Hagerty International: UK Classic Car Insurance

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What typically drives loss ratios up to 50%? Is it a one-off incident where an expensive car gets wrecked or is it more storms?

It has less to do with storms. One thing which is unique to us, which was always an issue for the underwriting officers in Hagerty US, is unlimited liability. A prime example was in 2012 when a guy on the Isle of Wight got knocked off his bike. He was an Olympic potential who broke his wrists and had life threatening injuries, and was clearly never going to be able to do anything athletic again. The payout was £58 million which is unlimited and punitive. One year, someone drove his Alvis into a brick wall. The damage to the car was £30,000 but the damage to him was £3.5 million.

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It seems they may have remedied that, in that earlier this year, there was a partnership with Markel where they capped their limit to $1 million and Markel covers the rest, does that sound familiar?

We arranged an internal reinsurance program, which meant we had a different rate for the top layer, which was more cost effective than insuring everything from the ground up. Markel are considerably sized, but they take everything from the ground up and charge a lower rate on that bottom line number because they take on the full million as opposed to 250,000. That will inevitably impact their loss ratios and they will charge less than their predecessors as a result.

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