UK gov appoints head of new unit expected to scrutinise state-backed insurance entities

The UK government has appointed a banker to lead a new specialist unit tasked with ensuring HM Treasury (HMT) receives greater compensation for the £400bn+ of guarantees it provides to a variety of sectors, including P&C insurance.

Siobhan Duffy

London-based banker Siobhan Duffy heads the Contingent Liability Central Capability (CLCC), a newly created unit which will advise HMT on opportunities to increase its income from its multiple guarantees while at the same time also identifying options to reduce the UK government’s contingent liabilities burden.

The appointment comes as the government continues its review into terrorism backstop Pool Re, which some fear will conclude with a recommendation to end the current unlimited guarantee in exchange for a reduced, fixed cap. Such a move would be unwelcome among the mutual’s UK insurer members unless Pool Re’s management and board are able to agree a new structure with HMT that overcomes those concerns.

Last year, the UK insurance industry’s recommendation that the government provide an unlimited guarantee for a new pandemic reinsurer, Pandemic Re, received a lukewarm reception from government officials, suggesting that HMT is reluctant to entertain more contingent liabilities on behalf of insurers and certainly any that are uncapped.

Pool Re is thought to be second only to student loans as the largest contingent liability on the UK government’s balance sheet but there are a number of other insurance entities – including Flood Re and the Nuclear Terrorism Pool – which also benefit from taxpayer guarantee support.

UK insurance schemes with government contingent guarantees

Prior to joining HMT, Duffy spent over 25 years working in debt capital markets structuring and advising European corporates on debt issuance.

During her career she has held several leadership roles, including global head of private placement at NatWest Markets and Royal Bank of Scotland. Prior to that, she served as head of private debt at ABN Amro.

Most recently, she established a debt distribution platform for London Bridge Capital, an independent corporate finance firm.

The CLCC sits within HM Treasury’s UK Government Investments unit, which oversees corporate governance and corporate finance.

The concept of a new central unit was first identified by HMT’s Balance Sheet Review in 2017 and set out in the Government as Insurer of Last Resort report published in March 2020.

The 2020 report recommends the government seek “appropriate compensation” for the insurance and guarantees which HMT provides. 

Leading the search for the CLCC head was Ian Lazarus, an experienced insurance and financial services recruiter specialising in senior executives. 

The Insurer comment

Pool Re has been held out as an exemplar for how public-private partnerships can work to manage a systemic risk – which is presumably why the UK industry under the stewardship of Stephen Catlin used the model as a proposal for a new platform to insure pandemic risk. 

All the more ironic then that the UK government appears keen to limit the guarantee which has been successful in distancing the taxpayer from loss and which HMT receives a handsome consideration for doing so…