whenever and however the next ATE provider exits the market, the solicitors and their clients may not be so lucky.

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