The stated reason for the exit was uncertainty over Brexit. However, considering its net combined ratio was 169.7% in 2015 and 168.1% in 2014, and with a static 0.5% market share it would not be illogical to suggest that poor performance has been the ultimate trigger.
The liquidation of Enterprise and Gable plus the closure of several other offshore carriers in the last 18 months has brought the broker's duty of informed insurer selection into far sharper focus.
ERS's A+ Lloyd's rating and financial strength are clear indicators of our ability to fulfil the policies we underwrite and most of all, meet our claims obligations. Whether brokers operate in motor as specialists or as part of a wider product offering, a readiness to continue to place motor risks with unrated providers will increasingly bestow on them a responsibility to understand the implications of insurer failure for their customers.
BIBA's recently launched Litmus Test to help its members with their decision making around using unrated insurers is an initiative we naturally welcome. The assessment metrics of capital base and financial performance as benchmarked against the top 50 rated carriers are important ones. However as long as a number of unrated, but nonetheless sizeable, insurers continue to pursue volume over profit in motor the fuller picture concerning their performance - or the impact of a sudden market exit - could still evade brokers.
While new capacity in the event of insurer failure is rarely hard to find, there is cost and complexity for customers and brokers in trying to replace cover mid-term.
Ours is a tough market with many uncertainties and challenges that we must plan and price for. Claims inflation continues to run at 4% to 5% a year- effectively neutralising the rate increase mooted for motor in 2017. This will continue to be an issue until recent reform measures take effect and even then we don't anticipate a beneficial impact on costs until at least 2018. The Lord Chancellor's review of the Ogden discount rate - due later this month - also has the potential to significantly impact liability costs across the market.
Ultimately, we work in a highly competitive and crowded market place. Brokers and customers have a wide range of insurers to choose from – but are they making informed and balanced decisions?
I anticipate that we have not seen the last of insurers and MGA's pulling down the shutters. But then I say, bring it on. As 2017 gets underway I am personally committed to reinforcing the integrity and validity of a strong capital position with Lloyd's and ultimately the confidence that brokers, customers and investors can have in ERS as a sustainable and specialist business.
