UK Bribery Act concerns financial institutions experts

The professionals from the financial institutions (FI) market were gathered in the Old Library at Lloyd’s of London last week where they were asked about the issues that most concerned them in the coming year.

“Corrupt practices are broadly an issue, with the Foreign Corrupt Practices Act in the US and the Bribery Act in the UK. The impact of the latter is expected to be considerable, and the only defence for a commercial organisation will be to show that it had ‘adequate procedures’ in place to prevent bribery by its associates. The breadth of the act is a daunting proposition for large, multi-national businesses,” said Edward Kirk, an insurance partner in Clyde’s New York office, at the seminar.

The new UK Bribery Act was passed by the UK parliament earlier this year, having received Royal Assent on April 8, and will become law next April.

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The act will provide a more effective legal framework to combat bribery in the public or private sectors, including any dealings a UK company has overseas. It creates a discrete offence of bribery of a foreign public official and aims to help tackle the threat that bribery poses to economic progress and development around the world.

It will place a penal penalty on directors if they, or people within their organisation, break the new law.

In terms of claims being made in the next few years, 36% of respondents felt these would come from actions by shareholders, while 40% said that a major cause of claims in the sector would come from an increase in regulatory investigations—both domestic and foreign.

“Given the scale and severity of the fallout from the global financial crisis, and the ongoing high levels of uncertainty around sovereign debt in Europe, it is probably not surprising that the underwriting community feels this way,” said Mr Kirk.

Opinion was split over capacity in the FI sector in 2011. 52% felt that it would stay the same, while 39% felt it would increase.

“It is perhaps easy to see why opinions are divided. In the US there have been a number of withdrawals as it has become harder to write this class of business profitably. Those who responded that capacity would stay on constant are possibly responding to the fact that, while in a few individual cases the claims experience has been quite severe, across the entire book of business underwriters are finding that the picture is more benign,” Mr Kirk commented.

China, the sixth largest insurance market in the world, with $133.5bn in premium for the first half of 2010, topped the poll as the developing market that respondents were most interested in, over the next three to five years, with 40% of the vote.