The Dangers of Off Shore Insurance Companies
posted 19th August 2022
Many customers are being offered unrated markets and offshore (outside the UK) Insurance companies by UK brokers & comparison sites.
These companies do provide competitive premiums but there are several warnings regarding them that you should be aware of so that you can consider them from an informed position:
Off-shore insurance companies are based outside the UK and as such they have no financial rating – meaning that it is difficult to establish their financial strength, security, and stability. Several significant offshore insurance companies have either gone under or been told to stop writing business in the UK due to concerns about their financial ability to meet claim liabilities.
You may not be covered under the Financial Services Compensation Scheme if an Off-Sure insurer goes under. The FSCS was set up to protect policyholders if an insurer goes out of business and can't pay claims. It can also protect you for the majority of the premium you have paid (FSCS). However there is no guarantee they will protect you if your insurer is Off Sure. In the last few years several offshore insurers, including Alpha Insurance A/S, Gable Insurance AG, Horizon Insurance Company Ltd, Qudos Insurance A/S, Enterprise Insurance Company PLC, have collapsed overnight, leaving tens of thousands of clients, and their businesses, waking up uninsured and unhappy
They are registered with the UK Insurance Regulator (FCA) and as such complaints procedures and rulings will not be upheld or dealt with in the same way that they would be with a UK Regulated Insurer.
For Contractors Insurance, major principal contractors and large companies (which could directly or indirectly be your customers) may not accept policies from unrated and offshore markets. This can and has resulted in contractors being refused permission to work on a site due to them not having adequate cover in place.
You might ask, how are they allowed to trade in the UK?
The answer is that as they are often based in countries such as Gibraltar or Denmark (amongst others) and can passport in and trade in the UK due to EU Trade Laws and Directives.
Think about the consequences of insuring with an unrated market and contrast this with the potential shorter-term cost saving you are making on your premium. Unrated markets can have their uses if you have a poor claims record or are looking at a first year of trading – essentially if it is a undesirable or distressed risk – but it is important for you to know who you are dealing with as an Insurer and to go into the policy with your eyes open.
As a final thought, we do not (and would never) use Off Sure Insurers for any policies that we provide, in order to protect our customers from the dangers mentioned above.