Conference likely to be confluence of themes as M&A, remuneration and service challenges emerge

The past month has been largely dominated by the build up to the annual British Insurance Brokers’ Association (Biba) conference in Manchester, which takes place on the 10th and 11th May.

Much of the talk in recent weeks has been around whether the event would deliver the same level of energy as last year when it returned from a two year COVID hiatus. Biba had decided the theme for this year is “Rising to the Challenge”, but CEO Steve White and his team weren’t anticipating a challenge from the UK Government a week before the event.

It came from Michael Gove, Secretary of State for Levelling Up, Housing & Communities, who wrote a letter to the association aimed at shining a light on broker remuneration.

In his letter, Gove highlighted the findings of the FCA’s report on broker commissions for buildings insurance stating that there is “no suggestion” brokers have done sufficient additional work to justify the 64% increase in real-world retained commission seen between 2019 and 2021. He went on to say these practices must attract “forensic scrutiny” from government and regulators and are “completely unacceptable”.

Gove invited proposals from BIBA’s members outlining, “how they will change their behaviour, individually and as a sector, to be more transparent and more competitive” and requested detailed proposals within one month.

It saw White switch his attention away from Manchester to provide a robust defence of his members. The association said it has been working on the challenges around the insurance of high-rise multi-occupancy residential buildings for over three years.

Among the letter’s key highlights, White noted that BIBA’s primary focus has been on solving the cost of insurance for buildings which have significant fire safety defects. As part of this, brokers have had to undertake a lot of extra work and deliberately calibrate down their earnings, often moving to a fee, to lessen the impact of the overall price increase on leaseholders.

The association said it agreed with the regulator that the solution to questions around broker remuneration lies within its members evidencing fair value in a more consistent way. The association will work with its members to improve the quality and accuracy of the fair value assessments they produce – and invited the FCA to work collaboratively with it to this end.

“We also agree with the FCA’s point around better disclosure of information on insurance arrangements to leaseholders and will work with members to enable better disclosure of information to leaseholders via the freeholder,” he said. “Legislation from DLUHC to mandate that freeholders make better disclosure would be welcomed by our members, if this remedy is to have any success.”

Lloyd’s hits the headlines again

Elsewhere, Lloyd’s was in the media again this month after plans to offer a backstop to the National Health Service were revealed. Reports said the markets’ chair and its CEO had been to Whitehall to discuss whether there was an opportunity for Lloyd’s to create a facility which would support the NHS if it was suddenly plunged into a new pandemic and with it a huge uptick in operating costs. What the reports did not reveal was who the market has persuaded to provide the capacity for such a facility and any real detail on the way in which such a coverage would operate and be triggered.

Given the constant warnings from the insurance sector over the rising scale of climate exposures and the fact that it is likely the industry will not be able to provide complete solutions, a plan to support the NHS seems to go against the grain of current thinking exposure management and aggregated risks.

Howden builds war chest

In the broking sector, the big news this month has been at Howden Group.

Howden announced it had  raised more than £875 million across both debt and equity, with total cash and facilities available for investment in M&A, new initiatives and talent in excess of £1 billion.

The fundraising will see Peter Blanc, Executive Chairman of Howden UK&I, take on the new role of Head of M&A, reporting to CEO Howden Group, David Howden.

Howden, said: “Our focus now turns to three key areas: unlocking the extraordinary value within the Group by harnessing our collective power; attracting talent and aligned businesses; and investing in our infrastructure to ensure our experts are empowered to do their best for our clients.”

The news that Howden group has created a war chest for acquisition will mean any broker speaking with a senior member of the Howden team at Biba in Manchester is likely to set tongues wagging, while the remuneration discussion prompted by Gove will likely continue.

For insurers, the event will also see the publication of the first round of Biba’s investigation into insurance service levels, which it began last year. Interesting times indeed.

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