Britain has long since relinquished its status as a superpower. In military terms that is. A certain Tony Blair would not agree with that statement in political terms, and London continues to fight passionately for its right to still be recognised as one of the financial capitals of the world. Perhaps with the exception of sport, however, nowhere is the clash of cultures, heritage, best practice and regulation between the USA and Britain more marked than within the insurance and reinsurance sectors.

Before unmasking the insurance-related differences between the two nations, however, let us dwell on some of the more light-hearted, but nevertheless deep-rooted differences between the two. Let’s begin with sport.

Are we talking football or soccer?
The Americans cannot get their heads around how we Brits can get passionate about a game played over five days with no guarantee of a decisive result (cricket). The very concept of a draw is an anathema to the American psyche. We Brits marvel how a game played only by Americans with two token Canadian teams and some guest Puerto Ricans can compete for the “World Series” (baseball). Then there is the American obsession with “time outs”. The Football (aka Soccer) World Cup – easily the biggest and most televised worldwide sporting event behind the Olympics - was very nearly taken away from the USA in 1994 because the media giants funding the event initially insisted upon having four quarters rather than two halves so as to maximise advertising revenue. Nothing – and I mean nothing - could outrage your typical British sports fanatic more than interrupting a crucial football match!

Service if you please!
And what about the social niceties? Take ordering a diet coke. The American at a UK bar complains about the single ice cube in his half pint of soda – are they being rationed over here, he asks? Conversely the Brit in the US considers it an injustice to see a glass full of ice cubes with no more than a splash of the ordered beverage. When it comes to restaurants and service, the US definitely leads the way. Americans demand and generally receive top quality service, and will raise immediate issue if they do not get it. The British are all too often too polite and reluctant to complain about poor food, wine or service.

The executive agenda
On the whole, Americans are more insular and unaware of other countries’ cultures and practices. The British are sometimes still viewed as oldfashioned, sticklers for tradition and detail - and hence stubborn. Individual American executives are far more competitive than their European counterparts. They are constantly aware of how all dealings impact their own position within an organisation - which can make them less “team players”. Well known for being outspoken, most American executives love to make decisions and promises - and be viewed to have that authority. Negotiating and agreeing contracts, formal or otherwise, planning and timetables are innate to most Americans. Such matters are higher up the agenda than in the UK, and on-the-spot commitments are more the norm. The Brits need time to build trust and do not like committing to a deal until they are good and ready. Many an American marketing in the UK has complained about his two lunches, three dinners and five meetings with the same prospect – and yet they still do not know if they will be doing business with each other. A New Yorker’s nightmare!

Another frustration as perceived by Americans is “getting to the point”. Business meetings appear more relaxed, but key issues are raised and addressed in a far more direct manner than in the UK. Letters and reports are expected to be concise. Americans love bullet point summaries without the “flannel” - they will ask you for that if they want it. Clear agendas should be set for every meeting. Americans expect all issues to be raised at meetings, including the thorny, difficult ones. Avoiding the issue is not deemed businesslike in the US. Failure to address the issues is a constant complaint of American insurance representatives attempting to collect disputed insurance and reinsurance debts from British companies. A frustrated American visitor can interpret British caution and deliberation as fudging and avoidance techniques.

Most American insurance staff have very clearly defined experience and job functions. British insurance staff - certainly those not working for the traditional “tariff” companies - tend to have broader experience of such as other types of claim, of underwriting or accounting procedures, etc. Whilst awareness has increased over the last few years, many American staff remain relatively unfamiliar with the London Market and its unique practices and procedures. Despite all the media, Lloyd’s and Equitas still are often misunderstood.

Americans are more familiar with premium audits, claim audits, etc rather than the full range inspection now commonplace in the London Market. Because of the regulatory practice of triennial state inspections and the like, they are used to opening up their books for review. A request for an audit in the USA has never necessarily been seen as questioning the company’s integrity, as was once the case in the UK and still remains somewhat in Europe.

Do you speak English?
Two nations divided by a common language is a much-used cliché. Discussions between mainland Europeans and the British or Americans involve a self-evident language issue. Less obvious is the language barrier between the British and Americans. Whilst both speak English, the underlying meaning and intent of words and phrases can be very different. Key idioms and phrases can cause confusion, even complete misunderstandings. A true story illustrates this perfectly.

A London broking firm was tendering a detailed proposal to a visiting delegation from a Pennsylvania insurance company and set aside two days for the meeting. Towards the end of the first day of intense discussion, the head of the American team proposed “let’s table it”. The head of the British team, keen to take stock and re-group before the final day of talks, agreed enthusiastically. The next morning, the British delegation assembled. No sign of the Americans. Eventually the British team leader phoned the American’s hotel and discovered they had checked out the previous evening and were now on their way back to Philadelphia. “Table it” in British means to put down on the agenda for discussion. In American it means to scrap it – “we’re done”. An excellent illustration of a lesson learned the hard way!

Does size matter?
One of the most obvious differences between the two nations is geography. A painfully obvious statement, but the USA is an enormous country in size. Did you know that the whole of Britain could fit inside the State of Wisconsin? It can take longer to fly from New York to Los Angeles than London to Moscow. Marketing strategies within the US need to sectionalise the country into manageable territories – the North East corridor, the Mid West, the West Coast etc. The unique concentration of representation of the British insurance industry in “The City” of London magnifies the geographical factor exponentially. The “face-to-face” broking of insurance risks practised in The City – even now in the age of e-mail - is an alien phenomenon to many American underwriters.

The scheming Brits
So what of the Brits and their “schemes”? The word “scheme” has connotations in American terms of reference about being underhand and dishonest – a scam. This is most unfortunate. Within the insurance context, Schemes of Arrangement are recognised UK court approved mechanisms for the administration of a book of business – be it an insolvent scheme or a solvent scheme. The essence is for creditors to be asked to agree to a bar date for the submission of claims, after which all claims are assessed and final settlements collectively approved by the courts. Solvent schemes of arrangement have become the most popular and effective method within the UK to finalise and close down a run-off book of business. These have not yet been adopted in the US (with the exception of Rhode Island), largely because US regulation of insurance is on a State level, rather than a Federal level as with banking, and imposing one State’s determination of liabilities upon the creditors of other States is riddled with the potential for legal wrangles.

The converse fear of “scheming” is true. The Brits are extremely nervous about the fairness with which they are treated by the US regulators and courts. American courts are usually keen to classify the London Market as direct writers of US-domiciled risks, allowing them to use domestic carriers as no more than a “front”. One has only to look at the recent court activity relating to the Legion administration to see the convenience with which the relationship between insurer and reinsurer was undermined by allowing Legion policyholders to pursue claims directly against London Market reinsurers, despite the absence of any cut-through provision in the underlying contracts.

The cynical amongst the Brits see the American State regulators dealings with the London Market as more to do with the protectionist policies of successive White House incumbents than anything to do with protecting domestic policyholders. Is it more a case of protecting the risk carrier rather than the policyholder?

Transatlantic misunderstandings
Perhaps the greatest insurance confrontation between the American and British value systems – with neither being “correct” – is the attitudes to resolving US asbestos-related litigation. First let’s set the scene. Class actions within the US combine many very serious claims – warranting millions of dollars in compensation – with thousands of unimpaired claimants who warrant no or little compensation. The plaintiff’s bar cleverly present cases in such a way as to make differentiation between the cases difficult and cost ineffective. The American direct carrier perspective is that it is far more sensible and commercial to settle most of these actions on a class basis, rather than litigating every case individually in front of a partisan jury. They seek reinsurers to “follow the fortunes” and to support this approach, even if it means not all of the claims are “proved”. The London Market perspective has been to draw a line in the sand so as to discourage the practice of “rewarding” unimpaired claimants for “piggy-backing” on the merits of genuine claimants. It is therefore putting forward that it should only settle reinsurance claims where the underlying claims are valid and within the terms of the relevant contracts. The reality is that both the Americans and the British are compromising. The Americans are formally resisting what are known as the increased reinsurance documentation requirements to prove their claims, but behind the scenes are building the increased standards of proof into their protocols. The British in turn are formally insisting upon a policy of strict contractual adherence - no proof of loss by claimant, no payment – but are behind the scenes negotiating policy “buy-backs” and global commutations.

There are many other areas of differing interpretation. None of these are a case of right or wrong, more a case of understanding the other countries’ perspective.

• Does Directors and Officers Liability fall within the umbrella of Professional Liability? One recent transatlantic case had five experts split 3:2 in favour of the assertion, but the two dissenting voices were both American.
  
• Are facultative obligatory contracts classed as treaties, or as automatic facultative facilities? A Massachusetts court in the “SANS” case determined the latter, reminding the London Market reinsurers who assumed it to be a treaty of the adage “when in Rome, do as the Romans do”.
  
• How does each marketplace determine undefined phrases -such as “incidental”, “miscellaneous” and “business written as such”? The answer is - without consistency! For example, does an excluded class of business within a treaty “except if incidental” mean that otherwise excluded business must be incidental to each individual cession, or does it mean a small percentage of risks so-classified are acceptable?
  
• Are insurers and reinsurers entitled to see attorneys’ reports? Are Declaratory Judgements recoverable? Are the ceding companies’ travelling expenses recoverable as loss adjustment expenses? There are diverse interpretations applied by arbitration panels and by the State and Federal Courts in the US and UK. The jurisdiction which applies to a claims dispute can in and of itself sometimes determine whether the loss is ultimately going to be validly recoverable or not.

Do we have a future together – or is it a case of irreconcilable differences?
There are huge differences - real and perceived – between the two countries. Unquestionably, there are mountainous legacy issues to clean up. Politically, America and Britain still refer to their “special relationship”, despite the latter’s role in the ever changing “State” of Europe. To survive the special relationship must now rely upon its strong business relationships. Such business relationships will only prosper with a proper understanding of the inherent cultural differences between the two marketplaces. It is time for two of the most arrogant nations to acknowledge and accept each others differences and focus on their shared values and rewards.