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Market Change in Blowing in the Wind
01/08/2008
- Post Magazine
Andrew Holman, Chief Executive, Holman's
It was all going too well really; a benign hurricane season,
roaring investment markets and plenty of merger and acquisition activity meant
that insurers' pockets were well and truly lined. Never mind some pesky credit
crunch, it was just a blip - a rebalancing of the US property index. It would
soon blow over and, anyway, it served the US banks right for giving mortgages
to people that didn't have a chance of paying them back. "It won't affect
us," claimed the investment managers, "we don't have any exposure
to any of that - we're much too professional to have fallen into that trap."
Those sentiments were expressed six months ago, before the full impact of
US-collateralised debt securitisation had fully sunk in and the global impact
had become apparent. Far from being a US phenomenon, irresponsible lending
was arguably embraced just as wholeheartedly by British banks, the consequences
of which we are now all-too-fully aware. Added to the lending misery, the
pound has dropped significantly against both the dollar and the euro while
the cost of raw materials, particularly steel and oil, has skyrocketed.
So, what does all this mean for the UK insurance industry? Well firstly, as
we are beginning to see, insurers' investment portfolios have taken a hammering.
The other side of this coin - the double whammy from the market fall - is
that the size of insurers' pension liabilities has increased dramatically
too, adding to their profit and loss woes.
And what about the rest of us, the smallest of oil molecules that help to
lubricate the global insurance engine? I will whisper this and I'm not getting
too excited because we certainly haven't seen any evidence of it yet - but
sometime soon we should start to see the market hardening as economic reality
forces insurers' hands to price for underwriting profit. How much and how
quickly is still open for debate, but storms like Ike and Josephine lurking
in the Atlantic certainly have the potential to ramp up the pace. As reinsurers
meet in Monte Carlo this week, there will be plenty of sweating behind the
bluster and bravado.
Southall Harries swoops after Oval covenant breach payout
Birmingham-based broker Southall Harries has made its first acquisition with
the takeover of Holman's book of retail business - Holman Risk and Insurance
Management.
The move came in the same week the broker discovered it had to pay out a six-figure
sum to Oval after founder Marc Harries was deemed to have breached a covenant
agreement.
Holman's, which specialises in Lloyd's wholesale broking, decided to pass
the book to Southall Harries to focus on one niche area after the person in
charge of that part of the business left, according to Mr Harries, a director
of the Birmingham broker.
"We use them as our Lloyd's broker so we have a very good relationship
anyway and they wanted a broker they could trust so their reputation wouldn't
be damaged off the back of it," Mr Harries told Post on Monday.
The company, which launched two years ago, will look to continue gaining a
larger foothold, he said, but added that he and his partner, Matthew Southall,
will not expand further than necessary.
"We've got nine people here at the moment and have desks for 25. But
we'll remain as a single office because through that we've got control,"
he explained.
Southall Harries will not see any staff joining as part of the acquisition,
he added, but would be handling the main book of business.
Meanwhile, the payout, which was agreed in an out of court mediated settlement
and announced on Tuesday, arose from the fact that Mr Harries, a former Oval
employee in the consolidator's Birmingham office, took a number of Oval's
clients with him without consent, breaching the restricted covenants agreement.
Jeff Herdman, group managing director at Oval, said: "It's an industry
built on trust, so as far as I am concerned, if you've signed a contract you
should abide by that."
Mr Harries was not available to comment on the payout as Post went to press.
