UK pension trustee insurance in crisis – report
UK – The number of insurers prepared to take on pension trustee liability insurance has halved in the last 18 months – leading to rising premiums, said insurance broker Heath Lambert.
“Up until about 18 months ago, there were between eight and 10 insurers writing pension trustees' liability insurance,” said Heath Lambert spokesman Reuben Aitchison.
He added that the sector was now seen as “high-hazard” by providers. “Our brokers who place the business have seen the number of insurers prepared to underwrite it drop to four.” And he cited the firm’s brokers for reports of increases of up to 1,000%.
“Naturally, few premium increases are as extreme as that. The level of premium will depend on the client's claims record and their potential exposure to litigation, though the shrinking of the market is driving rates up in general.”
“It has been a difficult year for pension trustees and insurers are reluctant to be involved in the class, with half the companies writing pension trustees’ liability withdrawing from the market,” the company said in a 26-page report on the state of the UK insurance industry.
It said it is very difficult for closed funds with ongoing liabilities to attract new insurers.
“This has added significant upwards pressure on rates as the incumbent insurer has no competition and has to rate for the potential of diminishing fund value or, at the minimum, large increases in employer contributions against potential growth in pension payouts,” the report said.
It added: “One area of uncertainty is the eventual impact of the Myners report. It may lead to tighter regulation, the effect of which would mean new areas of potential claims, which will likely come with increased premiums and/or tighter restrictions in the coverage available.”
Dara Glover, benefits officer at the National Association of Pension Funds said: “If there’s no cover to cover a breach, who’s going to want to become a trustee?”
“Obviously Myners will be increasing liabilities,” she added, “The more responsibilities the more protection that is needed.”
She said the Law Commission is currently consulting on the issue and would be reporting later this year.