The Chairman of the Lloyd’s Market Association (LMA), Barnabas Hurst-Bannister, has told the Association of Lloyd’s Brokers (ALB) in Chicago that the Lloyd’s market is now ‘ahead’ of its competitors when it comes to its approach to process modernisation. In a wide ranging speech delivered yesterday afternoon to the ALB’s annual lunch, Hurst-Bannister also warned on the risk of bottom line losses if current pricing continues downwards.
Modernisation
Commenting on the London market’s approach to modernisation in which he pointed to the introduction of developments such as the Market Reform Contract, contract certainty and the increased use of technology for placing risks as well as settlement of premiums and claims processing, Hurst-Bannister, said: “Where we have not always been so exemplary is in the way in which we have administered business … this gave people the impression that London was an expensive centre to do business in. No longer can this accusation be levelled. The change that I have outlined (in process modernisation) puts us ahead of our competitors in our approach to processing.
“We are committed to the work that will widen this advantage. As well as making us cheaper and slicker to deal with, our embracing of technology means we are a more open market with which to trade. Business can find us without the need for a local physical base. The modern, flexible and efficient marketplace with which increasingly sophisticated clients would wish to trade in the twenty first century is being built in London.”
Thinning underwriting margins
Turning to the continuing softening market across most classes (offshore energy aside), Hurst-Bannister warned ALB delegates of the dangers of underwriters continuing to write below a sustainable price: “Whenever we make a profit, intruders appear, cutting prices until everyone makes a loss; then the intruders retreat, bloodied, bowed and minus their capital. We are currently just entering that phase when CFOs will begin to fear that, whilst all their quarterly bottom line numbers are growing, they will unfortunately be increasingly in brackets. The harvest which we are reaping following the good results of recent times is one of strain on pricing … by and large recent industry results show few signs of pain but we all know that that in itself will hasten that moment when ever-thinning underwriting margins and diminishing investment returns will produce bottom-line losses.
“Every client, every broker, every capital provider, every reinsurer, every regulator and every underwriter knows that there have been too many periods in which underwriters wrote below the level of which they were capable. And everyone has paid the price. The future is about not paying that price all over again.”
Source : LMA News Release
