At Michael Bright's Christmas party on Monday, the great man was in high spirits. Not just because of his triumphs at Birmingham recently, either. He detects palpable rate-hardening in the reinsurance market that bodes well for those trying to make money in general insurance.
On that day, the reinsurer Swiss Re had agreed to buy America's Underwriters Re, the property and casualty reinsurer of Alleghany Corporation. The acquisition should serve to consolidate that market and make it a little easier for reinsurers to ask a more realistic rate. The corollary of that is that Bright's Independent, and everyone else, can and must charge their customers a higher premium. After years in the wilderness of appalling loss ratios – Independent excepted, of course – the promised land of rational underwriting is at last in sight.
That, put crudely, is Bright's view. And looking at what is going on in Lloyd's at the moment would seem to corroborate it. By the day, things are getting worse, as more and more pigeons come home to roost on Richard Rogers' towers.
Yet insurance, as they say, is a funny old business. And for every significant indicator that suggests the market is tightening, it's not hard to find a significant indicator that points the other way.
As we reported on our front page last week, Biba's chief executive is confident there's a wall of money due to hit the industry any moment now. Backers are apparently queuing up to fund new entrants who perceive major opportunities in general insurance. Big brand names are looking to leverage their household appeal into financial services. Backward old-fashioned insurance is ripe for the taking.
Now you might say that Biba would say that. It suits its purpose to keep traditional insurers on their toes and trying to improve their service levels more effectively than is currently the case. But the truth is, it really is happening. A look at Eastgate provides compelling evidence of the Sophisticates At The Gates.
Gates is the right word, because it's Bill's boys who are driving this impending revolution. Off the back of what's coming out of Silicon Valley, Eastgate has linked with IT consultants Cap Gemini to offer an e-trading service for insurers and brokers.
However, it's amongst the household names Biba hints at that this initiative, Consumer Direct, is arousing greatest interest. These people see the opportunity it delivers to launch pre-emptive strikes into general insurance. With no legacy baggage and a vastly reduced cost base, the threat to the established order is vast.
Of course, insurers and brokers are just as able to redefine themselves along similar lines. But if they're trying, they're being pedestrian about it. That can be fatal in these days when the race is not to the big rather than the small, but to the fast rather than slow.
