Though 11 September has prompted talk of a super-hard market, Marie-Louise Rossi warns we will soon be entering a soft market again....
There has been so much talk of a super-hard market after the major loss of the World Trade Centre that some might become complacent.
The coming year should be profitable for international insurers and reinsurers as the vast majority of companies in the London Market retain their ratings intact, notwithstanding loss of capital, and are well positioned to compete for business in this new environment.
There is, however, an imperative to take a longer view, both at a corporate and market level. Money moves so rapidly these days that capital is already flooding back into our industry to replace what was lost on 11 September. This may be a positive sign of the globalised economy's ability to respond to temporary shortages, but it means there will be pressure for rates to come down again.
No one knows for certain how long the high prices will last, though Berkshire Hathaway chairman Warren Buffett recently predicted they would end within a year. Even if you take a more optimistic view, sooner or later we will be in a soft market again.
For individual insurance and reinsurance companies the message is clear - high standards of risk selection and underwriting disciplines must be maintained. There are some grounds for confidence. Underwriting is much more professional than it was five years ago and I believe the trend will continue, as rating and modelling techniques become ever more sophisticated and widespread.
For the London Market as a whole, there must be no let-up in our efforts to streamline business processes; the London Market Principles (LMP) are as relevant as ever. As International Underwriting Association (IUA) chairman Stephen Cane told a conference recently, it would be a tragedy if we were to allow the inefficient practices and attitudes we have tried so hard to eradicate to come back.
It is well known that the LMP reforms have not gone entirely to plan, but they have notched up some notable successes. Most tangibly, there is the creation of Ins-sure, the new joint back office bureau for the IUA and Lloyd's. This will do much to create a seamless London Market.
After a delay in the summer, to allow further legal advice to be taken, the new slip is now published, and embodies much of what we are trying to achieve. We had hoped to release it at the end of September for use in this year's renewal season. For obvious reasons, we do not now expect them to be used until next February. Usage is entirely voluntary, but we are confident it will gather momentum during 2002. Similarly, the General Underwriting Agreement is also agreed and in the public domain.
Looking ahead, we still have to address directly many other highly important issues, such as the time it takes to pay premiums and claims. London provides the world of insurance with a unique meeting point and pool of talent, which are sometimes by-passed because business processes can be so frustrating.
Putting that right remains a priority whatever market conditions happen to be like at the time.