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FSA Principle-Based Regulation |
April 2008
THE FIRST HURDLE FOR FINANCIAL SERVICES AUTHORITY ("FSA") PRINCIPLE-BASED REGULATION
The FSA is in the process of changing the way it regulates financial services in the UK. The FSA wants firms to focus on the consequences of their actions rather than on rigid adherence to specific rules.
The FSA started with a very large handbook containing detailed rules and guidance. It has reduced the size of its handbook and the firms it regulates are increasingly expected to determine whether a particular action will be viewed by the FSA as a breach of their rules by reference to a small number of high level principles. This new approach requires the management of the FSA regulated firms to apply their own judgement about whether a particular action would breach the FSA's general principles.
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In-sure
This month's edition looks at the effect of the credit crunch on the insurance industry, the FSA investigation of transparency in the commercial insurance market and the Court of Appeal's decision in the WASA International Insurance Company Ltd case....
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April 2008
DELAYED LITIGATION - THE COURT OF APPEAL CONSIDERS SCOPE OF DUTY, CAUSATION, LOSS; AND EXISTENCE OF DUTIES OF CARE OUTSIDE OF ANY RETAINER
A review of the Court of Appeal's judgement in Hibbert Pownall Newton ("HPN") v Whitehead & McLeish, which was handed down on 4 April 2008. Davies Arnold Cooper acted for the solicitors, HPN.
This was a factually-complex solicitors’ negligence claim in which the decision at first instance to hold the solicitors responsible for a curtailment of losses in a claim caused by the client’s suicide, may have jarred with the insurance community. It has now been overturned and the claimant also failed to overturn a separate finding regarding the non-existence of a separate duty of care.
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THREE LITTLE WORDS - £50M LOST |
March 2008
THREE LITTLE WORDS - £50M LOST
In Standard Life Assurance Limited v. Oak Dedicated Limited and others, the Commercial Court has sounded a warning to those responsible for preparing wordings, highlighting the danger of using anything other than the clearest language where aggregation is concerned.
Facts
The case arose as a result of Standard Life seeking indemnity in respect of mortgage endowment misselling claims. Standard Life faced approximately 97,000 individual claims, most for under £10,000, but a total liability in excess of £100m. Standard Life sought indemnity from its professional indemnity underwriters pursuant to a professional indemnity and crime insurance placed by its brokers Aon. The policy provided cover of £75m excess of £25m in respect of claims made during a three year period between May 1998 and May 2001. Claims were defined under the policy as:
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Insurer can take over the conduct of a claim, and repudiate liability |
March 2008
Reinsurance Group E-Alert
Insurer can take over the conduct of a claim, and repudiate liability
Kosmar Villa Holiday Plc v Trustees of Syndicate 1243 (2008)
In a positive move for insurers, the Court of Appeal ("CA") has overturned a first instance decision which suggested that, in the context of a liability policy, once insurers have taken over the conduct of a claim, they may well find themselves bound to indemnify the insured even though there was a clear breach of a condition precedent which insurers were still investigating.
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Read more... [Insurer can take over the conduct of a claim, and repudiate liability]
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Reinsurance and Litigation Caselaw |
March 2008
A summary of recent developments in insurance, reinsurance and litigation law
- Follow the settlements and back to back reinsurance. A summary of the Court of Appeal's decision in Wasa v Lexington.
- Waiver of breach of conditions precedent and whether a Reservation of Rights is needed. A summary of the Court of Appeal's decision in Kosmar Villa Holidays v Trustees of Syndicate 1243.
- Service of claim form out of the jurisdiction and effect of defective service under local law. A summary of the Court of Appeal's decision in Olafsson v Gissurarson.
- Professional negligence claims and time bar arguments. A summary of the Court of Appeal's decision in Watkins v Jones Maidment Wilson.
- Whether "take or pay" clauses amount to penalty clauses. A summary of M&J Polymers v Imerys Minerals.
- Bringing different proceedings in different EU courts - are the proceedings "related actions". A summary of Research in Motion UK v Visto Corp.
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In-sure
This month's edition sees HMRC publishing the Insurance Business Transfer Scheme Order, HM Treasury extending the Regulated Activities Order, the Treasury Committee calling for evidence on inherited estates and the ABI and NAPF updating their executive contracts and severance guidelines. Also in this issue, research suggests that corporate governance pays off and steady progress on customer satisfaction...
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Landmark Victory For Reinsurers |
 March 2008
Landmark victory for reinsurers: New Jersey Supreme Court holds that IBNR claims do not qualify for participation in the final distribution of Integrity Insurance Company's estate
In a matter of first impression under New Jersey law that potentially impacts both the insurance and reinsurance industry and policyholders of insolvent insurance companies, the New Jersey Supreme Court held that the final dividend plan proposed by the liquidator of Integrity Insurance Company should not be approved because it unlawfully allowed incurred but not reported (IBNR) claims to share in the insolvent insurer’s estate (In the Matter of the Liquidation of Integrity Ins. Co. A-29-07 (NJ Dec 13, 2007)).
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Foreign (re)insurers doing business in the EEA |
March 2008
Foreign (re)insurers doing business in the EEA: setting the record straight
Prior to the Reinsurance Directive, there was no harmonised system of regulation of pure reinsurers in the European Economic Area (see Note). Member States, bearing in mind the GATS provisions, as noted below, could choose to what extent reinsurance was regulated in their own jurisdiction, resulting in inconsistencies for reinsurers throughout the EEA both in terms of authorisation requirements and prudential supervision requirements.
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Connecticut Supreme Court Ruling |
March 2008
Connecticut Supreme Court rules that common cause provision of reinsurance treaty is ambiguous with respect to the aggregation of claims
In a recent decision, Hartford Accident and Indemnity Co. v Ace American Reinsurance Co., 266 Conn. 744, 934 A.2d 224 (Conn. 2007), the Connecticut Supreme Court considered the proper construction of the phrase “any one accident” as used reinsurance contracts between the plaintiffs, Hartford Accident and Indemnity Company and several of its affiliates (the Hartford), and the defendants, various reinsurers (the Reinsurers). The Supreme Court found a common cause provision in the contracts to be ambiguous for purposes of whether multiple asbestos claims could be aggregated as a single occurrence, and reversed the lower court’s decision granting summary judgment to Reinsurers.
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Implementation of the Reinsurance Directive in the UK |
March 2008
Implementation of the Reinsurance Directive in the UK
This is the latest in a series of consultation papers on the issue (see the September 2006 and March 2007 issues of the Kendall Freeman Insurance Review). The document focuses on the remaining changes to UK legislation which will be necessary to complete the implementation of the Directive. Most of these changes will be made to the Financial Services and Markets Act 2000 (FSMA) and related secondary legislation. The changes will impact on two key areas: passporting and portfolio transfers of reinsurance contracts under Part VII of FSMA.
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Catastrophes: Insurance Issues |
THE TOPIC
FEBRUARY 2008
The term “catastrophe” in the property insurance industry denotes a natural or man-made disaster that is unusually severe. An event is designated a catastrophe by the industry when claims are expected to reach a certain dollar threshold, currently set at $25 million, and more than a certain number of policyholders and insurance companies are affected.
Catastrophe losses in 2005 totaled $61.2 billion from 24 disasters. The final tally for Hurricane Katrina losses is $41.1 billion stemming from 1.75 million claims. By contrast, losses for 2006, a year of little hurricane activity in the U.S., were $9.2 billion.
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Read more... [Catastrophes: Insurance Issues]
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