Someone needs to get a grip of the cycle, says Elliot Lane
' Plunged, plummeted, nose-dived - whatever adjective or description you wish to choose, this market has gone soft.
And not just soft but dangerously out of control.
It has reached Canary Wharf, leading the insurance industry's watchdog David Strachan to express his own concerns last week.
He is worried that the solvency ratios of many of the UK's biggest insurer names are teetering on the brink of destruction and that the cycle will break many like butterflies on its wheels.
Where the danger lies is in the lack of communication between the top and the ground troops. As the late historian and Conservative MP Alan Clarke once wrote about the troops in the First World War, "they were lions led by donkeys".
However, the blame is well spread across the industry. Brokers tell stories of certain major insurers offering 40% discounts on the book price which has already dropped 10 or 15 points. Volume overrides profit in many UK regions.
On the other hand, AXA chief executive Peter Hubbard has said that he can monitor where the market is going soft by the number of experienced versus inexperienced staff.
Those that have lived through many cycles hold their nerve while others begin to panic.
But the fundamental problem across the board is that middle management and regional offices have been set high targets through the hard market and shareholders expect the same returns.
What is not happening is a revision of budgets. They have been set for 2005/2006 and have to be met. They are not being regulated or adapted to change.
At a time post-Spitzer, when brokers are trying to explain to clients the intricacies of the business, the insurers are undermining the argument.
People are fearful of losing their jobs but shouldn't keeping the company afloat be the priority?
Underwriting controls are needed quickly and needed now. IT
