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About You

Finance Director

Reducing Your Insurance Premiums
Substantially. Safely. Strategically.

Reducing insurance premiums for finance directors

Insurance Inspect

The insurer’s business model

  • Receive premium typically several years in advance of the claim needing to be paid
  • Add 12% IPT as a cost to you, pass straight through to HMRC
  • Thus can invest premiums for medium/long term
  • Effectively, you have lost this investment income, rarely part of Cost of Risk considerations
  • In addition the IPT cost is rarely part of your Cost of Risk considerations
  • Insurers will have set the premium to make a reasonable ROC, thus unlikely to lose in the long-term
  • Thus thinking like an insurer can substantially benefit your balance sheet


Accounting Issues

Are you over-reserved for historic risks? Could these be released for future risk taking?

  • In most cases, data for legacy liabilities is sparse eg historic headcounts for asbestos claims.
  • Where there are gaps, it is prudent to carry higher balance sheet reserves
  • We have years of experience help clients to “fill the gaps”, safely reducing the balance sheet reserves required, without compromising the security for your claimants
Accounting issues


  • Some risks are already indirectly hedged on the balance sheet – no need for insurance
  • We often see clients asking for coverage for historic asbestos claims/deaths
  • Since these claimants will usually be Pensioner members of your pension scheme, increased asbestos claims/deaths (which are usually at relatively young ages for Scheme Pensioners) is usually a benefit to the pension scheme.
  • Thus insurance is not required.
  • Furthermore, this also impacts on the cost/benefits of buying-out the pension scheme, since there is a natural on-balance sheet hedge (early asbestos deaths from the insurance fund) to absorb increasing longevity risks, the typical reason for considering pension fund buy-outs

Insurance Inspect

Over-Estimating Insurer Credit Quality

  • Insurance recoveries are balance sheet assets, the same as any other assets.
  • Since Solvency II, there is now substantial publicly available evidence on insurer credit quality
  • Credit ratings/bond ratings/issuer ratings are simply inadequate for insurance purposes
  • How do you manage insurer security risk, if the insurer will not allow commutation/cancellation?
Over-estimating insurer credit quality
Balance sheet materiality

Balance sheet materiality

  • A “large claim” may be a small impact to your (large) P&L/balance sheet, or even exceptional, not affecting investor metrics
  • For asset losses, there may be no balance sheet write off at all, if the asset was undervalued/not booked in the first place
  • Insurance recoveries (especially for litigated claims) can be uncertain – and thus not booked until crystallised

Corporate Governance: Are your claimants’ safe? Can you afford high policy excesses?

  • Reducing premiums is easy by increasing excesses; protecting claimants is harder
  • Other advisors just increase excesses, we give claimants’ security as well.
  • Your claimants are usually more at risk of YOUR failure than insurers’ failure!
Corporate governance