Mactavish expresses concern that implications are widely misunderstood by most UK corporate Boards and insurance buyers.

Senior Executives at Mactavish, the UK’s leading expert on Insurance Governance, reiterated their concern today that most UK corporate policyholders have yet to grasp the significance of the compliance implications they face with regard to the Insurance Act 2015.

The Insurance Act received Royal Assent on 12February 2015 and will come into force on 12 August 2016. Mactavish CEO, Bruce Hepburn, advised: “The current risk analysis standards practised by most Boards and insurance buyers today, including many of the largest companies in Britain, will fall substantially short of the new statutory regime imposed on them.”

The core objective of the new Insurance Act 2015 is to professionalise the way in which Boards of businesses and their insurance buyers arrange their contracts with insurers. Corporate policy holders must in future demonstrate a comprehensive understanding of their insurance risk and will have a ‘duty of fair presentation’. Information provided to insurers must be clear and accessible, material facts known to senior management must be revealed and businesses must conduct reasonable searches for additional potential risk detail.

Another key driver of the legislation is its intention to prevent insurance companies from rejecting business customers’ claims for what could be deemed to be tenuous reasons.

Mactavish research indicates that 45% of large or strategically important commercial claims are disputed by insurers and these disputed claims take three years on average to settle, with the policyholder only typically recovering 60% of the indemnity claimed from the insurer. Policies often force customers into binding arbitration where there is no right of appeal.

The new Insurance Act 2015 will improve the legal regime for policy-holders by reducing the rights of the insurer to avoid claims when the policyholder breaches a condition of the policy unrelated to the loss. Nevertheless, it shifts the focus, in turn, for potential future disputes in respect of misrepresentation and disclosure.

Paul Spencer, speaking as a Mactavish Non-Executive Director and as one of the most powerful pension fund trustees in Britain (presiding over the most pension fund assets of any professional trustee according to Pensions Insight research) , added: “This new Act will impose new statutory duties on UK boards to enable them to mitigate major risks effectively through the Insurance market. In large infrastructure projects, strategic investments and higher risk asset classes (such as private equity), investors will expect Boards to ensure that the insurance of significant potential capital loss is done so in a way that is compliant with the new statutory regime imposed by the incoming Insurance Act 2015. Companies that announce that their earnings are down because they failed to negotiate effective Insurance that properly mitigates the Insured risk will not be well received.”

The Insurance Act 2015 will apply to every insurance and reinsurance policy written in England and Wales, Scotland and Northern Ireland, including all international business placed in the London market. The impact will also be felt in jurisdictions, such as Bermuda, where the principles of the London market influence the legal framework, and in international courts, like the DIFC (Dubai International Finance Centre) Courts, where law is based on English Common Law.

The Act is therefore set to significantly change the global insurance and reinsurance landscape. The new law will be principles-based and hence the real impact will only become apparent as court judgements develop from August 2016 onwards.

Mactavish was amongst the core group of consultees the Law Commission relied upon to prepare strong empirical evidence in support of the Insurance Act 2015 and the urgent need to update the existing law. Without Mactavish research and recommended solutions – drawn from analysis of opinions and examples from difficult to access but critical parts of the insurance market – the Law Commission would not have had such significant insight into the current operational realities and difficulties amongst policyholders, brokers and insurers in different parts of the market.

Given the substantial challenges ahead for UK corporate policyholders in preparing themselves for the incoming new law within a tight 18-month time-frame, Mactavish recently welcomed

David Hertzell, the former Law Commissioner for commercial and common law, to the Mactavish team where he will work exclusively on Insurance Governance as a special advisor.

Commenting on this appointment, Mactavish CEO Bruce Hepburn said: “I greatly respect David’s knowledge, integrity and advice and I know that his input at Mactavish, helping us to support the successful market implementation of the new law to the benefit of all across the next 18 months, will prove invaluable.”

David Hertzell said “If policyholders carry on in the same way that many do now as highlighted by Mactavish’s research, with poor analysis of their insurable risks then they will fall foul of the new Act and will not get much sympathy from the courts.  The likelihood will be that there will still be a lot of worthless policies out there or at least policies where a much reduced claims payment will be made and much delayed.  Insurers are likely to be tougher too as the new remedies will be perceived as being “fairer” and therefore relied on. It would be a mistake for policyholders to think the new Act allows them to treat the purchase of insurance lightly – the duty to give a fair presentation of the risk means exactly what it says.”

UK policyholders and Boards who wish to take advantage of the new law must act fast. The time-frame to August 2016 is already tight. Mactavish urges immediate action in order for UK Boards to get onto the front foot in respect of the new Insurance Act.

In conclusion, Mactavish Chairman and ex-CEO of Swiss Re, John Coomber said: “Today technical standards in insurance risk transfer are falling short. They do not reflect the critical importance of insurance coverage to a business of capital replacement and cash flow protection following a major loss event. Transparency between principals needs to improve as too often business provides poor analysis of their risks to insurers and insurers provide poor contracts in return. I believe The Insurance Act 2015 will trigger a transformation in professional standards. Mactavish will be at the forefront of this change having been one of the influential parties behind the legislation.”

David Hertzell added “Mactavish lead thinking on Insurance Governance. They provided the Law Commission with acute insights into the way in which businesses purchase insurance. Their evidence was widely quoted and helped shape the new legislation”.


For further information and media interview requests, please contact:

Bridget Jennings – The Media Team on 01458 250200 / 07850 822820
Tom Miskin – Senior Analyst, Mactavish on 0208 834 1621 / 07711 006483

Notes for Editors

About Mactavish

Mactavish specialises in the analysis of commercial risk, insurance policy reliability, disclosure, placement procedures and conduct and insurance governance standards. Mactavish works with corporates, helping them to increase the reliability and governance of their insurance, and with carefully targeted brokers and insurers to deliver improved insurance solutions, leading to higher standards of governance, the provision of more flexible levels of capacity and clearer policy wordings that are more robust when tested by large losses. The company is unique in its focus on establishing standards across the insurance industry which will be fair and work for all parties.

Mactavish also designs and undertakes a range of unique and proprietary large scale studies across the corporate insurance landscape, focused on changes in the world of corporate risk. Throughout the legislative process leading to the Insurance Act, the Law Commission and Mactavish cooperated closely, with Mactavish research being the single largest primary evidence source for the Law Commission’s work.

Mactavish Biographies:

John Coomber – Chairman, Mactavish

John Coomber is the former Chief Executive Officer of Swiss Re. Upon retirement John became a Non-Executive Director of Swiss Re for almost a decade retiring in 2014. Mr Coomber is Chief Executive Officer of Pension Insurance Company Ltd.

Paul Spencer – Non Executive Director, Mactavish

Paul Spencer is Chairman of British Airways Pensions scheme, Chairman of BT Pension Scheme, and Chairman of the Investment Committee for Rolls-Royce Plc Pension Fund. Paul is also Chairman of Hermes Fund Managers. He was also formerly chairman of National Savings and Investments. Paul is the most powerful pension fund trustee in Britain, presiding over the most pension fund assets of any professional trustee according to Pensions Insight research.

David Hertzell – Former Law Commissioner, now working with Mactavish exclusively on Insurance Governance

David Hertzell was appointed as Law Commissioner for commercial and common law on 1 July 2007, retiring in December 2014. Mr Hertzell’s legal career specialised in professional indemnity, reinsurance, captive insurance and regulatory issues. He is currently President of the British Insurance Law Association, Chair of the Chartered Insurance Institute’s Professional Standards Board and a Board member of Airmic. David has recently been appointed jointly by the Secretary of State for Justice and the Chancellor of the Exchequer to Chair the Government’s task force on insurance fraud.

About the Insurance Act 2015

For formal detail about the Insurance Act 2015, please refer to this link :

For advice and insight regarding the Insurance Act 2015, please contact Mactavish directly. Contact details above.