UK: Pinsent Masons Insurance Briefing - Insurers Should Innovate In Wake Of Hurricane Harvey, Says Expert

Last Updated: 6 September 2017
Article by Colin Read, Nicholas Bradley and Alexis Roberts

Welcome to Insurance Briefing - a fortnightly round-up of insurance legal and business developments published on Out-Law - with analysis and commentary from the insurance team at Pinsent Masons.

The six topics of focus this fortnight include:

Insurers should innovate in wake of Hurricane Harvey, says expert

The catastrophic flooding caused by Hurricane Harvey in Texas will not have a significant impact on the insurance and reinsurance markets, despite the damage caused to thousands of homes. Insurance law expert Nick Bradley said only a small proportion of homes in the US have insurance covering flood damage, and suggested there was scope for the insurance industry to innovate more to offer products protecting communities from such catastrophes. "Hurricane Harvey has caused extensive damage to property, both residential and commercial, across several of the southern states in the US, including severe disruption and loss in its fourth largest city, Houston. Yet, despite predicted economic loss in the range of $30 billion to $90bn, insured losses are forecast to be only in the range of $6bn to $10bn."

Ruling clarifies ease of 'joining' insurers of insolvent insureds to cases under new law

LEGAL UPDATE: A UK court ruling has clarified the effect of the Third Parties (Rights Against Insurers) Act of 2010, which allows a third party to pursue a company's insurers directly when that company has gone out of business. The ruling in a case between BAE Pensions and Royal & Sun Alliance (RSA) confirms that the 2010 Act does not require proof that an insurer covered the event in question before being joined to the proceedings. Proof of that coverage can form part of the case itself. This ruling, which is the first reported case to deal with the 2010 Act in force since 1 August 2016, confirms the intent and effect of the 2010 Act which is to make it easier to join an insurer to proceedings against an insolvent insured.

FCA urges consumers to 'make a decision' on PPI ahead of 2019 complaints deadline

Consumers will be urged to "make a decision" about whether to claim compensation for mis-sold payment protection insurance (PPI) as part of a two-year awareness-raising campaign. The campaign, which is being paid for by the 18 financial firms who reported the majority of mis-selling complaints, will consist of TV, cinema and online advertising and outdoor billboards, running up to the claims deadline of 29 August 2019. The firms are also funding a dedicated FCA phone line which will assist consumers with their PPI queries, and have agreed to put procedures in place to make it easier for customers to make a complaint. Insurance law expert Colin Read said that firms should be prepared for additional complaints in the run-up to the 2019 deadline. "Texts, emails, calls and traditional advertising have been deployed by claims management companies seeking new complainants for some years. Banks and insurers will be watching carefully to see if this publicity campaign – with an 'official' push by the FCA behind it – generates genuinely new complainants, requiring financial institutions to revisit their provisions for PPI claims."

New LMA working group will examine 'political' risks of banking regulation

A new working group which will look into the potential impact of banking regulation on insured banks, and potentially their insurers, has been set up by the Lloyd's Market Association (LMA). The group, which will report to the LMA's political risks, credit and financial contingencies panel, will particularly focus on understanding the potential impact of the use by banks of non-payment insurance as a means of capital relief. Banks take out non-payment insurance to cover the risks associated with borrowers defaulting on loan repayments. The policies can also be used as a means of capital relief, provided that the bank complies with the relevant Basel III requirements.

China plans crackdown on insurance rule breakers

China's insurance regulator plans to identify and punish insurers who break the country's laws, China Daily has reported. The China Insurance Regulatory Commission signed a memorandum of understanding (MoU) with 30 ministries and regulators including the People's Bank of China, and the National Development and Reform Commission to tackle illegal activities in the insurance sector and "hold wrongdoers accountable", China Daily said. Insurers who are found to have broken the rules will be restricted from setting up banking, securities or insurance businesses in future and from any government procurement or subsidy schemes, the news site said.

BREXIT UPDATE: Some claims could still be influenced by CJEU under Brexit dispute resolution proposals

The UK's proposal for a legal disputes framework after the UK leaves the EU lacks detail and the fall back provisions leave the door open to ECJ influence after Brexit, an expert has said. The UK government published the paper on Tuesday arguing for the implementation of a 'cross border civil judicial cooperation framework' to resolve disputes between the UK and EU following Brexit. Litigation expert Stuart McNeill said: "The paper addresses two main areas of interest: the law that applies to contractual and non-contractual matters; and which courts have the jurisdiction to determine a claim and the recognition and enforcement of any judgment that they issue. On the choice of law there are no surprises. The paper confirms what already appeared to be the case from the UK's Repeal Bill, namely that the UK plans to transpose the European rules on conflict of laws, Rome I and II, into domestic law. The UK is free to do this unilaterally and so nothing will change. Everything else however requires reciprocity. As expected the government aims to negotiate a new judicial cooperation agreement with the EU in order to maintain the relative ease with which intra-EU judgments, or those of Norway, Iceland, Switzerland and others, are recognised and enforced. The paper emphasises the 'shared interest' in achieving this aim but there is no detail about how this might be done."

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