Best's Review



UK Reinsurer Flood Re Offers Vision of Its Own Demise

Plus developments at Lloyd's and the U.S. health market.
  • Robert O'Connor and Meg Green
  • August 2018
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Flood Insurance

by Robert O'Connor

“‘Our Vision’ is an important milestone for Flood Re achieving a successful transition.”

Andy Bord, Flood Re

Emphasizing its goal of seeing affordable flood insurance made available for all U.K. homeowners by the time of its own planned demise in 2039, residential mutual flood reinsurer Flood Re Ltd. has recommended a dozen intermediate steps, ranging from defining affordability to promoting closer cooperation between government and the insurance sector.

In the report, Flood Re, Our Vision: Preparing for a future of affordable flood insurance, the reinsurer also argued for the need to accept that a small number of residential risk will never be seen as affordable.

“To tackle this, policymakers will need to decide whether some form of support continues beyond 2039,” Flood Re said in the report, which is the second plan in Flood Re's transition.

Flood Re, which is supported by policyholder premiums and a levy on participating insurers, is scheduled to go out of business in 2039, to be replaced by a free market. The transition process is to be subject to periodic review.

According to Flood Re, 5.3 million homes in the United Kingdom are at risk of flooding. The typical cost of repairing a flood-hit home, Flood Re said, ranges from £20,000 (US$26,514.30) to £45,000.

Flood Re, which has been in business since April 4, 2016, operates on a not-for-profit basis to provide subsidized reinsurance cover to homes in flood-prone areas. The legislation creating Flood Re was enacted in 2014.

Over the next 21 years, Flood Re said, work should be done “to reduce the number of properties” that might need to be subsidized against flood risk.

“'Our Vision' is an important milestone for Flood Re achieving a successful transition,” Andy Bord, chief executive of Flood Re, said in a statement. “By 2039, when the scheme [ends], the market needs to have risk-reflective pricing and at this point we also want to ensure that both premiums and excesses [deductibles] remain affordable for the majority of households at risk of flooding.”

Flood Re said it has been encouraged by the response to its call for increased spending on flood protection.


Lloyd's New Digital Structure Aims to Improve Market Access

by Robert O'Connor

“It will enable coverholders in different parts of the world to benefit from easier access to Lloyd’s expertise, underwriting talent, significant capacity and financial security.”

Bruce Carnegie-Brown, Lloyd’s

Lloyd's has created a digital structure aimed at speeding both communications and transactions within the market.

Lloyd's said the pilot program, known as Lloyd's Bridge, will match insurance businesses with Lloyd's underwriters and allow these businesses to function in some cases as Lloyd's coverholders.

Lloyd's Bridge will be available first in the United Kingdom, New Zealand and Australia, before being expanded more widely in 2019. The system will eventually operate globally, Lloyd's said.

In a statement, Lloyd's said the new platform will support its strong commitment to broker-based business, “with brokers having access to the platform if they act as a coverholder or are acting on behalf of a coverholder.”

Lloyd's Chairman Bruce Carnegie-Brown said Lloyd's Bridge will meet the desire of clients globally for improved market access.

“Lloyd's Bridge offers the ideal platform to do this quickly, easily and efficiently,” Carnegie-Brown said in a statement. “It will enable coverholders in different parts of the world to benefit from easier access to Lloyd's expertise, underwriting talent, significant capacity and financial security.”

Lloyd's Bridge, Lloyd's said, is part of a number of technology-based initiatives designed to improve service, efficiency and underwriting capability.

Lloyd's pointed to its requirement, brought in this year, that 80% of business be placed electronically by the end of 2019. Lloyd's also cited the planned launch in September 2018 of the Lloyd's Lab, which will concentrate on using technology to promote advances in the Lloyd's market.

And Lloyd's said it intends to release details of its planned “new underwriting portal that will enable coverholders to quote, underwrite risks and issue policies on behalf of Lloyd's syndicates.”

Vincent Vandendael, Lloyd's chief commercial officer, said about 30% of Lloyd's premiums are placed by coverholders, which he described as local insurance businesses “writing policies on behalf of Lloyd's.”

Lloyd's, Vandendael said, is determined to strengthen the role of coverholders.

Health Care Market

Allied World VP: Huge Verdicts Create Stir in Health Care Market

by Meg Green

“I think we’re seeing new thresholds reached, particularly in some awards in what we might think of as the more severe venues.”

Adam Bates, Allied World

Adam Bates, vice president, Allied World, said several recent awards and settlements have ranged from $30 million to $50 million, sending shock waves through the hospital and health care liability sector. Bates spoke with A.M.BestTV at the Bermuda Captive Conference, held in Southampton, Bermuda.

Following is an edited transcript of the interview.

How is consolidation in the health care market impacting the insurance industry?

A number of years ago when the physicians became employed and they integrated the health systems, we saw the physician carriers really enter the hospital space, creating an excess of supply.

As the hospital systems have merged over the years, you saw entire insurance towers disappear, and thus the insurers were competing for market space. Again, I think it really created somewhat of an imbalance in the supply demand equation, where the supply was larger than the demand. I think that's exacerbated the soft market.

What are you seeing in terms of claims today?

I think we're seeing new thresholds reached, particularly in some awards in what we might think of as the more severe venues. Certainly in Cook County, we're seeing $50 million verdicts in some neurologically impaired infant cases.

Even the other day, we saw one university publicly had settled a claim, a similar bad baby case for $30 million-$40 million.

What kind of pressure does that put on the marketplace?

It's a real challenging environment, but it's one of the areas where Bermuda has an opportunity to excel, because our clients have been coming down here for years. We have a real longevity relationship.

Although some of these conversations can be difficult as we talk about increasing retentions or increasing premium, that relationship really helps us navigate that collaboratively.


Robert O’Connor is London editor. He can be reached at

Meg Green is a senior associate editor. She can be reached at

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