Pubs’ plight highlights growing influence of offshore insurers

Publicans received a text alert from the Vintners Federation of Ireland last week warning that their insurance could be worthless. Shunned as too risky by most local insurance companies, up to 1,000 pubs, restaurants and other retail outlets had turned to Gable Insurance, a British-owned underwriter that operated throughout Europe from a base in Liechtenstein. Many must now be regretting this decision.

After failing to secure a capital injection from shareholders, administrators appointed to Gable by financial regulators in Liechtenstein are seeking to wind up the company. Policyholders have been advised by the Central Bank of Ireland to seek alternative cover immediately because of the risk that claims made against them will not be covered by Gable.

The publicans’ predicament is increasingly common. After incurring heavy underwriting losses, including losses of €684m on motor cover between 2013 and 2015, local insurers are turning their backs on all but the best risks, forcing a growing share of the insurance market to look offshore for cover.

According to industry sources, up to 40% of motor insurance sold in Ireland has to be written offshore because local players are reluctant to underwrite those who are single, younger than 30, have accumulated penalty points or whose cars are more than 10 years old. The offshore providers often operate from tiny financial outposts such as Malta or Gibraltar and lack security rating from independent agencies such as AM Best or Standard & Poor’s. Recent events have shown there is a price to be paid for underwriting risks that local insurers refuse to touch.

Gable is the third offshore player to run into difficulties, following the collapse of Malta-based Setanta Insurance in 2014 and Enterprise Insurance, based in Gibraltar, earlier this year. Their problems have been blamed in part on new regulatory requirements, known as Solvency II, that require all insurers to carry higher levels of capital since the start of this year.

“We suspect that those insurers that recently went out of business did so because they were unable to meet the standards demanded by Solvency II,” said Ciaran Phelan, chief executive of the Irish Brokers Association (IBA). “Unlike the Central Bank of Ireland, the IBA doesn’t have access to financial accounts of insurers and is therefore not in a position to advise which insurers or brokers consumers should deal with.”

The Law Society of Ireland is more forthright in its advice for up to 2,400 solicitors’ firms whose compulsory professional indemnity insurance will fall due for renewal on December 1. “The Law Society urges solicitor firms, when making judgments about which insurer to use, to consider very carefully whether or not an insurer has a financial rating,” said Ken Murphy, the society’s director-general.

One of the providers of solicitors’ insurance is Precision Underwriting, a local agent for offshore insurers set up by three former underwriters at Quinn Insurance, which collapsed in 2010. Precision has been Gable’s managing general agent in Ireland since 2014, while sourcing cover for solicitors from another unrated provider, CBL Insurance Europe, a New Zealand underwriter based in Dublin.

Stuart Taaffe, a director of Precision, said Gable’s administrators had imposed only a “temporary freeze” on paying claims and “will continue to pay claims in limited circumstances”. He also noted that Gable’s owners have pledged to challenge the administrator’s move to wind up the company. Peter Harris, the group managing director of CBL in New Zealand, said it planned to obtain an independent financial rating for its Dublin-based operation in the next 12-18 months.

“It is not the lack of a rating or size of the company that is necessarily the problem; it is a case of how well the insurer is regulated and supervised, what solvency capital regime it is measured by, and its overall financial and reinsurance backing,” he said.

“Brokers or intermediaries who don’t care about these things will always find an insurer desperate for premium growth . . . If the insurer tips over, the broker will still keep its income and just find another insurer desperate for premium to pick up the marginal business. CBL has been approached several times over the past 12 months for business that was looking for a home away from Gable; we consistently turned it down.”

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