Expertise

The apocryphal curse “May you live in interesting times’ has often come to mind over the course of this year. The actual origin appears to have been a speech by Joseph Chamberlain at the end of the 19th century, who said “I think that you will all agree that we are living in most interesting times. I never remember myself a time in which our history was so full, in which day by day brought us new objects of interest, and, let me say also, new objects for anxiety”.

We have certainly not been short of objects of both interest and anxiety over the past three years. The latest is of course the dramatic series of increases in wholesale energy prices following reduced levels of gas exports by Russia. Movements of this magnitude in the price of any major commodity have knock-on effects across a wide range of areas in financial and trading markets, including commercial contracts, derivatives, insured risks and the financial condition of the counterparties to these transactions, some of whom will face insolvency.

These knock-on effects may be indirect and wide ranging – for example, on the prices of securities indexed to inflation as energy prices drive inflation indices.

The current energy crisis also has a major political and human dimension. In the case of the UK (as for many other countries), it is widely agreed that a significant part of the population simply cannot afford to pay energy bills based on the latest price cap announced last week. As a result, some form(s) of Government intervention (the details to be announced once the current Conservative leadership contest is finally concluded) is inevitable and markets will price the effects into Government borrowing costs and the Sterling exchange rate.

It seems that times will remain “interesting” for the foreseeable future.

Also, in this edition of Expertise:

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My fellow director Tim Dowlen provides an update to his February article on the response by the insurance world to the Covid pandemic in the UK. Interestingly, lawyers in a number of other countries have been looking both at UK market practice prior to the pandemic and at insurers’ approaches to dealing with claims in its aftermath. Tim also comments on the potential for coverage against further pandemic outbreaks.

 

Managing Director, GBRW Expert Witness August 2022