Vladimir Putin hijacked 500 commercial aircraft after invading Ukraine. Photo: MIKHAIL KLIMENTIEV/POOL/AFP via Getty Images
Insurers will go broke if they have to cover the costs of Vladimir Putin's war in Ukraine, warned the founder of one of the world's largest brokers.
David Howden, who built the £11bn insurance empire of the same name, said his industry could not be expected to cover the costs of the war amid the Putin hijacking scandal of hundreds of commercial aircraft.
Mr Howden said: “The insurance market cannot systemic support for the war between Britain and Russia. And it's not meant to be. No policies cover this.
“Otherwise, if we cover all this, it will still remain with the government – we will all go bankrupt.”
Russian authorities confiscated 500 commercial aircraft belonging to foreign leasing companies shortly after the start of the war with Ukraine.
The owners, mostly based in Ireland, tried to claim the insurance but were denied. They are now suing insurers Lloyd's of London for refusing to pay up to $10bn (£8bn) in claims. A High Court trial is scheduled for next year.
Mr Howden said insurers are legally refusing to pay under the terms of certain types of coverage.
He said: “After all, war was never something that was covered by insurance.”
If insurance policies were broad enough to cover the effects of the war, it would force the government to bail out companies. “Because there isn't enough capital in the insurance market to pay for it,” he said. “The insurance industry—no one really knows—[but it's] four or five trillion dollars of capital. . It is small. For example, it's a tenth of the derivatives market.»
Mr. Howden founded his eponymous empire in 1994 with three employees, dog and £25,000. insurance policies, but has deep connections in the industry as the largest broker in Europe.
The controversy over 'stolen' aircraft in Russia comes as the UK's insurance sector is still reeling from public backlash over refusal to pay claims under the Covid business interruption policy.
Small business and finance The UK regulator challenged the industry in court, and the Supreme Court eventually ordered insurers to pay compensation.
Mr Howden acknowledged that insurers had handled the crisis poorly.
He said: “Have we covered ourselves in glory due to the suspension of business during the Covid pandemic? No, we didn't. Should we react differently? Yes, they should have.
He said that insurers were too focused on the technical details of policies despite the extraordinary circumstances.
“When claims come in, the insurance company is right from a technical point of view, but possibly wrong from a PR point of view. look over, say, “I'm sorry, this is not covered by our policy.”
Currently, the insurance industry is facing a new headache about how to handle cyber threat insurance.
Members of Lloyd's of London, the 335-year-old insurance market, are outraged that the organization insists that all cyber policies rule out state-supported attacks.
Many hackers are based in countries such as Russia and North Korea. Figuring out which are state-supported and which are not may be more of an art than a science.
Lloyd's members complain that the overall policy is too broad and prevents them from offering coverage they would be happy with. for sale.
Mr Howden called the cyber insurance scandal «ridiculous.» An outspoken 59-year-old man said: «The hype around cyberspace is laughable.»
«We're trying to be clear and trying to tell people it's not covered, [but] all of a sudden — because we're bad at PR — people are like, 'Oh my God, they're ruling out war.' This has never happened. covered.»
Mr Howden suggested that Lloyd's settle the dispute by issuing formal guidance on what constitutes a state-backed attack that the market fears would expose participants to «systematic risk «.
He said, «Most wars are easy to define. Cyberwars are harder to define.
“In terms of cyber security, we should have one of the very clever GCHQ definitions of what is war and what is a system attack. And then you could go out and buy your military insurance separately from the insurance market.
Mr Howden founded his eponymous empire in 1994 with three employees, a dog and £25,000 from an angel investor. The company is currently headquartered in One Creechurch Place, a 156-meter skyscraper in the heart of the city that overlooks the second-floor office where it all began.
Howden Group is the fifth largest employee-owned company in the UK Photo: David Rose Presence in the insurance sector.
Mr Howden built the largest insurance broker in the UK and the largest operator outside the US through a series of smart acquisitions backed by private equity investments from General Atlantic and Hg Capital, as well as funding from Canadian pension fund CDPQ.< br />
However, the Howden Group is the fifth largest employee-owned business in the UK, with 4,500 employees owning a 35% stake in the company.
“The employee-owned collaboration is amazing,” said Mr Howden. “We built our business around people.”
The contribution of employees helped create a positive culture without too much effort,” he said.
“People care about people and people seem to be having fun. This is culture. It's like your family or friends, it's the way you act, the way you act.»
«Wherever I go, where they have their culture on the wall, you know what it is. not their culture. You know they're lying.”
The combination of Howden Group employee ownership and private investment is exactly the model that John Lewis, Britain's largest employee-owned business, is now considering.
Mr Howden said: “We don't have any dividends at all. All the money we earn we reinvest back, unlike a public company that would use most of its capital to pay dividends.” carefully groomed leaders. Running a private business means he doesn't have to be ashamed of his words.
«We don't make fucking kitchens!» he exclaims when asked about Howden Joinery, the kitchen supplier of the same name and better known to the general public.
“They cost half as much as we do. They are worth £3.6bn, we are worth £7.2bn.” (Add to that Howden's approximately £4bn of debt and the group's enterprise value exceeds £11bn.)
Mr Howden laments that his business is not as well known as his public competitors such as L&G. or Aviva.
“We're opening more offices on Main Street than anyone else. We have a larger market cap than Sainsbury's, but no one has heard of us!»
Howden Group headquarters are an extension of the personal tastes of its co-founder. Life-size dog figurines, a plethora of art and clocks of all shapes and sizes lie scattered on the 14th floor of the company's headquarters.
“These clocks are Howden clocks because we were watchmakers too. ', he explained, referring to the Victorian watchmakers who bore his family's last name.
For the insurance sector to thrive, he says, it must shake off its stuffy past. Above his office is a cafe and bar with a neon sign filled with beer and wine galore — more Shoreditch than Square Mile. We want to have really capable young guys who think they're going to work at Google,» he said. "Don't work for Google, come to Howden"
Mr. Howden may have been destined for a career in insurance. After dropping out of Radley College after receiving O-Levels, he began working for city broker Alexander Howden in 1981. The company was originally founded by his great-great-great-grandfather, although by the time he joined the family ties had been lost.
Today he lives on the Cornbury Park estate in Oxfordshire, best known among the younger generation as the site of the Wilderness Music Festival.
“I love life,” said Mr. Howden. . “I think to be good at work, you have to be good in life. I don't think you can just be a workaholic.»
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