Chief executive hits out at undisciplined underwriting at Lloyd’s
The chief executive of Ascot Under-writing has launched a scathing attack against fellow Lloyd’s underwriters, accusing them of “sloppy” underwriting
Martin Reith said some of Lloyd’s leading insurers were slashing their rates while broadening the cover, in a bid to win trophy clients.
Although he declined to identify specific companies, he said: “Some people you wouldn’t expect to be sloppy are being sloppy. We are seeing this on big accounts and I think it’s more about Lloyd’s having them as clients instead of managing their aggregations.”
He added: “It’s disappointing but not surprising. When you get big ticket clients in the market demanding broader coverage for cheaper premiums, undoubtedly some kudos is awarded for landing those big clients.”
Reith said Ascot, which is backed by AIG, had strived to maintain discipline within the soft market but others had not followed the same course of action.
Ascot’s chief underwriting officer, Andrew Brooks, highlighted the market for Gulf of Mexico catastrophe cover where, despite the 2005 hurricanes, premiums were being cut while the level of cover being offered was growing.
Reith said by undercutting catastrophe pricing companies were taking a massive gamble. He said: “It all hinges on whether the wind blows. If it doesn’t then they’ve got away with it, if it does, they’ll have a rude awakening.”
Lloyd’s insisted it closely monitored the underwriting of franchisees. A spokesman said: “We work closely with all managing agents throughout the year to ensure disciplined underwriting, taking a good look at their business plans and challenging their assumptions.
“These challenges will become even more robust as we enter a soft market and we will continue to work with firms to ensure that a strong focus remains on making a profit rather than chasing market share.”
David Stephenson, associate director of Fitch Ratings, said the extent of any undercutting would not become apparent until next year when the 2007 results are released.
He said: “That’s really when it will be easier to determine if there has been sloppy underwriting. Insurance companies themselves are the ones closest to understanding the adequacy of risk pricing at the moment.”
Stephenson added that when undercutting had occurred in previous years it tended to be in areas such as energy, commercial property and motor.
Meanwhile, Ascot has announced that in the face of prolonged soft market conditions and the weakening US dollar, it has reduced its 2008 syndicate capacity by 2% from £625m to £540m.