Insurers' loss is brokers' gain

As the year closed and headlines trumpeted 2005 as the worst year on record for insurance, there was a silver lining on the cloud for brokers. Things may have looked depressing to insurers, but the fact that 2005 was the worst year for them does not, however, make it the worst for brokers. In fact, the flurry of punches spectacularly endured by the energy markets served to firmly underline, in the minds of business managers in all sectors, the need to have a comprehensive programme of insurance covers in place.

According to Aon, losses suffered by the energy market were caused by two key events, namely the large loss at the Suncor Canadian oil sands facility, occurring in early 2005 and generating a market loss in excess of $1.3bn (£75m) and hurricanes Katrina and Rita in the Gulf of Mexico, which is estimated to cost energy insurers between $3.5bn and $5bn. Offset this against a global premium income of $3.5bn and the magnitude of the net loss to underwriters becomes clear. Other fascinating facts about the great thump that winded energy underwriters in 2005 include the trials of Oil Mutual, in the frame for claims arising from the Buncefield fuel depot. It is widely predicted to post losses in the order of $1.75bn to $2bn for the year; $1bn is from Katrina, making its Buncefield exposure seem trifling by comparison.

Insurance losses from Hurricane Katrina have also been reported to push the UK's current account deficit to a record £10.2bn.

Severe weather around the world also contributed to 2005 being the most costly year on record, with unprecedented levels of insurance claims on damaged property according to the United Nations Environment Programme.

Speaking at length to adjusters attending the aftermath of a now-decimated Buncefield, underlined the importance of the need for a range of covers in such an event. Even when insurance money is paid quickly to affected businesses and staff rehoused as part of a business continuity plan, a proportion of them still go bust; what hope do those without comprehensive cover and contingency plans in place have?

So, while much of brokers' attention, time and energy has been spent responding to regulation, red tape and surviving in a soft market last year, these high-profile disasters should leave your clients in no doubt why they need your expertise at the end of it.