News


Bolt defends Lloyd’s ‘critical friend’ approach


T


he Lloyd’s of London market is steering a steady course through troubled waters


– in part thanks to a regulatory approach that is “thoughtfully challenging”, says Tom Bolt, director of performance at Lloyd’s. He argues the approach is thorough and detailed but not to the detriment of the market. “We are not just in the business of saying ‘no’ because it’s an easier regulatory response,” Bolt says. “We are in the business of challeng- ing whether assumptions make sense. It’s very much a balancing act. We try to ensure that there is a certain level of proportionality in our response; our role is that of a critical friend.” Bolt has previously been criticised by the marine energy sector, which interpreted re- marks made by him about the sector as being unnecessarily risk averse. But Bolt says his com- ments were misconstrued. “I never said that we didn’t want to under-


write liability; I never said that we don’t want to underwrite packaged policies. What I have


said is that I’d like to make sure that given the nature of aggregation, particularly following the circumstances of Deepwater Horizon, that Lloyd’s syndicates have a demonstrated record of thoughtful underwriting,” Bolt says. “Do they have the ability to track aggregates and communicate those to me in a way that I can understand the exposure of the central fund, both within a syndicate and across the market? The key focus of my communications on marine energy was not so much to restrict anybody’s underwriting, but to make sure that they do it in a measured way.” Bolt also admits the European sovereign


debt crisis could also cause the market problems and says matters may yet worsen for re/insurers if the low interest rate environment is coupled with rising inflation. “That would present some very interesting challenges for a non-life re/ insurer – and perhaps for life re/insurers even more so,” he says. Bolt believes good pre-planning and risk


Tom Bolt, Lloyd’s


management means the Lloyd’s market is not overly exposed to the debt of some of the trou- bles.


“We have not had much involvement with


the fringe European sovereign debt; the bulk of our European investment portfolio is in French and German sovereign debt. We have been working on this kind of scenario for a year or more and so what’s happening now is not a surprise to us considering the stress-testing and planning that we do.”


have little inclination to accept any further softening during what has been a troubled year.


Reinsurers should part with ‘mercenary’ clients R


ates will inevitably dominate discussions at this year’s Baden-Baden but reinsurers


That is the view of Alexander Craggs, property treaty manager at Lloyd’s syndicate Antares. It will be difficult to determine a definitive


direction for rates, Craggs says. “I really don’t think we will know how things will play out until December. We have been presented with some firm order terms already but, as a syndi- cate, we will be fairly resistant to rate reduc- tions. We approach rates by managing our line size according to how much margin we think we will get on a particular deal and where we think we are in the cycle. “If rates don’t improve we will either keep


what we’ve got or we will move our lines down. In extreme cases we will come off programmes altogether. This is not something I like to do; we generally try and stay on lines and manage the whole cycle. But if clients appear too mer- cenary and chose to nickel and dime us over rates, then we will eventually have to part com- pany with them.” Craggs agrees it is difficult for clients that


Alexander Craggs, Antares


have not claimed loss with their reinsurers for a long time to be asked to pay more. “But the


12 | INTELLIGENT INSURER —BADEN-BADEN TODAY | Wednesday October 26 2010


26.10.11 WEDNESDAY


whole idea of reinsurance is mutualisation and therefore losses internationally will inevitably be reflected in European or US pricing. “All of the conversations that I have had


with our own reinsurers lead me to believe that retro costs are going to go up. If my reinsur- ers can’t give me more, then I am going to get squeezed. And this squeeze will inevitably af- fect our underwriting approach in order for us to remain profitable.” Craggs also questions the premise that


healthy levels of capital remains in the industry. “This year has seen some significant losses on the cat-side and yet brokers are still talking up how much capacity there is and arguing that until there is a significant erosion of capital and some real pain felt by the market, we will not see a hardening of the market. “However, and evidently in spite of their


predictions, we have seen examples of rate im- provements – we saw it in the US in July and for all of the European business we saw since July there were no rate reductions – so there is evidence that an uptick in January is likely.”


www.intelligentinsurer.com


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20