Insurers now face potential risks for costs above their limit of liability. In a recent case professional indemnity insurers were ordered to pay the claimant’s legal costs of up to £1m, in addition to the limit of indemnity of £2m. This is the first time that the court has exercised its power to award costs against a non-party in a PI context.
The insured was a firm of architects who was found negligent for £2.07m. Insurers paid the £2m limit of indemnity (their total liability under the policy). The claimant was also awarded its costs, which were estimated to be in the region of £1 million. The insured was insolvent and couldn’t pay. So who did pay? Insurers had paid up to their limit, so they were out of the picture, right? Unfortunately not....
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As the G-20 grapple with how to change the global legal framework for financial services to ensure that there are no future financial crises, some countries have moved to quickly modernize their laws to accommodate the insurance needs of consumers and the business opportunities afforded thereby.
Like the rest of Latin America, the Brazilian economy has struggled in the face of the global economic downturn. This overall stagnation has negatively impacted the Brazilian insurance market, reducing the predicted industry growth rate to 4.9% for 2009 from the average 13% growth experienced annually between 2003 and 2008.
Over the last year, we have discussed in detail the operation of "cession limits" and "right of first refusal" such that the "opening" of the Brazilian reinsurance market clearly had its limits.
IRB-Brasil Re, the government-controlled former monopoly holder in Brazil's reinsurance market has maintained a 78.5% share of the market's local reinsurance premiums since the market's opening, but perhaps at a significant cost to its bottom line.
In the last year, the overall Latin American insurance market has continued to experience robust growth, estimated at 7.4% by Fundacion Mapfre for the first half of 2009 over the first half of 2008.
A recurrent issue for foreign insurance and reinsurance companies active in Latin American in the last few years has been anti-corruption compliance, both as a compliance issue and an underwriting tisk.
Venezuela remains an enticing and daunting jurisdiction in 2010, as the government continues to intervene in the financial services and other major industries and the insurance industry faces the prospect of a new comprehensive insurance law.
2009 was an eventful year for the Latin American (re)insurance markets, with local factors and varying exposures to the global economic downturn leading to tremendously different results, trends and regulatory initiatives in the various countries.
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