London: A land of opportunity?
09 May 2019- by James Calder
The global insurance market is going through one of the biggest upheavals I have seen in a casualty career spanning more than 40 years.
Unlike the catastrophe-driven cycles our industry has previously seen, this one is almost entirely self-made – and while a challenge for many, it provides us at Price Forbes with an amazing opportunity.
Over the last few months, there has been a seismic shift in the historic market order with several key American underwriters – market leaders such as AIG, Liberty, Swiss Re – performing a 180 degree change of strategy.
Announcements of reduced capacity and exiting whole classes of business have become common place from them in nearly all sectors – casualty, property, marine, cargo…
The upside of this – for us – is that we have been fortunate to see that business being redirected to London.
The pendulum effect
Of course, this swing or pendulum effect of business moving across the Atlantic is not new. The phenomenon is a regular one. Rates in one country rise, pushing more business to the other.
The US is often the first to lead on these increases, and the cuts, but this time it was London whose property centric markets felt the first pain after the 2017 storms, and then suffered a year of public surgery on their underperforming books. While they, too, faced cuts in capacity and participants – the resulting new London market is arguably now stronger and more “match fit” for new opportunities.
In the meantime, the US carriers continued chasing rates down and only now they are realising that the losses sustained are untenable. Both man-made and natural catastrophes have had huge impacts on capital reserves, while personal injury claims, left largely unchecked, have ballooned to incredible levels.
These losses have been compounded by insurers offering cover at inadequate rates, driven by an insatiable thirst to win the business. While there has always been competition between underwriters, this has led to disastrous results, particularly in America.
To refresh an old adage: the tide has gone out and we are now seeing who has been taking on cheap, under-priced risks.
What this all means for the London market is that we are on the edge of an opportunity the size of which has probably not been seen in living memory.
For my colleagues and I at Price Forbes, one of the few truly independent, specialist, wholesale brokers with a very significant presence in the London market, we are focusing on what we do best: solving our clients’ problems.
For those clients that find themselves with reduced amounts of insurance, we have secured cover in London, Europe or Bermuda. We have not just filled the gaps but have often had to re-engineer their entire insurance programmes.
Our teams have long-standing, extensive relationships with their markets, and it’s times like this that those relationships and our experience of market cycles really make the difference. In some instances, we have to look beyond the traditional markets and play on our knowledge from other classes to complete programs. If it can be done, we will find a way to do it.
Early planning and expectation management are crucial at this time. We have been working harder than ever on these key duties. And while no one likes to be told of reductions in capacity and increasing premiums, working together with our clients to discuss options and agree on a suitable strategy makes a huge difference.
We know we have to be absolutely transparent and, if things look like they are likely to be challenging, to inform the client as soon as possible and help them manage the process both with their markets and colleagues.
This will help until the US companies come back – and they will. You don’t leave this business, whatever these companies say now, they will be back – they need the revenue. This is not the first time the pendulum has swung.
Until then, however, London is likely to become a key part of renewal discussions, and while we will be very busy, we relish the opportunity to help clients and agents alike.
Brexit uncertainty aside, while the pendulum is swinging our way, now is our time to shine.