Franchise board cracks down on underwriters who cut PI rates
The Lloyd's franchise board has told professional indemnity (PI) underwriters that it fears a price war due to the large amount of capacity flooding into the market.
It is understood that the franchise board has warned managing agents that it will stop them underwriting if there are any signs of undercutting on PI rates.
One Lloyd's managing agent said: "Lloyd's are concerned that the amount of new capacity coming into the market could cause a mini price-war.
"They've told us they will stop us writing business if there's any sign of undercutting."
PI is becoming an increasingly attractive market for many underwriters.
Former SVB chief executive Rupert Villers is talking to capital providers with a view to raising up to £150m to set up an insurer that will include PI as one of its main lines of business.
Last week, SVB confirmed it had launched a £50m rights issue to fuel a drive into PI business.
SVB plans a 58% increase in PI and management liability business to £125m gross premium income next year compared to £79m projected for 2003.
The move followed SVB's acquisition of a team of underwriters from Brit who were formerly with PI insurer PRI.
Earlier this month, the Catlin Group announced plans to launch a UK-based insurer focusing on specialty lines business, including PI.
It is understood that Catlin Insurance Company Limited (CICL), which will be headed by former PRI chief executive Andreas Loucaides, will write around £150m worth of business.
Meanwhile, Abacus' new PI syndicate 2526 will begin trading on 1 January 2004. The syndicate will have a capacity of £40m, 90% of which will be focussed on SME risks in the UK.