Insurance giants are no longer afraid to sue competitors over ‘team poaching’
London’s insurance sector is becoming increasingly litigious as the battle for niche talent intensifies, after a wave of High Court cases suggests ‘team poaching’ has become a legal flashpoint.
If, like me, you are glued to the court filing system, you’ll have seen a noticeable uptick in lawsuits over restrictive covenants going to London’s High Court, with high-profile firms hitting the headlines over the last few years.
These disputes mostly involve insurance giants seeking legal action following a team or key players being poached.
In October 2023, just before a high-profile trial was set to begin in London’s High Court, Howden settled with Guy Carpenter, the reinsurance arm of Marsh McLennan, after a defection of 38 executives, led by former Guy Carpenter Europe CEO Massimo Reina.
WTW sued rival Alliant Insurance Services in 2021 over alleged poaching, and the case ended in a settlement.
In another case, still ongoing, professional services giant Aon sued Howden over a significant team move, including Luke Foord-Kelcey, former head of Cyber Reinsurance at Aon, and Antonio Jorge Rodrigues, former CEO of Aon Re Brazil.
Another ongoing case, revealed by City PM, saw insurance intermediary group PIB and its subsidiary Acquinex launch legal proceedings against rival Howden over a “team lift” of 32 employees.
Cases now reach the courtroom
David Samuels, partner at Lewis Silkin, explained, “Many cases settle before trial, but an increasing number are going all the way.” Back in November, Guy Carpenter launched cases against Willis Re, which kicked off at the High Court for a three-week trial over an alleged “unlawful raid” to gut Guy Carpenter’s speciality business.
But why has there been an uptick in legal action?
Historically, restrictive covenant clauses were not enforced very vigorously, says Henna Elahi, senior associate at Grosvenor Law, but as she points out, in a niche, high-value insurance brokerage, where skills are hard to find and retain, “the potential cost of litigation is a viable investment to secure the business of the employer.”
Clare Brennan, partner at Hunters Law, explained: “Hiring an experienced, cohesive team ensures immediate impact, particularly in niche areas in the insurance market as clients tend to follow… but a business can be virtually wiped out overnight if a team leaves.”
Talent crisis in the Marketplace
The specialist London market is currently tackling a range of talent challenges, from addressing a talent crisis to attracting the next generation of professionals. The sector, which includes brokers writing very niche lines, requires highly specialised skill sets that are often hard to find.
“Given the costs of litigation…. the insurance sector has been one of the most active, principally due to the fact that team moves seem to occur more frequently in the insurance market than anywhere else,” Samuels explained.
Going to the High Court is not cheap for any business, as legal costs start to rack up very quickly.
So what do Aon, Guy Carpenter and others get by seeking to enforce these employment laws? Andrew Czechowski, associate at Simkins, explained that businesses can seek urgent High Court injunctions to stop breaches of restrictive covenants immediately.
“If granted, costs can be substantial. Legal fees, damages, and even an account of profits can follow. By the time many executives get legal advice, the damage may already be done,” he added.
With employment law at the tip of everyone’s tongue over the last year, thanks to the Employment Rights Bill, the insurance sector’s legal landscape is only likely to become more complex as employment contracts become more detailed across the board.
“Threats of such litigation are used not only against outgoing or former employees but also prospective employers to prevent poaching and slow down the move,” Elahi added.
As firms continue to fight fiercely for the best talent in an increasingly specialised market, legal disputes over team moves and restrictive covenants are set to remain a defining feature of the court’s time – and the insurance sector.
Eyes on the Law is a weekly column by Maria Ward-Brennan focused on the legal sector.