RPC: Hard market shifting balance of power on policy wordings

In an in-depth interview Simon Laird, global head of insurance at RPC, examines current market trends and highlights how the hard market has shifted demand for legal services

How does RPC see the M&A landscape evolving over the next 12 months?

We are anticipating more of the same across the board – that means more broker consolidation across all sizes of business, ranging from smaller acquisitions, which we are already seeing quite a lot of, through to medium and larger sized deals, like the recent Howden and Aston Lark deal.

Of the broker consolidation we have seen, a good number of deals have involved private equity selling to other funds or PE backed businesses.  As PE deals become larger and larger, it will be interesting whether in time we see more IPOs and listed groups.  

We have seen several new MGA start-ups. The ability to provide capacity to smaller entities with strong management and underwriting teams, especially when they can use technology to rapidly build scale and reduce cost, is proving appealing for insurers. 

The legacy market is also active, continuing a trend of the last few years. We are starting to hear insurers talk more about optimising their balance sheet. With the hard market in certain lines we expect more insurers to look to free up capital to take advantage of current conditions.  With so much legacy capacity currently coming in, it is a good time for insurers to look at disposing parts of their portfolios to enable them to deploy capital elsewhere. 

How does the hard market impact the support the market needs from RPC?

We’ve seen increased demand around wordings reviews. Insurers are looking to rationalise their wordings, particularly in light of business interruption claims experiences. 

During a long period of sustained soft market conditions, insurers were not always able to insist on using their own wordings leading in some instances to many wording variants being used.   

A harder market presents a slight shift in the balance of power, leading to more active underwriting and more challenges around some of the terms (like choice of law and jurisdiction clauses).

Insurance companies are typically huge organisations with very global challenges.  How do you keep ahead of that challenge when it comes to servicing your clients’ needs?

In May this year, we launched Global Access, a group of six best in breed insurance law practices from countries including the UK, US, Canada, Netherlands, France and Australia.  These are the go to insurance practices for their domestic markets which we can tap into through Global Access.

Global Access was launched to provide a platform for collaboration and to provide our clients with access to market leading support across the globe.

There are 2,000 lawyers across those six firms, which allows us to support clients with global needs in much greater depth. 

As well as a more seamless and joined up service through Global Access, we maintain contacts with more than 100 different law firms across the globe, giving us the flexibility to pick the right law firm for the right job.  This is particularly helpful in those jurisdictions with less mature insurance markets where a one stop shop is unlikely to have the necessary breadth of expertise.  

What legal developments are on your watch list for our readers?

If I was going to pick one area that insurers should be keeping a watchful eye out for its data subject litigation. 

There have been two cases in particular that are relevant – one is a recent judgment in the Warren vs DSG Retail case. 

This was helpful from an insurer’s perspective because the outcome of the case meant the claimant law firm should not be able to recover ATE premium in a typical data subject case.  This decision might deter claimant law firms from bringing similar claims under one-sided “no win, no fee” funding arrangements.

The other case – Lloyd vs Google – hasn’t had a judgment handed down yet, but we’re expecting a decision this side of Christmas from the Supreme Court. 

The case is considering whether damages are recoverable for loss of use of data. So if an organisation uses your data in a way they shouldn’t, do you have a claim against them? 

Historically, the answer to that is in the absence of distress, no. But the courts are considering whether that’s right in today’s world. And if distress is required, we can expect the court to provide some guidance on the threshold you need to meet to recover damages. 

Finally, the court will be considering whether representative actions are appropriate for large scale data subject litigation. In Lloyd v Google, Richard Lloyd is seeking to bring a representative action on behalf of several million individuals he says were affected by loss of control over their data.  If successful, this might open the open up the possibility of large ‘class actions’ in the UK, for data subject litigation.

The cyber market would likely bear the brunt of this development but it could have ripple effects into other areas such as professional indemnity or D&O. 

Simon Laird, global head of insurance, RPC