Partner Article

Professionals still at risk from financial crisis fallout

The fallout from the global financial crisis continues to have a lasting effect on professional indemnity claims in the London Market, according to research from insurance and risk law firm BLM.

In the first of a series of reports looking at the impact of UK and Ireland macroeconomic conditions on London market claims exposure, the research, conducted in partnership with the Institute of Directors, considers the impact of past, present and predicted economic trends which will impact on and produce claims against professionals in the financial, legal and construction sectors. This includes global population and employment demographics, the evolving price of living and economic indicators such as GDP, debt and investment returns.

Rising interest rates, property prices and technology are among a number of new factors set to dramatically impact professionals in the short to medium term. In particular, the report highlights the potentially devastating effect that rising interest rates could have on property professionals, with another housing bubble likely to result in soaring claims against estate agents.

Furthermore, the current government focus, including the pensions reform package, represent significant potential claims risks..The freedom provided by this new scheme has already led to a 33 per cent surge in claims, and an increase in financial crime, such as liberation scams, in this area is expected. Incoming legislation will also bring further exposure, with the impact of the Consumer Rights and Housing and Planning Acts yet to be fully felt by professionals and their insurers.

Jennette Newman, partner and head of Lloyd’s and London Market at BLM, said: “This research and our predictions demonstrate how insurers’ ongoing claims experience in the UK and Ireland is and will continue to be impacted by and driven by the economic environment we live in, with any number of political, economic and technological changes capable of causing spikes in claims activity and the risk of the development of new and emerging claims . We hope our research and predictions will enable the sector to prepare in advance for the challenges ahead.

“Though we assume that the global financial crisis is long behind us, with our economy now growing and wages rising, this mind-set neglects the many lingering effects that are as relevant today as they were in the recession. The shift in worker demographics or the impact of the housing crash are just two examples that have been shown to continually affect professionals and the risks they face every day. Our forthcoming papers will highlight the challenges faced in the property and casualty market too.”

This was posted in Bdaily's Members' News section by Pablo Rodriguez .