Risk Matters - Summer 2014

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Welcome to this summer 2014 edition of Risk Matters, your guide to the latest themes affecting domestic and international insurance markets. In this edition we review some decidedly delicate issues as broker conflicts hit headlines and whistle blower laws come under the microscope.

Ever since the Spitzer affair in 2004, the issue of broker compensation has received special attention. Various groups including the risk management lobby and competition authorities have attempted to push through reform making remuneration of the commercial insurance process a more transparent affair. Now with the FCA Thematic Review into broker conflicts of interest and intermediary remuneration the industry has received the proverbial ‘wakeup call’. Maxine Cupitt explains what it will mean for brokers who now need to get their houses in order.

Meanwhile, our insight into the current status of whistle blowing law reveals a new impetus for insurance companies to consider their policies and practices and encourage genuine complainants to come forward and expose malpractice. Sarah Ozanne points out how the UK Government has recommended legislative and non-legislative actions, but stopped short of a US-style system with financial incentives for whistle blowers, preferring a cost support mechanism at tribunal.

Elsewhere across CMS, our experts have their finger on the pulse of developments in continental Europe. Ian Stevens highlights in the first of a series of articles how insurers with outsourcing arrangements will need to address those contracts in compliance with Solvency II, so that critical functions are identified, monitored and appropriately managed. In Poland, where EU membership recently passed its tenth anniversary, Warsaw-based partner Iain Batty looks at its comprehensive programme of market reforms. He explains how the Polish financial services regulator, the KNF, which has been critical of methods such as the ‘group insurance model’ used by insurers to sell through affinity partners like banks, energy and telecoms companies.

With ‘Heartbleed’ hitting UK insurers as recently as May, this vulnerability reminds us that no insurance review would be complete without a look at current cyber risk issues. Ian Stevens talks threats, protective actions and regulatory change.

Always following the upward trajectory of technology, Joanne Wheeler has played an important role in advising UK government on its space industry development. Here she reveals how a recent exemption from Insurance Premium Tax stands to benefit space and satellite investors substantially.

Back down to earth, we have two contrasting pieces; firstly Danielle Drummond- Brassington looks at the complex issue of contingent property liability and asks, when should you pay for the sins of a previous tenant? Then, we review our recent successful seminar at Lloyd’s where a panel of experts reviewed the increased risk of global flooding as it produces ever more significant catastrophe losses and how modelling could help assess these exposures.

And finally, CMS was named the number 1 law firm for insurance legal work in Europe by industry trade title, Reactions, and our colleague Belinda Schofield was named “Best (lawyer) in insurance and reinsurance” at the fourth Europe Women in Business Law Awards. Please join me in congratulating Belinda and the rest of the team.