Lloyd's reinsurance underwriters under pressure
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International casualty reinsurance underwriters at Lloyd's of London risk losing discipline and repeating historical mistakes, according to a straw poll of underwriters in the market released Tuesday.
The Lloyd's Market Association, which represents underwriters at Lloyd's, said 68% of casualty treaty reinsurance underwriters it surveyed believe that by relaxing terms and conditions, the market may risk repeating mistakes of the past.
Almost all — 95% — of the underwriters questioned for the LMA poll said they had seen a softening of terms and conditions in the international casualty market.
And 39% of those surveyed said they believe that more than half of those changes to terms and conditions were having a material effect on underwriters' exposures.
Almost three-quarters — 71% — of those surveyed said they believe that differential terms, whereby some following underwriters on a reinsurance slip or different placement layer underwrite the risk on different terms and conditions to those agreed to by the policy leader, were becoming more prevalent.
“This is a fairly informal survey, but its results point strongly towards a buyer's market in which traditional underwriter discipline is under considerable pressure,” Patrick Davison, senior executive at the LMA, said in a statement Tuesday.
“The growth in the prevalence of differential terms is particularly disturbing,” Mr. Davison said. “These create headaches for the market's back office and the efficiency with which claims in a subscription market can be managed.”
“Differential terms might be one indicator that some reinsurers have concluded further amendments to coverage or retentions are unsustainable,” he added.
The LMA surveyed 19 underwriters, representing about 75% of the international casualty gross written premium at Lloyd's, in August.
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