Lonmar’s executive director of London market risk encourages Lloyd’s underwriters to return to the capital if they wish to retain the market’s ‘market leading, global position’
The “peaks and troughs” of hard and soft market fluctuations does not do “an awful lot of good in terms of final clients’ outcome”, especially as “there is still some headroom for further [price] increases” as a result of today’s hard market conditions, says Bob Peterson, executive director of London market risk at independent London market broker Lonmar.
Speaking exclusively to Insurance Times on the subject of the current hard market, Peterson started by explaining that the directors’ and officers’ (D&O) insurance sector “is a big, big question mark” that “has got a fair old way to run yet because nobody really knows what the consequence of the pandemic is going to have on that class of business”.
He continues: “There is still some headroom for further [price] increases.
“[As for] where the market is moving, it’s about capacity and it depends upon clients’ industry and the type of business they’re in - some are more challenging than others.”
For Peterson, one issue surrounding the hard market is that the insurance industry does not “appreciate that clients get taken through this soft and hard market peaks and troughs”.
“The client would have preferred a steadier line than peaks and troughs, soft and hard markets. I’m not sure it does the industry itself an awful lot of good in terms of the final clients’ outcome,” he says.
“No client likes surprise and I think as an industry, we tend to forget sometimes that all these peaks and troughs, hard and soft markets, have a direct impact on the client’s budgeting, so it is important that we get some consistency around what’s going on and we can deliver the correct news that people want to see.”
Lonmar chief executive David Pexton adds that there has been “signs of levelling off in certain areas”, however.
He says: “In the [professional indemnity] market, [it is] certainly starting to level off, although it is tough - terms are still difficult and the wordings are tighter. Property is also seeing a levelling off.
“More capital is coming into the industry, more capital is coming into Lloyd’s and, therefore, it has to be fed. There is no sign of any [price] decreases yet, but there is levelling off.”
Despite acknowledging that professional indemnity (PI) prices may be “levelling off”, Pexton still notes that “it is a very tough market, no question”.
With this in mind, it is important that brokers dealing in PI have expertise and deliver a “personal service”, to effectively communicate challenging premium prices linked to the hard market.
He explained: “Because of the way the market has increased rapidly and prices have increased so much, it’s quite difficult to convince your client that they should be paying so much money.
“You need a very specialist, experienced team to actually pass those messages on to the client who [is] paying a lot more money.”
This skill set is something Lonmar is gradually building – although the firm already employs a dedicated team of 10 to handle PI risks, the business is also recruiting in this field.
“We’re fast becoming, within that professional lines area, one of the larger independent brokers,” Pexton adds.
Business as usual in London
Alongside the topical trends arising from the hard market, the Covid-19 pandemic and its resulting impacts are still looming large for Peterson, most notably on the London market and Lloyd’s.
For him, underwriters must get back to in-person work as this is “the only way” that the UK’s capital is “going to retain that market leading, global position” in the wider insurance industry.
He explains: “London is renowned as the epicentre of the world’s insurance placement. If you look at it from the point of view of the pandemic, we’re very, very keen to encourage Lloyd’s to get underwriters back in the rooms so that some kind of normality can return.
“It is vitally important we have the underwriting skill set for brokers to go and see because that’s the only way we’re going to retain that market leading, global position.
“From an underwriting point of view and a broking point of view, there is no doubt that what Lloyd’s and the London market represented and does represent is a unique way in trading and doing business. It’s important that we get back to that position as soon as we’re allowed to do so.”
Peterson adds that helping clients cope with the economic fallout from the pandemic is also important for brokers.
“It’s about understanding and trying to be a part of that togetherness within the industry, understanding what is happening today and how that can be best dealt with,” he says.
For example, Peterson explains that brokers can engage deals with underwriters that don’t impose large, minimum deposit premiums and that bespoke renewal terms that reflect commercial clients’ economic downturn should be considered, alongside earmarking a potential review six to 12 months down the line. This means that clients don’t have to afford an annual premium immediately.
Peterson notes that underwriters have so far been keen to support measures such as these, which is viewed positively by end customers.