The renewals season is taking longer to complete as buyers scurry around capacity providers. Sarah Goddard explains.
"It was the best of times, it was the worst of times." The opening to Dickens' Tale of Two Cities has seldom been more appropriate than when applied to the most recent renewals season, which, despite officially being scheduled to complete on 1 January, is still continuing.
For sellers, uncertainty over exclusions and the rating levels they could push, extended the negotiation time. Buyers have, for the first time in years, been at the beck and call of capacity providers' favours.
For many purchasers this has been a shock . Stories, some no doubt apocryphal, abound of premium quotes being increased week on week over the recent round of negotiations, sometimes by hundreds of per cent.
However true this is, there is little doubt that buyers are being confronted by the biggest market turnaround in living memory, and probably in the history of insurance. While opportunistic capital is flooding into Bermuda, and to a lesser extent to London, the new competition is playing the cherry-picking game, and last year's buyers' market has transformed into this year's sellers' market.
As the capacity providers stated their demands, and buyers reacted to the increasingly unstable world by wanting to purchase more cover, the negotiations for renewals started later in the year and will last longer.
Nevertheless, the torrent of capital that has already swept into the international markets could quickly subdue the huge swell in premium levels witnessed in recent months. In fact, more capital has entered the market since 11 September than has so far left in the form of WTC-related losses, and this could start easing pressure on rating levels for the 1 July renewals. Although I doubt whether anyone has really thought that far ahead.
As the nature of risk has changed, so too has the meaning of rating and stability and reflection is needed to establish the new take on rating.