Sonya is a solicitor of several years having been admitted in April 2001.

John has extensive experience in the management of insurance captives and Protected Cell Companies (PCCs) belonging to large global organisations. More recently he has specialised in direct writing insurance companies within but not limited to Europe including commercial insurance companies, captives & PCCs. He is an Associate of the Chartered Insurance Institute qualifying in December 2004 and became a Chartered Insurance Practitioner in 2007.
 
Commenting Jason Smart, Group CEO, said “We extend a warm welcome to John to the Board of Elite. Our continued growth and diversity of operations in the legal expenses insurance market will be contributed to greatly by John’s experience."

COO, Russell Smart, commented, "We see this as another step toward our longterm goal in the after-the-event legal expenses insurance market which is for market dominance. A-t-E continues to grow in terms of commercial, insolvency and personal injury lines. Our client's demand premier service, all encompassing terms and a fair claims process. We see the standards set by the ABI as proof of our committment to this". 

The event will take place at: The Thistle Tower Hotel, St Katharine’s Way, London E1W 1LD.

For more information please visit their website.

If you would like further information regarding the event please contact us.

Clients can now follow the progress of cases during the underwriting process, quotation process, cover inception and so on.

Commenting, Russell Smart, Business Development Manager, said "This unprecedented access improves our overall service levels allowing clients realtime data on every aspect of their cases".

For a personalised demonstration email enquiries@elite-insurance.co.uk    

Elite has featured heavily in the article underlining it's recognition as a premier provider of ATE insurance.

The article can be located on Page 23 of the October 2007 edition of Litigation Funding Magazine which is a Law Society Publication.

For the full broker's note click on the link below.

http://www.elite-insurance.co.uk/uploadfiles/Litcomp2023Octo07.pdf

Guest speakers included James Tipping and Chris Collins from the Finance Centre and Head of Insurance Supervision in Gibraltar respectively. Also speaking was Elite's CEO, Jason Smart. The workshop covered issues such as Gibraltar's regulatory framework, underwriting cases for ATE isnurance and a brokers perspective of ATE, delivered by Richard Myrtle of Universal Legal Protection Limited.

Introduction

After the Event (ATE) insurance is a concept which can cause confusion, particularly since it has a number of features not shared with other types of insurance. The “Event” is simply some issue that potentially gives rise to a legal liability, such as a slip or trip, or a breach of contract, clinical negligence, etc.

“After” refers to the fact that insurance is taken out after the initial issue in order to pursue a legal case, and the insurance is covering the possibility that the challenge is lost with liability incurred for the opposition’s costs.

The existence of the ATE market is in fact a pre-requisite to the successful operation of the access to justice system in England and Wales. Without insurance for the opponent’s legal costs, cases would often not be pursued.

The key feature of ATE insurance is that the premium is conditional on the legal challenge being successful. More recently, the premium is now increasingly only payable on the conclusion of the case - deferred premium basis.

The point here is that the premium is effectively going to be paid to the insurer by the opponent, if he agrees, or by order of the court. Thus, the ATE insurer needs to anticipate potential disputes over the level of premium and ensure that it has sufficient supporting rationale for the premium rating process.

The core underwriting assessment is the chance of the legal challenge succeeding, and the potential costs to pay if it fails. Because there are many uncertainties involved in litigation, including evolving case law and statutes, ATE insurance is most certainly insurance in the full sense, but with these special features.

Gibraltar

A distinction is often made between “on-shore” and “off-shore” ATE insurers, and then to infer the inferiority of the “off-shore” company. At Aon Insurance Managers (Gibraltar) Ltd, we manage two leading ATE insurers in Gibraltar – Mount Grace and Elite – but these are not “off-shore” in any true sense of the word.

In the first place, Gibraltar is connected to mainland Europe, so it is not an island. Most importantly, Gibraltar is part of the European Union (unlike the Isle of Man or the Channel Islands) and is accordingly subject to the same fundamental EU insurance regulations as the UK, Germany or France for example. In fact, Gibraltar has been assessed by the Foreign Office and Treasury as meeting UK regulatory standards for insurance supervision. This does not mean that UK standards have to be replicated precisely, since the emphasis is on achieving the equivalent “outcome” of regulation.

There are, however, some important differences that explain why many insurers (not just ATE) choose to locate in Gibraltar.

The requirement to hold solvency capital is per the EU regulations. The Gibraltar regulations require, in practice, a significant margin above this although there can be limited derogations depending on the nature of the risk and the extent of reinsurance protection.

A key issue, it cannot be denied, is the more favourable corporate income tax regime. This can make the insurer more secure since greater post-tax profits can be retained in the balance sheet.

There are “softer” issues, for example the ability to hire a Manager in Gibraltar – such as Aon – to coordinate regulatory compliance, accounts, underwriting and other corporate governance issues. We will return to the role of the Manager later.

Other soft issues concern the approachability of the regulator in Gibraltar and the comparative speed in which an insurance licence or queries can be dealt with by the Financial Services Commission (FSC). For the insured person of an ATE insurer, or their representatives, it is important to stress that all Gibraltar insurers have to pay a levy to the Financial Services Compensation Scheme (FSCS), which then means that the consumer is guaranteed 100% of his claim, or 90% above £2,000, should the insurer become insolvent.

Further protection is offered by the UK Financial Ombudsman Service (FOS), which all Gibraltar insurers can join – under the voluntary jurisdiction scheme.

Thus, with FSCS and FOS protection, coupled with regulation by the Gibraltar Financial Services Commission equivalent to the FSA regulations, a Gibraltar ATE insurer can offer the equivalent security compared to a UK based insurer.

International Recognition of Regulatory Standards

Gibraltar has volunteered to be assessed by the IMF and in 2001 was judged to be compliant with 66 out of 67 internationally accepted standards. The sole exception related to on-site visits to insurers by the FSC, and this recommendation was accepted and acted on. The IMF have noted that Gibraltar “is at the forefront of the development of good practices”.

Gibraltar was amongst the first wave of territories to be granted Qualified Intermediary status by the USA Internal Revenue Service, in recognition of Gibraltar’s strict Know Your Customer rules. Gibraltar has also been assessed by the Financial Action Task Force (FATF) as a cooperative jurisdiction.

Role of the Manager

At Aon, we do not see our role as purely a service provider since Aon’s reputation is linked to the companies it manages. Thus, the underwriting role is central, particularly when it comes to ATE.

The key challenge is the delay in knowing whether a policy pays out or not. This is amplified by the market practice which makes the premium conditional on a successful case. Thus, an increasing failure rate can be multiplied into an even greater increase in loss ratio, and this would only be discovered after a significant time lag.

Whilst the manager is not able to replicate the in-depth knowledge of specialist legal practitioners, it is possible, and essential, to ensure that the underwriting and subsequent reserving is operating on a realistic basis, and is tested against the available data.

Regular monitoring and interpretation of underwriting results, particularly for each solicitor/panel, is emphasised.

It is very important that the insurer has a robust underwriting control procedure, and that any individual underwriting is checked – the “four eyes” principle. The rating can require special mathematical matrices to handle the different stages of a case and their assessed probabilities, and also to handle the conditional nature of the premium.

In the Merthyr Tydfil appeal judgment, Lord Justice Brooke explained very lucidly how a case with a 50% chance of success requires a premium of 100% of the likely loss - just to break-even without even taking into account commission and other costs. This is because the premium is conditional. Any misunderstanding of this could lead to serious under-rating of risks. This is illustrated in the graph.

The mathematics are relatively simple, but the result is a curve rising at an increasing rate. It is for this reason that an underwriting matrix should be used at all times to verify the consistency of an assumption about probability of success with the recommended premium.

It is also important to make due allowance for costs and a profit margin.

It is often assumed that a case that makes it to trial has a 50/50 chance, on average, given that the other side would concede if the case was not worth defending. Whether or not an underwriter can beat this average over the long-term, this widely held assumption clearly creates a benchmark for assessing risk once the case has reached the trial stage for reserving purposes, or for rating the final staged premium.

Commercial cases are now increasingly subject to ATE insurance. The potential loss indemnity can be very high, and the underwriting clearly needs to be extra rigorous taking full account of the principles addressed so far.

Recent Developments

The Merthyr Tydfil judgment is rightly seen as very positive for ATE insurers in terms of the recovery of premium. There is now a persuasive precedent to support the recovery of premium, with the assumption made that an insurer will likely be in the best position to assess the premium required for the risk. However, this does not prevent a challenge to the premium, and really reinforces the need to have sufficient back-up documentation and procedures.

A recent innovation in the market is the rise of deferred premiums as an alternative to funding by lenders or solicitors. This has arisen possibly due to the relative expense and conditions of the funding process, and the rise of deferred premiums may therefore be explained as simply the market finding a more efficient means to achieve the same result – i.e. the customer does not pay much or anything up-front. However, the implications for cash-flow have to be understood and allowed for, another key responsibility of the Manager.

The ATE market is approaching maturity with established principles of underwriting now widely shared across the industry. On this basis, insurers should be able to react robustly to changes in the access to justice system. This author notes that the recent Department of Constitutional affairs consultation could have a major impact, but we leave this for a later article.

Andrew has diverse insurance-related skills, complemented by exposure to legal and corporate-related disciplines. His history includes five years in risk and claims management and four years in which he designed, facilitated and successfully launched a pioneering Child Maintenance Insurance – the first policy of its kind. He has also been Head of a Technical Claims Department, where he had direct delegated authority to the value of US$100 million.

Prior to his appointment, Andrew was working as a freelance Claims Consultant and previous roles include periods at Liberata and Corporate (4U) Ltd.

Jason Smart, Chief Executive Officer at LitComp, said:  “We welcome Andrew to LitComp and believe that his appointment of significant strategic importance. LitComp has seen a considerable shift in its focus and, with Andrew’s expertise, we believe we can capitalise on future business opportunities.”

Mike Fallon’s experience in the insurance sector is well complemented by his legal background. He joined First Assist in 2000 and worked to develop its “Pursuit” product, helping to position it as a key player in the ATE market. As the senior underwriter he has been able to build strong links with solicitors and brokers, which will prove to be valuable in his new role.

Chris Bell joins from Complete Claims Ltd and has a broad experience of the insurance industry as both a broker and an underwriter. After obtaining his law degree from Manchester Metropolitan University, he worked as both litigation consultant and auditor at the Accident Group before moving to PricewaterhouseCoopers.

Jason Smart, Chief Executive Officer at LitComp, said:  “We welcome Mike and Chris to LitComp and believe that their strategic appointments will add to the strength we already have in our ranks. Their combined legal and insurance experience will be a great asset to the Company as LitComp continues to grow as an ATE provider.”

Elite Insurance Company Ltd (“Elite”), LitComp’s Gibraltar-based After the Event (“ATE”) Insurer, has finished its first full year of trading ahead of expectations.

Trading for LitComp’s Medico-Legal Reporting subsidiaries has, as previously reported, been weak. However the elimination of uncertainty in this market as a result of the settlement of the Wollard appeal, together with a number of marketing initiatives, leads the directors to be confident that there will be an improvement in volumes later in the year.

The anticipated EBITDA for the year ending 31 March 2007 is expected to be at least £1,2m (2006: £28,000) and anticipated net profit before tax at least £800,000 (2006 loss: £(342,000)). The figures do not reflect the impact of FRS 20.

Commenting, Jason Smart, CEO of LitComp, said: “I am delighted to be able to update the market on LitComp’s progress. We have been working hard to ensure the success of Elite and this has been rewarded, as the division has established itself as a profitable business. Meanwhile, the outlook now looks more positive for our medico-legal subsidiaries as the market recovers from a period of uncertainty and the marketing drives we put in place begin to take effect.”