COMMENT: London’s reinsurance law tremors

COMMENT: London’s reinsurance law tremors

The largest ever merger between two law firms will be consummated at the beginning of November when Barlow, Lyde & Gilbert (BLG) comes together with Clyde & Co. The merger of the two insurance law specialists creates an insurance law giant, with more than £300m ($475m) in combined revenues, more than 1,250 fee earners and 2,250 total staff operating from 27 offices worldwide. In addition to insurance, the firm will also cover sectors including aviation, marine, trade energy and infrastructure.

In reality, Clyde is acquiring BLG, well known for its venerable reinsurance practice, and the new firm will accordingly operate under the Clyde name. Furthermore, according to reports, around 15% of BLG’s 100 partners were asked to leave the firm before the merger takes place, most of them from the firm’s equity rank.

BLG partners joining the merged firm will be tied into a three-year lock-in period, during which they will have to pay a financial penalty should they decide to go.

A points system means that senior partners choosing to leave immediately could face a payment of £180,000, while junior equity partners opting to do the same could face a £90,000 bill. Clyde’s partners are not subject to the lock-in.

Those lawyers that have been released are already beginning to pitch up at rival firms. Ince & Co, which has announced plans to launch a London market desk in the Lloyd's building, made a double partner hire from BLG.

Ince is to open the market desk on the eighth floor of the Lloyd's building on November 1 as a workspace and a place to meet clients. Partners and associates from practices including insurance and reinsurance, political risk and marine will come to the office every day on rotation. BLG’s commercial risk and reinsurance partners Kiran Soar and Simon Cooper are set to join Ince as partners in the coming weeks.

Cooper, who has 25 years' experience advising insurers and reinsurers, specialises in the resolution of large-scale insurance and reinsurance disputes in England as well as drafting contracts. Soar, who has a similar practice focus, has been a partner at BLG for more than two years.

Meanwhile BLG’s head of marine, energy and trade Patrick Foss is joining rival law firm Norton Rose on November 1 alongside fellow marine insurance partner Chris Zavos. Financial services regulatory partner Chris Brennan left BLG to join Lloyds Banking Group.

One partner everyone is eager to hear the news on is Clive O’Connell, BLG’s highly respected reinsurance practice leader. Reinsurance sits uneasily with law firms used to representing insurance firms on the other side of a dispute, so the reinsurance sector probably has little future at the newly merged Clyde. That means O’Connell, a keen cyclist who in September rode 960 miles to the Monte Carlo Rendez-Vous, won’t be staying on at Clyde and is most likely being courted by several of Clyde’s competitors.

So while not seismic, the tremors from the merger will continue to be felt throughout the reinsurance law arena (and it is adversarial, remember). Clyde will have difficulty in running a reinsurance practice in parallel to its bigger insurance business. So that means expertise and business will flow to other firms. It remains to be seen who will be the main beneficiary, but it is certain that the London market’s reinsurance litigation lines will continue to be re-drawn over the coming weeks – with maybe some surprises in store.

UK justice minister criticised over family insurance interests

Still on legal matters, news has emerged that Jonathan Djanogly, the justice minister, has been stripped of his responsibility to regulate claims companies after a UK newspaper revealed how he and his family could profit from changes to legal aid that he was pushing in parliament.

Djanogly had failed to declare that his teenaged children were minority shareholders in his brother’s two “ambulance chasing” businesses. Djanogly's brother-in-law, Ben Silk, runs two firms, Legal Link Introductory Services that trades as Justice Direct and Going Legal, which claimed it has recovered £20 million for unfair dismissal claims since 1999.

The firms collect a payment known as a referral fee for putting claimants in touch with lawyers. According to the Guardian newspaper, in May the Legal Services Board, the independent body which advises minsters on legal regulation, said the case for banning referral fees "had not been made out". Four months later – without any consultation or impact assessment – Djanogly announced a ban on referral fees in personal injury cases, but effectively excluded his brother-in-law's businesses, which deal with employment law.

The Guardian further revealed that Djanogly has been forced to publicly declare in the parliamentary register that his controversial stakes in the insurance industry have been placed in a "blind trust" to insulate himself from the fact he could personally profit from legislation he is piloting in the Commons.

Djanogly has at least £250,000 in shares in companies with insurance subsidiaries and is a member of his family's Lloyds underwriting partnership that deals in accident, health and motor claims. He has been entitled to a £41,000 a year from that partnership, known as the Djanogly Family LLP.

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