APRIL 2015 FINANCIAL INSTITUTIONS RISK BULLETIN FINANCIAL INSTITUTIONS RISK BULLETIN APRIL 2015 In this edition we showcase the innovative D&O insurance coverage extension for Private Warning Costs which we have recently developed with leading insurer - XL Group Insurance. We also explore the increasing trend of Insurance Market Consolidation and the resulting impact on the Financial Institutions market and client base, and announce the new brand ambassador for Arthur J. Gallagher. We were delighted to welcome Will Greenwood, the 2003 Rugby World Cup Champion, to Arthur J. Gallagher as our new brand ambassador, supporting us in bringing our vision, values and ‘Business Without Barriers’ philosophy to life. With a career that spanned 11 years and 55 international caps, Will has the second highest international try scoring centre of all time. Will retired from Rugby in 2006 and now writes a column for the Daily Telegraph and is also a Sky Sports presenter. A former City trader with an economics degree from Durham University, Will is a dedicated professional with a witty humour making him one of sport’s most engaging personalities. With his rugby World Cup-winning pedigree, passion and determination, Will is a great fit for the Gallagher family with our people focus on teamwork, integrity and entrepreneurial spirit. Brand ambassador to champion Arthur J. Gallagher e Financial and Professional Risks Division of Arthur J. Gallagher (‘AJG’) in partnership with XL Group Insurance (‘XL’) is now including an extension for Private Warning Costs in the AJG/XL Directors’ and Officers’ insurance policy for Financial Institutions. Private Warnings – a letter issued by the Financial Conduct Authority (‘the FCA’) to an individual that criticises or expresses concern about that individual’s conduct – have been gaining increased publicity in recent times. e letters stay on an individual’s record and have been described as casting a long shadow as they may have to be disclosed to a new employer and are likely to be considered by the FCA’s authorisation team when granting approval for a person moving to a new regulated role. Last year the FCA issued a record number of Private Warnings and concern has been growing that they amount to ‘enforcement by the back door’. It is anticipated that over seventy Private Warnings will be issued by the FCA in 2015. e extension is the first of its kind and fills an important gap in D&O policies for Financial Institutions, which are currently unlikely to respond to the Private Warning process. Highlights of the extension include coverage for legal and other professional costs incurred in responding to a ‘minded-to-letter’ issued by the FCA, which informs individuals that the FCA proposes to give a Private Warning. e extension therefore provides coverage in assisting individuals in attempting to prevent a Private Warning being issued. omas Falcon, Technical Director at AJG commented: “We are delighted to be including the Private Warning Costs extension in our policies with XL. Covering the costs incurred in dealing with regulatory investigations is a key consideration for individuals insured under D&O policies, especially in light of the hardening regulatory environment. We always strive to provide coverage for the costs in responding to a range of approaches by regulators. In the case of Private Warnings it was clear to us that the best solution is to provide a specific extension”. Arthur J. Gallagher and XL Group launch Private Warnings Costs Coverage
Transcript
APRIL 2015 FINANCIAL INSTITUTIONS RISK BULLETIN
FINANCIAL INSTITUTIONS RISK BULLETIN
APRIL 2015
In this edition we showcase the innovative D&O insurance coverage extension for Private Warning Costs which we have recently developed with leading insurer - XL Group Insurance. We also explore the increasing trend of Insurance Market Consolidation and the resulting impact on the Financial Institutions market and client base, and announce the new brand ambassador for Arthur J. Gallagher.
We were delighted to welcome Will Greenwood, the 2003 Rugby World Cup Champion, to Arthur J. Gallagher as our new brand ambassador, supporting us in bringing our vision, values and ‘Business Without Barriers’ philosophy to life.
With a career that spanned 11 years and 55 international caps, Will has the second highest international try scoring centre of all time. Will retired from Rugby in 2006 and now writes a column for the Daily Telegraph and is also a Sky Sports presenter. A former City trader with an economics degree from Durham University, Will is a dedicated professional with a witty humour making him one of sport’s most engaging personalities.
With his rugby World Cup-winning pedigree, passion and determination, Will is a great fit for the Gallagher family with our people focus on teamwork, integrity and entrepreneurial spirit.
Brand ambassador to champion Arthur J. Gallagher
The Financial and Professional Risks Division of Arthur J. Gallagher (‘AJG’) in partnership with XL Group Insurance (‘XL’) is now including an extension for Private Warning Costs in the AJG/XL Directors’ and Officers’ insurance policy for Financial Institutions.
Private Warnings – a letter issued by the Financial Conduct Authority (‘the FCA’) to an individual that criticises or expresses concern about that individual’s conduct – have been gaining increased publicity in recent times. The letters stay on an individual’s record and have been described as casting a long shadow as they may have to be disclosed to a new employer and are likely to be considered by the FCA’s authorisation team when granting approval for a person moving to a new regulated role. Last year the FCA issued a record number of Private Warnings and concern has been growing that they amount to ‘enforcement by the back door’. It is anticipated that over seventy Private Warnings will be issued by the FCA in 2015.
The extension is the first of its kind and fills an important gap in D&O policies for Financial Institutions, which are currently unlikely to respond to the Private Warning process. Highlights of the extension include coverage for legal and other professional costs incurred in responding to a ‘minded-to-letter’ issued by the FCA, which informs individuals that the FCA proposes to give a Private Warning. The extension therefore provides coverage in assisting individuals in attempting to prevent a Private Warning being issued.
Thomas Falcon, Technical Director at AJG commented:
“ We are delighted to be including the Private Warning Costs extension in our policies with XL. Covering the costs incurred in dealing with regulatory investigations is a key consideration for individuals insured under D&O policies, especially in light of the hardening regulatory environment. We always strive to provide coverage for the costs in responding to a range of approaches by regulators. In the case of Private Warnings it was clear to us that the best solution is to provide a specific extension”.
Arthur J. Gallagher and XL Group launch Private Warnings Costs Coverage
APRIL 2015 FINANCIAL INSTITUTIONS RISK BULLETIN
Insurance Market Consolidation – what does it mean for financial institution insurance?
Completed Consolidation Time Scale Deal Value £
Sompo / Canopius Completed May 2014 600m
Qatar Insurance Group / Antares Completed June 2014 Undisclosed
Renaissance Re / Platinum Re Completed March 2015 1.14Bn
Proposed Consolidation
XL / Catlin Expected completion mid 2015 2.5bn
Axis / Partner Re Expected completion second half 2015 6.6bn
Fairfax / Brit Not known 1.2bn
Endurance / Montpelier Not known 1.2bn
Industry observers predicted last year a wave of insurance company consolidation, and with three large deals in the pipeline for 2015 it seems they were correct. Insurers are clearly struggling to find growth in a competitive and low interest rate environment. In addition, a comparatively low level of natural catastrophe losses means many have cash heavy balance sheets so it’s a logical strategy is deliver expansion and cost saving through acquisition.
As financial institutions insurance specialists the natural question is will this current consolidation reduce the amount of insurance available to us as, typically, when insurers combine they will reduce their exposure to any one risk? In our opinion, we don’t believe that any of the existing merger activity will have a material effect on the amount of available capacity for
financial institution risks. We take this view because the planned mergers are either structured in a manner that will allow the merging entities to continue to operate independently or one of the partnering companies does not currently offer financial institutions insurance. Moreover, for most clients in the financial institutions space there is marked oversupply of capacity which is more than ample to replace anything lost through the current consolidation.
Looking forward, however, we expect to see continued consolidation and in particular independent listed Lloyd’s vehicles may be targeted so we cautiously predict that continued significant consolidation could well neutralise insurance market growth and maybe even reduce the number of markets available to us.
MEET THE TEAMAustralian born, Murray graduated from Notre Dame University (Australia) in 2006 with a degree in Commerce majoring in Finance and Management. Shortly after his world travels in 2007, Murray started his career in insurance with FirstCity Partnership, specialising in all lines of business for large global Financial Institutions and general Specie business, including All Risks, Excess SIPA/SIPC, CIT and P&T. Murray later joined Arthur J. Gallagher in 2010 following the acquisition of FirstCity Partnership and has continued to provide full broking services to large financial institutions in a number of territories from Northern America all the way to Russia.
Murray is an avid rugby union fan and represented his state (Western Australia) for the age groups; Under 14s, 15s, School Boys and Under 21s.
CONDITIONS AND LIMITATIONSThis information is not intended to constitute any form of opinion and recipients should not infer any opinion from its content. Recipients should not rely exclusively on the information contained in the bulletin and should make decisions based on a full consideration of all available information. We make no warranties, express or implied, as to the accuracy, reliability or correctness of the information provided. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide and exclude liability for the statistical content to fullest extent permitted by law.
Arthur J. Gallagher (UK) Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: The Walbrook Building, 25 Walbrook, London, EC4N 8AW. Registered in England and Wales. Company Number: 1193013.
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