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London News Digest - April 2005

Marsh and Heath Lambert outline new commission structures
As the debate over broker remuneration for services rumbles on, the UK arms of Marsh and Heath Lambert outlined new structures. Heath's said it would charge London market insurers a fixed 1 percent commission for services they perform on their behalf, while Marsh said it would charge 0.75 percent.

Equitas settles largest direct asbestos exposure
Lloyd's run-off vehicle Equitas paid $415mn to settle its largest direct asbestos exposure last month, bringing finality to all outstanding asbestos claims arising from power generation systems manufacturer The Babcock & Wilcox Company (B&W).

Since April 2003, the reinsurer has completed 11 major settlements involving a payout of $2.2bn, including Honeywell, Halliburton, Travelers and B&W.

Aviation market agrees to reforms
The long awaited conclusions of the European Commission's probe into alleged anti-competitive practices employed by aviation insurers in the aftermath of 9/11 were revealed last month along with a series of binding reforms to "promote competition and transparency" in the sector.

Allianz Global Risks announces new UK General Manager
German insurance giant Allianz announced the promotion of Doug Pennycuick as the general manager of its London market arm, Allianz Global Risks UK.

Catlin launches FSA authorised operation
London-listed Bermuda-headquartered (re)insurer Catlin has widened its options in Europe by launching an FSA authorised operation Catlin Insurance Company (UK) Ltd.

Omega floats on AIM
Trading in Lloyd's insurer Omega Underwriting Holdings plc shares began on 6 April priced initially at 115p after the company floated on the Alternative Investment Market of the London Stock Exchange in an IPO that valued the firm at £44.9mn.

Privately owned Omega - which manages the historically profitable Lloyd's Syndicate 958 - raised net proceeds of £18.24mn in the initial public offering that was underwritten by Omega's adviser and broker Numis Securities Ltd.

Lloyd's appoints Denton as Council member
Lloyd's appointed the former Deloitte & Touche insurance head Celia Denton to its ruling body, the Council of Lloyd's, last month.

PwC to sue KPMG over Independent collapse
KPMG is facing a negligence action over its involvement in the collapse of Independent Insurance in 2001 by the insurer's administrators, PwC.

PwC is already pursuing a similar complaint against the insurer's actuaries Watson Wyatt.

LCL appoints former Euclidian chief
LCL Group - the run-off manager to debt collections specialist - has appointed former Euclidian Underwriting Ltd chief executive Andrew Holland to become its chief operating officer.

Kiln roars through 2004
Lloyd's specialist insurer Kiln posted record pre-tax profits of £38.1mn for 2004, an increase of 5 percent on 2003's result.

Gross written premiums rocketed by 17 percent to reach £313.5mn, but the company's combined ratio rose to 86 percent against 2003's market leading low of 77 percent.

Integer announces second Scheme
The Lloyd's Names' stop loss mutual Integer has announced a second proposal for a scheme of arrangement, with the aim of distributing its £9mn assets to the Lloyd's members who bought stop-loss reinsurance polices from the company in the late nineties.

Creechurch moves to gherkin
Swiss Re's 30 St Mary Axe building has another tenant, as Lloyd's managing agent Creechurch Underwriting Ltd moved in this month.

Chaucer's Highway takeover talks terminate
Lloyd's listed insurer Chaucer Holdings saw its shares rise by 1.5p to 54p on news that talks to takeover motor insurer Highway had ended. In contrast, Highway shares fell 2p to 37.5p after the 14 April announcement.

The Chaucer offer is the second from a Lloyd's insurer to be rebuffed by Highway. Last April the company revealed that talks with Cox Insurance had broken down.

On that occasion, talks ended in controversial fashion, with both sides claiming that they had initiated the termination.

2004 sees premium increase
Non-marine premium levels in the London company market have increased for the third year in a row, according to the latest statistics released by the International Underwriting Association (IUA).

For the 2004 underwriting year total premium of £1,656.4mn was processed by Xchanging Ins-sure for the company market, said the IUA - an increase on 2003's figure of £1,623.1mn, 2002's figure of £1,590.5mn and 2001's figure of £1,336mn.

FSA chief puts onus on industry-led solutions
John Tiner, chief executive of the Financial Services Authority (FSA), turned the spotlight once again on the hot topics of contract certainty and transparency of commissions at the regulator's inaugural annual conference.

"Collectively the reforms mark change of the highest order in the insurance industry; responsible reforms that will deliver more responsible firms," he said, emphasising new enhanced capital requirements for all insurance firms, based on the individual risk-based capital assessments (ICAs) which lie at the heart of the new regulatory regime.

However, Tiner said that to impose mandatory commission disclosure on the industry would be a "knee-jerk" reaction to Spitzer and "would not in any event be a panacea, nor provide a safe harbour from the need to manage conflicts."

Instead, he said he was keen to encourage the London market to implement its own solutions to market problems. "The wholesale insurance market is a grown-up and professional market; a market where we will only intervene where it is appropriate to do so; and a market in which we are prepared to rely on market solutions where there is a real chance that they will work," he continued.

He also sought to address the subjects of contract certainty and disclosure and transparency together.

"We recognise that these two subjects cannot be seen in isolation. We recognise that some shifting, shuffling - and in some cases shouting - is taking place within the market as wholesale brokers rethink and renegotiate their business models and underwriters respond in kind."

On contract certainty, Tiner said the FSA is seeking "market-led solutions with regulatory review."

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