There has been plenty of debate in the market about unrated insurers, following the demise of enterprise and Gable. Most recently, MGAA chairman and boss of Manchester Underwriting, Charles Manchester, has recently had his say on unrated insurers in Post Magazine.
His comments deserve a response.
Unrated insurers, whether UK or not, have an important role to play in widening broker choice and with that in mind shouldn’t’ competition be championed rather than curtailed? – if not then the losers will ultimately be the general public and I can’t imagine that anyone in ‘our’ industry wants that.
There are plenty of credible reasons to use unrated insurers, not least because there is some evidence that UK insurers, needing to de-risk their books as a result of Solvency II, are removing their capacity from lines deemed to be at higher risk, such as non-standard motor, taxi, grey fleet and the like.
The motor market is said to be highly competitive, because customers searching for quotes on the aggregators have a dizzying selection of brands to choose from. Quite often though, there no more than one or two underwriters sitting behind those brands. Thanks to unrated insurers, customers still have a choice beyond, say, half a dozen brands from one company.
My business, Building Block PCC Ltd, is based in Malta. The Malta Financial Services Association (MFSA) is modeled on FCA lines. Regulated bodies would hardly notice the difference if they were regulated from Canary Wharf or Valetta. Both jurisdictions are Solvency II compliant. Becoming a regulated entity in Malta requires businesses to jump through as many hoops as doing so in the UK.
We will stick to what we know. We don’t take on business that we don’t understand, and we are certainly not ‘high risk.’ Indeed, our underwriting expertise for the products that we design and distribute via our UK partners compares favourably with any UK-domiciled business of a similar size and scope.
As I have pointed out before – rating strength does not provide absolute guarantee of financial stability. Those of us with any kind of memory will recall that rated Icelandic banks went bust in 2008. Further back, Independent Insurance folded in 2001 a matter of weeks after being having its financial health affirmed by the rating agencies.
Charles signs off with a despairing: “Why does our industry need to do this to itself?” I am proud to be a member of this industry. I am proud to serve my customers. We are all part of the same industry, protecting our customers in their hour of need. In that task, my business as an unrated insurer does exactly the same thing as his business.