Insurance and Reinsurance
What’s it all about?
Insurance underpins virtually every commercial and consumer transaction. It is a key factor in risk management and financial planning. Most people are aware of insurance products such as household, motor and professional negligence. However, this only scratches the surface of a diverse and fast-paced industry. For example, specie insurance covers high value items such as jewellery, fine art and cash in transit, and reinsurance is insurance purchased by an insurance company in order to cover its own risk of having to pay out potentially huge sums under various policies. Also, insurance companies are constantly offering commercial clients new insurance products designed to meet changing business needs.
However, despite its dynamic nature, the insurance industry is also steeped in history. For example, Lloyd’s of London began in 1688 with a group of shipping merchants meeting in a coffee shop to discuss their insurance arrangements. It’s now based at an impressive modern building in the City, but the heart of Lloyd’s of London is still firmly rooted in its traditions; it is home to the Lutine Bell, salvaged from a naval ship sunk in 1799 and still rung on ceremonial occasions.
The working culture
An insurance litigator will handle disputes ranging from a claim by an individual on a motor policy to a claim by an insurance company against its own insurer (known as a reinsurer) for payment in respect of product liability claims (such as those arising out of serious side effects from pharmaceutical products) worth tens of millions and lasting a number of years.
A corporate insurance lawyer can spend a day drafting a brief policy document or a month working full-time on a team of brokers moving from one company to another. This means the average working day can vary hugely, and lawyers will either be working in a team on a large scale dispute or transaction or independently on a number of smaller matters, with junior support where necessary.
Client contact is frequent, both at junior and senior levels, and the industry is moving towards favouring alternative dispute resolution, such as mediation or informal settlement negotiations, so face to face interaction with your own client and your opponent is increasingly common.
What other practice areas do insurance lawyers work most closely with?
Corporate and commercial transactions in the insurance world are a common occurrence. Often, a team of lawyers working on a merger or share sale will include lawyers from the insurance, corporate, employment, and regulatory teams, as each will bring something different to the table.
An insurance lawyer based in the City is also likely to work with overseas lawyers at several points in their career, as many international businesses obtain their insurance via the London market (whether Lloyd’s of London or companies market), and the applicable jurisdiction for disputes will not always be England and Wales.
What phrase is an insurance lawyer most likely to use and what does it mean?
The insurance industry has its own terminology that can seem very alien at first. For example, the phrase “an insurer is currently seeking to avoid a business interruption policy on grounds of misrepresentation or non-disclosure of material facts” may sound a little daunting, but its meaning is actually fairly straightforward: an insurer will enter into a contract of insurance with an insured on the basis of what the insured and/or its broker has told them. If any relevant information is not disclosed to the insurer which would have affected the terms on which the insurance was offered, or whether it was offered at all, this may render the insurance contract void.
Other common issues arising in insurance dispute and the drafting of insurance policies are questions of notification i.e. the timing of when an insured notifies an insurer that there might be a claim under the policy is relevant to whether or not there is coverage. Speaking of coverage, disputes as to what is included within the remit of an insurance policy can often be the subject of a dispute in itself.
An insurance or reinsurance lawyer needs to have excellent attention to detail. Insurance policies and other documents are very complex, and one exclusion or condition in the policy fine print can make the difference between the insurer being liable to pay out millions in claims or nothing at all. A good commercial brain is also essential, as clients are looking for solutions which fit not only within the parameters of the law but also within the structure of their business.
Also, the insurance industry is very sociable, so strong communication skills and a real interest in networking and business development are also extremely valuable.
By and large the insurance industry is regulated by the Financial Services Authority (FSA), and there has been a growing trend of increased interest from the FSA in insurance business’ activities. This, together with the industry’s preparations for the introduction of the Solvency II Directive, which will introduce new minimum levels of capital required for insurers, means that insurers will have to look even more closely at their operating procedures. In other developments, greater focus on anti-bribery and other similar legislation means that firms are increasingly looking at the way in which they do business and lawyers have a definite role to play in that process. Ultimately, an insurance lawyer’s goal is to help the insurance industry continue its forward-thinking approach to business.
Judith Perkins, associate, Elborne Mitchell