Magazine article Public Finance

Mutual Insurer under Threat Following Legal Challenge

Magazine article Public Finance

Mutual Insurer under Threat Following Legal Challenge

Article excerpt

Legal action by a private firm against a not-for-profit insurance mutual set up by London local authorities could threaten its existence, its chair has warned.

London Authorities Mutual Limited began operations in April. The company was backed with funding from the London Centre of Excellence, which is sponsored by the Department for Communities and Local Government.

It was established to tackle concerns about the limited number of local government insurance providers and the difficulty London councils had in achieving the best value for their insurance premiums.

Lami is expected to offer savings of up to 15% on councils' insurance spend, and a series of London authorities are expected to sign up as their current insurance deals expire.

But Risk Management Partners - which is owned by insurance broker Arthur J Gallagher and acts as an agent for giant insurer AIG in the UK public sector - has launched a legal challenge against the London Borough of Brent, a founder member of Lami, which came to court this week.

The judicial review - in which Lami and the London Borough of Harrow will also be represented - will establish whether local authorities can insure themselves through a mutual rather than go through a commercial tendering process. …

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