It just doesn’t make sense.
You’ve done everything you need to do. Your risk management is top-notch; you know what coverage you need and under what terms. You know you’re a good risk.
So, why is it so difficult to find an insurer that can provide the coverage you need at a premium you can work with?
Where are all the commercial insurers?
That question is a little trickier to answer than it may seem. However, this article will attempt to do just that. Read on to find out how many commercial insurers there are and why you might be having trouble finding one.
What Is a Commercial Insurer?
Before you can even start tallying the number of potential commercial insurers available, you need to know what a commercial insurer is. More importantly, you’ll need to know how a commercial insurer differs from other insurers.
An insurer, in the general sense, is a type of regulated legal entity. It’s authorised now or has been before to write insurance contracts. If an insurer is no longer authorised to or not selling new policies, it’s said to be in “run-off”.
Reinsurers are a different type of entity. Reinsurers only offer financial protection to other insurance companies. When an insurance company takes on risk that is too large to manage single-handedly, they enlist the help of a reinsurer.
Essentially, this allows insurers to write policies even if they don’t have the cash/capital on hand to cover potentially catastrophic losses.
Another classification is the captive insurer. When a non-insurance business owns an insurer that exclusively accepts the risks of its parent company, that’s a captive insurer. Captive insurers are also excluded from the standard definition of commercial insurers.
Finally, you have commercial insurers. They behave much like ‘high-street’ insurers except for only selling policies to businesses, never individuals.
What About Lloyd’s of London?
Lloyd’s is a special case. Technically falling under none of the categories listed above, Lloyd’s is an insurance and reinsurance market, not an insurer itself.
It’s made up of syndicates, which are small groups of members that specialise in a specific type of insurance. There are over 100 syndicates, and the members (investors) are either individuals or corporations.
These syndicates work through brokers to sell insurance policies. When you go to a broker to buy insurance, that broker takes your insurance to Lloyd’s. Then, the syndicates decide how to split your risk.
Each syndicate takes on a small part of risks that they specialise in. That allows insurers to spread risk much more effectively and safely.
For Solvency purposes, Lloyd’s is traditionally counted as a single insurer even though it’s technically the individual investors in the syndicates who take on the risk.
Some insurers use Lloyd’s syndicates in parallel, running alongside their ‘normal’ insurance operations. That is to say, if you buy an insurance policy from them, you may technically be insured by two insurers at the same time (each one taking a different % of the risk, adding up to 100%).
How Does Brexit Change the Maths?
Before Brexit, EU-based insurers could sell UK policies and vice versa. Therefore, you might have had access to an insurance policy from an insurer from the EU. That’s no longer the case.
So, what does that do for businesses that have risks in the EU and in the UK? Well, your risks in the UK will be insured by a UK insurer and those in the EU by an EU insurer. So, some insurers in the UK, but not all, have now set up EU subsidiaries (and vice versa), to enable them to keep insuring UK risks.
But not all insurers have gone through this expensive legal process; that somewhat limits the number of insurers you have access to compared to the past.
There are at least 100 active insurers selling commercial employers’ liability (EL) and public liability (PL) policies in the UK. These are the two most requested types of commercial insurance.
That leaves the question of why you’re getting so few insurers quoting for your risk. There could be several reasons.
Your Excess Is Too Low and Your Cover Limits Too High
The lower your excess, the less risk you’re retaining. If you claim to be a good risk but don’t want to retain much of your own risk, you can see how that raises a red flag.
Your excess is the first thing you want to look at. By increasing your excess, you’re likely to receive the attention of far more insurers. Increasing your excess will not necessarily translate into a large premium reduction; if you have very high cover limits (per claim), premium reductions can be minimal, which puts many policyholders off. In this case, it is the high cover limits (per claim) which are the problem, as well as the low excess!
Your Insurance Renewal Submission Is Not Solvency II-friendly
Solvency II changed a number of things about what insurers like to see in your renewal submission.
Past claims add very little value, and basing your risk on them is the wrong way to go. If you undergo a risk assessment from the standpoint of the insurer, you could find that you’re not as good of a risk as you think.
Also, if you’re adding policy wording that doesn’t align with your insistence that “you are a good risk”, it sends a bad message to insurers. Long-term agreements and profit shares, for instance, are off-putting to insurers.
You’re Buying Insurance While Exempt
Essentially this boils down to a simple question:
Why are you buying insurance if you don’t have to?
From an insurer’s standpoint, it makes more sense to self-insure if you’re a good risk. You’ll need to work harder to convince them that you’re actually a good risk, if you are not willing to keep the risk for yourself.
How We Can Help
As you can see, the problem isn’t that there aren’t enough insurers. The problem is likely that you’re probably not thinking like one.
If you want to change insurers’ perceptions of your risk, you’ll need to speak in terms they understand. InsuranceInspect Services can help you do that.
We can show you how to evaluate your risk effectively and prove to insurers that you’re actually as good of a risk as you say you are.