It is being reported that the House of Lords have (23rd April 2013) passed Clause 61 of the Enterprise and Regulatory Reform Bill. This will (in good time) remove  section 47(2B) of the Health and Safety at Work etc Act 1974. Section 47(2) of HSWA explicitly provides that a breach of ‘health and safety regulations’ (a breach of statutory duty) is actionable where the breach causes damage, unless the particular regulations specifically exclude this right (currently very few regulations exclude civil liability). This is in contrast to the position for breach of the general duties under HSWA where section 47(1) makes clear that there is no right of action in any civil proceedings for breach of statutory duty. Most claims are currently brought in respect of both breach of statutory duty and negligence. In the absence of the former, it is expected that the law of negligence will develop to deal with situations and legal issues previously dealt with under statutory breach, more claims may be

IAS 37 provides the detail. see for example: http://www.iasplus.com/en/standards/standard36 Firms may have reason to consider that a liability is emerging, but don’t have to recognise it in the accounts unless: a present obligation (legal or constructive) has arisen as a result of a past event (the obligating event), payment is probable (‘more likely than not’), and the amount can be estimated reliably. Every firm will have its own method of making these judgements.  This in turn will be influenced by their risk management philosophy. They should offer these judgements to the auditor for an independent view. As an emerging risks regime is put in place and develops experience, there will be false positives which would show up on the bottom line. This would tend to lead to marginal judgements becoming hardened into “not yet, if ever”. A conservative view of emerging liabilities is entirely justifiable. Over time, money tied up by false positives would be rel

Paragraphs 11 and 12 of the PRA guidance paper insuranceappr1304 refer to market failure at the level of a given type of insurance policy e.g. third party motor insurance. The concern is that the beneficiaries of a policy would be denied their rights in the event that an insurer gets into difficulty. Of course, there are mechanisms for the market to pick up the tab for some kinds of insurance policy when an insurer goes out of business. The implication might be that PRA will take a market level view of threats to individual policy types e.g. Employer’s Liability, the more so the more difficult it would be to manage economic risks were those insurances to be withdrawn for whatever reason. EL is of course compulsory, so employment would be impossible without it, Prof Indemnity is highly advisable, its absence would not be in the interests of commerce or the beneficiaries of third party policies. Market-wide action on general threats to policy lines would seem to be the obvious resp

Prudential regulation of insurance has been transferred to a new unit at the Bank of England – the Prudential Regulation Authority (PRA). The PRA’s approach to regulation and supervision has three characteristics:  A judgement-based approach: The PRA will use judgement in determining whether financial firms are safe and sound, whether insurers provide appropriate protection for policyholders and whether firms continue to meet the Threshold Conditions. A forward-looking approach: The PRA will assess firms not just against current risks, but also against those that could plausibly arise in the future. Where the PRA judges it necessary to intervene, it will generally aim to do so at an early stage. A focused approach: The PRA will focus on those issues and those firms that pose the greatest risk to the stability of the UK financial system and policyholders.  The PRA approach to supervision will not seek to operate a “zero-failure” regime. Rather, the PRA will seek to ensure that a f

It was a great pleasure to lecture to Swansea U business and economics students just before Easter. Dr  Jing Chen (Maggie) invited a talk on emerging liability risks. Having explained the risk management and business planning context, the talk provided 4 examples of emerging liability risks: phosphate additives in food long nano fibres diesel engine exhausts night shift work In each case, the students were asked to be the Board of Directors and given 3 options, choose one which would be company policy on that risk. For example: do nothing, divest from that market sector, increase premium, reduce premium, prepare a defence strategy etc. … among the usual choices for insurance risk managers. Responses were provided and they were allowed to change their minds as the consequences of each choice were explained. But they made a choice. Its all about forming a judgment and making a decision. These well educated young people were able to form and evaluate their own judgements in the face