PARTNER CONTENT
By Dominic Pilgrim, Partner
Tom Abbotts, Associate Partner
Katherine Jardine, Senior Associate
Consilium
The economic uncertainty and volatility triggered by the pandemic heightened the risk of litigation, claims, and defaults, particularly in sectors like hospitality, retail, and healthcare. Insurers responded by reassessing their risk exposure, leading to a more conservative approach.
The insurance market entered a hardening phase during the pandemic, with insurers pulling back on capacity and imposing stricter underwriting standards. For Financial Lines, this meant reduced appetite for high-risk industries and more cautious approaches to underwriting policies, particularly for Private Equity (PE) clients involved in distressed or vulnerable sectors.
As insurers sought to manage their risk exposure, renewal terms for existing policies became increasingly challenging. PE clients faced steep premium increases—often double-digit hikes—as well as higher deductibles and more restrictive policy wordings. Some insurers even exited certain segments of the market entirely, further constraining options for coverage.
Evolving market dynamics
The market has since entered a buoyant phase, driven by new competition. This is largely due to the emergence of start-ups backed by Private Equity and Managing General Agents (MGAs), attracting talent from established insurance houses. This influx has increased insurer capacity, especially in the London market, providing Private Equity managers with better options.
Despite the UK being a strong hub for PE and VC investment, recent geopolitical tensions and shifts in the UK’s tax policy—particularly regarding carried interest—have added new layers of scrutiny. These developments raise critical strategic questions for investors, including potential shifts in market appetite, considerations for relocating operations and re-evaluating investment strategies across different jurisdictions.
Private equity’s role in M&A in 2024
In 2023, the financial services (FS) industry experienced a decline in mergers and acquisitions (M&A) for the second consecutive year. Despite this downward trend, the 2024 outlook for the FS M&A landscape is generally optimistic. An anticipated improvement in the interest-rate environment should support deal-making across various FS subsectors. Additionally, Private Equity has seen an increase in its share of total FS volume.
Within the three main FS subsectors—capital markets, banking, and insurance—expectations for 2024 M&A activity vary. Capital markets may rebound due to potential improvements in interest rates. Insurance continues to focus on strategic consolidation and transformative deals. Banking faces challenges from high interest rates, regulatory uncertainty, and presidential election concerns which could further dampen overall M&A activity.
Consilium’s bespoke solutions for a changing market
Consilium adopts a deeply client-focused approach to broking, ensuring they understand the core of their clients’ businesses. By doing so, they can better represent their clients and ensure that both the insurance policies and insurer partners are well-aligned with clients’ needs. Consilium is dedicated to ensuring that PE and VC managers remain resilient in a changing market by providing access to A-rated global insurers and offering policies designed to respond precisely to unforeseen events.
To address these risks, Consilium emphasises innovative and tailored insurance solutions. They work closely with clients, leveraging in-house legal expertise to develop proprietary insurance contracts that address industry-specific risks. This bespoke approach aims to ensure that insurance policies are robust and responsive to the unique needs of PE and VC managers.
Cyber insurance offers significant benefits to PE firms and their portfolio companies by mitigating financial risks associated with cyberattacks. As PE firms often manage multiple businesses, each with varying levels of cybersecurity maturity, a breach in one company can impact the entire portfolio. Cyber insurance provides financial protection against losses from data breaches, ransomware or system outages, covering costs like legal fees, notification expenses, and system restoration. It also helps companies manage regulatory fines and reputational damage, ensuring a faster recovery and minimising operational disruption. Additionally, having cyber insurance signals to investors and partners that the firm prioritises risk management, enhancing trust and business resilience.
Consilium has further enhanced its service offering by introducing innovative technological solutions to streamline the insurance process for clients, particularly within the Private Equity and Venture Capital sectors. Recognising the repetitive and burdensome nature of the annual renewal process, Consilium has developed new technologies to simplify and expedite this task. By eliminating the need for clients to complete and provide the same renewal applications each year, these innovations significantly reduce administrative overhead and enhance overall efficiency.
Streamlining innovation with Fundshield
In July 2024, Consilium launched Fundshield, a specialised product designed to provide Fund Directors and Officers with secure and competitive premiums. Fundshield is supported by robust policy wording, ensuring comprehensive coverage that addresses the specific risks faced by individuals in these roles. A key feature of Fundshield is its user-friendly, in-house developed online platform. This platform allows clients to obtain quotes and bind policies swiftly and securely, streamlining the insurance process even further. The platform represents a significant step forward in leveraging technology to make insurance more accessible and tailored to the needs of Fund Directors and Officers.
The introduction of these technologies and the Fundshield platform means clients can focus more on strategic aspects of their business, with less time spent on insurance administration. Through Fundshield, clients benefit from competitively priced insurance products that are not only tailored to their specific needs but also supported by Consilium’s commitment to robust and comprehensive policy wordings.
Consilium’s emphasis on technological innovation and client-focused solutions, exemplified by the launch of Fundshield, underscores its role as a forward-thinking partner in the insurance industry. This approach ensures that clients receive the best possible protection in a streamlined and efficient manner, allowing them to concentrate on their core business activities with greater peace of mind.
Shaping the future
The global insurance market is currently experiencing renewed competition, particularly benefiting the PE and VC sectors. However, ongoing geopolitical and regulatory changes in the UK present new challenges that require strategic consideration and tailored insurance solutions. Consilium Insurance Brokers position themselves as a key partner in navigating these complexities, offering bespoke, robust policies designed to meet the evolving needs of PE and VC managers.
Dominic Pilgrim, Partner – Experienced client executive with a demonstrated history of working in the Financial Institutions insurance sector for 19 years. Strong professional skilled in Professional Liability, Directors’ and Officers’ Liability, Crime, Employment Practice Liability, ERISA and Cyber. My depth of knowledge and specialism is dealing with Hedge Fund Managers, Private Equity, Venture Capital, Corporate Finance, Fund Administrators, Fintech and Real Estate Asset Managers.
Tom Abbotts, Associate Partner – Tom Abbotts, with just shy of a decade of experience across Cyber, Technology and Financial Technology (Fintech) Insurance, presently leading the offering at Consilium. Prior to establishing the Cyber, Technology and Fintech Insurance offering at Consilium 18 months ago, Tom was one of the founding members of another Lloyd’s of London insurance broker set up in 2015 focusing on emerging risks. Tom’s focus is working with financial & professional service firms, across the globe, to protect their balance sheet through cyber risk transfer solutions.
