Tide turns for Liverpool insurers

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Liverpool, once a global insurance centre thanks to its links with the shipping trade, is making a comeback in the business.

However, it is not the large insurers of old but a new breed of smaller boutiques offering innovative products that now dominate the city’s insurance sector.

The Royal Insurance Group was founded in Liverpool before merging with Sun Alliance and still has a large presence. And Royal Liver Group, founded in 1850, still occupies the renowned Royal Liver Building on the Mersey waterfront.

But most big companies have shut their Liverpool operations to concentrate regional activity in Manchester, its bigger rival just 30 miles away.

Mark Chadwick worked for Aon Insurance in the City of London before returning home to become chief executive of Professional Liverpool, the lobby group for local white-collar companies. He recalls Aon closing its office in Liverpool to consolidate its regional presence in Manchester, but now detects a Merseyside resurgence.

“What is driving the market are boutiques providing insurance solutions in innovative and creative ways. Liverpool’s resurgence as a city is based on its creative edge and insurance reflects that,” he said.

Some local asset managers are also looking at providing insurance solutions.

O’Connor’s, a law firm set up five years ago, offers international expertise to the sector. Paul O’Connor, partner, was head of commercial insurance at Eversheds in London before establishing the practice with Mark, his brother, and Nigel Wallis, who were both senior partners at DWF, a north-west law firm.

They now count the likes of Capita, the support services business, and Brit Insurance, alongside local businesses and councils, as

Mr O’Connor said: “It became clear to me that there was an opportunity to help companies get more from their insurance.” Typically, they would regard it as a necessary cost, he said, but it could be looked at as an opportunity.

“We do not think companies are getting a fair share or a reward. If you sell cars you are introducing business to an insurer. You should . . . take a share in the profits of underwriting.”

O’Connor’s knows the market well enough to know how much brokers and insurers are making, or to go direct to reinsurers. “It is linked to how insurance works and insurance regulation works,” said Mr O’Connor.

Much of it is also about tax. Mr O’Connor said it could make sense to set up captive insurers to hold the risk in offshore structures, typically in the Channel Islands or Isle of Man, to reduce tax burdens on policies.

Mr Wallis said the recession was helping. “Revenues have grown strongly, particularly in the last 12-18 months because people are looking for cost savings. We have seen our revenue grow by around 20-25 per cent a year,” he said.

The firm also advises on corporate finance, where business has dropped.

Manchester is not only home to regional headquarters but also to the Co-operative Group, which has about 3 per cent of the UK market, and Swinton, the largest chain of brokers.

The Co-op, the world’s largest mutual, offers most household insurance, from motors to pets. James Hillon, head of home insurance at the Co-op, said the group had been slow to react to the rise of direct insurers such as Direct Line and the use of the internet to compare or buy policies.

“Four years ago we were 100 per cent reliant on field agents doing home sales,” he said. “Customer habits changed and we did not change fast enough. Now we have field agents, call centres, brokers, bank branches and online sales.”

Independent consumer surveys indicated that the modernisation had not come at the expense of customer service, he said.

The Co-operative Insurance Society has £400m gross written premium, 900,000 home and 700,000 motor policy holders. It has just launched policies for small and medium-sized businesses, seeking to increase its commercial activity. However, group profits fell last year because of investment losses.

Back in Liverpool, Royal Liver has also gone through traumatic times but its business is stabilising. In December 2007, the latest period for which figures are available, it had 1.7m members with 3.2m policies covering life and critical illness, and £3.5bn of assets under management. The first half of 2008 saw it produce its first profit, £2.4m, in five years. The group has cut its annual cost base by a third in that time, from £127m to £81m, and launched new investment products. The company now has 800 employees in the UK, many in Liverpool.

Steve Burnett, chief executive, said the recession had affected its operations in the UK and Ireland: “What was a tough job to manage our legacy cost base whilst growing our new businesses, has got a whole lot tougher.”

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