Insurance/reinsurance

Insurance (and reinsurance – the insurance of insurers) is an integral part of commercial activity throughout the world. The insurance practices of top-end firms advise on a range of areas, including coverage disputes, investment management, documentation, mergers and acquisitions (M&A) of insurers, and the transfer of books and business between insurers. Regulatory law governs matters such as the establishment and regulation of insurance companies throughout the world. Clients include insurers, reinsurers and UK insurance institutions, as well as major insured companies and their captive insurers.

While in his native New Zealand all legal practitioners are admitted as solicitors and barristers, having studied commerce at the University of Auckland, Benjamin Lyon knew that he was more interested in the corporate advisory side of the legal world: “There are certain personality types that suit being a litigator and those that suit being a corporate M&A person,” he notes. “My personality traits certainly led me at a very early stage in my career to want to be more corporate M&A focused. And after doing a commerce degree, I realised that I liked the analytical side of finance and how it impacts on commerce. So, on the back of those interests, being a solicitor rather than a barrister was always going to be the path that I was going to go down.”

Benjamin started his career in New Zealand as a junior corporate lawyer without a set idea of which specialism he would end up in. However, having done a lot of general corporate advisory work in his early days in the profession, over time Benjamin’s speciality narrowed to the financial services field. Debevoise & Plimpton and London seemed like natural fits given his professional interests, the firm’s rich client base and focus on insurance, and the City’s focus on financial services generally.

Technically challenging environment

Benjamin works as international counsel in the insurance team at Debevoise & Plimpton. His team acts for global, European and UK insurers, brokers and other intermediaries that have an insurance focus. In addition, they work for investors in the insurance space (eg, private equity and pension firms). The scope of the team’s work is broad, with a very strong regulatory insurance focus. “We provide regulatory advice to all of our insurance clients and off the back of that, our expertise leads to the big-ticket M&A work that we do,” he says. “We do insurance regulatory and insurance M&A work, and also help insurance firms with capital raisings and other capital solutions for insurance firms.”

Insurance is a highly specialised area of law, but he relishes the challenge: “Insurance is a very technical area and I like the fact that it’s highly specialised and takes knowledge and dedication in order to become an expert. The possibility to work in a technically challenging area, in a great environment and with great clients is what I enjoy the most about my job.”

A recent case saw Benjamin working with the global speciality insurer AmTrust to sell its AmTrust at Lloyds business. This was a high-profile, complicated and difficult transaction that was strategically important to AmTrust. He led the transaction in challenging circumstances and obtained a great result for the client in April 2019.

Covid-19

The current covid-19 crisis has been extremely difficult for the global insurance industry. “First, the impact on asset prices has negatively affected the investments that insurers hold against their future expected payments to their insurance customers and has led to certain insurers raising additional capital to up any shortfall,” explains Benjamin. “Second, there has been significant uncertainty as to whether certain insurance policies cover business costs and losses resulting from covid-19. This is a reputational issue for the insurance industry akin to the cloud that the investment banking industry still operates under following the 2008 Global Financial Crisis. It seems clear that a number of insureds may have been mis-sold business interruption insurance that they thought would cover them for losses and costs arising from covid-19. Generally, almost all such insurance policies have specific exclusions for pandemic coverage or are required by their regulators to not provide coverage on the basis that pandemic losses would likely render insurance firms insolvent should a significant event arise such as covid-19 – leaving all other insured with no over for their other policies.”

Brexit: trade deal or no trade deal?

On Brexit, Benjamin says that “the current uncertainty surrounding the UK’s trading position with the EU when the current transition period expires at the end of the 2020 calendar year is clearly a negative for the country as a whole, including UK-domiciled insurance firms and EU insurance firms who operate in the UK on a cross-border basis. That being said, insurers are now well placed to address either a negotiated trade deal with the EU or a no-deal end to the transition period. This is on the basis that the insurance industry was required by their UK and relevant EU regulators to forward plan for either eventuality. Larger UK insurers have set up fully authorised subsidiaries or branches in the EU to ensure seamless service for clients and other stakeholders. Likewise, EU firms have done the same in the UK. A ‘no-trade deal’ end of the transition period will be hardest for medium to small insurers who may not find it economical to have more than one fully authorised firm in their group.”

Ongoing regulatory changes

The ever-changing landscape of insurance regulation at the EU level is another variable that poses a significant challenge for insurance lawyers going forward. “Solvency II is the European directive that governs insurance broadly and that key piece of legislation is not changing at a great rate of knots,” Benjamin says. “However, there are other EU directives and other continual changes in law and regulation that insurers need to comply with. People want certainty and ongoing regulatory change can disrupt that. While these changes can lead to more work for law firms, it is difficult for young insurance lawyers to learn about regulations if they keep changing every six months.”

Be interested in what you do

Having a genuine interest in insurance is key to being successful in this area of law. “When we have junior lawyers going through their traineeships, you can tell very quickly which ones come to insurance for six months with a real interest in the subject,” Benjamin says. “I had a genuine interest in the corporate world, as well as business and finance, and that’s continued throughout my career. It’s vital to be interested in what you are doing, because you are going to be doing it for a long time!”

He also recommends that lawyers at the start of their careers get the broadest legal education that they can. “You never know where you are going to end up,” he notes. “If you told me 15 years ago that I would be a senior insurance lawyer at a US law firm in London, I would have laughed at you. But because I got a very broad corporate legal education in New Zealand – I did capital markets work, general corporate advisory, M&A and commercial contracts – I found a speciality that I love. Having that broad legal education is critical to help you find the area that interests you.”