David Shipley and Richard Trubshaw are leading a revival of the owner-underwriter culture at Lloyd's.
As active and deputy underwriter of Managing Agency Partners (Map) they have successfully launched one of the largest start-ups at Lloyd's in recent years.
Map's syndicate 2791 is unusual because it is supported significantly by capital from traditional Names. This is at a time when corporate backers control an increasing share of the £10bn Lloyd's market – 77%.
Map has so far signed up £62m worth of capital from individual Names and Namecos, equal to 45% of 2791's total capacity.
The balance comprises money from various corporate backers and its 13 underwriter members who are equity partners in the business.
The syndicate started trading on November 1, with a stamp of £135m. This is £15m less than Map's initial business-plan target of £150m but Shipley and Trubshaw, both former Amlin men, are satisfied.
They said market conditions for Map in its first few weeks had been extremely buoyant.
“There is a whole lot of business that is re-pricing and is coming to us,” said Shipley.
His colleague went further: “We are up to our eyeballs in business, I've not been this busy since 1995.”
Trubshaw added: “There is a lot of business out there which is perfectly writeable. It is neither a soft or hard market, but is highly volatile.”
He went on to give this description: “It is not like 1993 when even a blind dog could make money and its not like 1995, when you had to sift a lot of dross to find a brass farthing. It's in between.”
Trubshaw said such unpredictable conditions were due in part to underwriters with big losses deciding to withdraw from whole classes of business. He said this had left brokers “tearing their hair out” as they found it more difficult to be able to place business.
Map said that in the face of such reduced choice, brokers had welcomed Map's entry into the market.
Shipley said: “Brokers are very commercial minded and do not care about an individual underwriter's ego. Their job is to provide a service to their client and in a tightening market with fewer ports of call, they want more choice.”
Map's underwriting philosophy is to write selectively, focusing on profitable risks, it will not chase volume.
Trubshaw said this underwriting approach is “not just a philosophy, it's there to get results”.
“Look at the people who did increase their market share in 1998, they have all come a cropper.”
Trubshaw said that Map's launch could not have been timed better: “Two years ago, the only way we could have broken into the market would have been on price and we would have struggled.”
Trubshaw and Shipley both claim the demise of the owner-underwriter culture has led to poor underwriting decisions at Lloyd's.
Trubshaw said the shift to a corporate structure was sold to underwriters on the basis that Name-based capital was more volatile compared with the security of a corporate structure.
But he felt that corporate ownership may be inappropriate to Lloyd's: “A corporate structure is adequate to mass market insurance where standardising management is required. But at Lloyd's, where the actions of one underwriter can destroy a whole business, it has led to managers becoming distanced from the results-end of the company.”
Shipley agreed: “People in management have no ownership of their business and control has gone as well.” He gave the example of Limit, where the management preferred a merger with Wellington Underwriting, but the corporate shareholders agreed to a higher bid from QBE.
Trubshaw said the new corporate structures had also changed the nature of underwriting at Lloyd's.
“Two years ago, a Lloyd's underwriting job was about developing relationships and access to clients. “Underwriters now are required to sit in their box and write only those classes of business they are told.”
Trubshaw argued that this had led to a “drone culture in Lloyd's” which “only encourages dumb underwriting”.
He claimed the remoteness of today's managers from the underwriting floor meant they were restricted to making blunt business decisions.
“For example, they might raise rates for all classes of business by one fixed amount, or exit whole classes of business. This leads to a lurching effect for companies.”
Shipley added his thoughts: “It's an industry problem that has been there for generations outside of Lloyd's, (in the London market) but since reconstruction and renewal, underwriters have imported hierarchical manager structures into Lloyd's. This has undermined the ability of underwriters to underwrite.”
Despite these obstacles Shipley and Trubshaw remain positive about the future.
Trubshaw said the Lloyd's insurance market had recently reverted to a more selective underwriting approach after, being gripped by a period when underwriters were less selective in terms of risk and were making a dash for volume.
Shipley said: “There has been a rediscovery in the market of traditional underwriting values after some operators suffered severe losses.”
Outlining Map's business approach for the next five years Shipley said: “We acknowledge that we operate in a volatile, cyclical market. We expect to take a more defensive approach over the next five years than we are currently because we expect market conditions will change. We will continue to focus on profit. If we think that conditions are getting poor we will shrink in terms of volume.”
He said that this ability to shrink its capacity was one of the less-publicised benefits of being a Name-backed underwriter. One that is not readily available to Map's less flexible corporate-backed competitors.