History is repeating itself for casualty/liability reinsurance underwriters at Lloyd’s, the LMA has suggested.
The Lloyd’s body did a study, in which 68% of casualty treaty underwriters said they think by offering more relaxed terms and conditions, the market could be repeating its historical mistakes.
The LMA said it was “worryingly for the market” that 71% said that differential terms across a placement were becoming more prevalent – ie. terms offered being loosened down the slip, between leading and following carriers, within the Lloyd's subscription market.
Underwriters felt that rates were “at the bottom of the cycle, or were approaching bottom”, according to the LMA, with relaxed terms and inadequate rates leading two thirds of underwriters declining more renewals year on year.
“The vast majority felt that current prices were unsustainable,” warned the LMA, adding that another surprise was that reinsurance purchasing had not increased to take advantage of the buyers’ market.
“The growth in the prevalence of differential terms is particularly disturbing,” said Patrick Davison, the LMA’s senior executive for underwriting.
“These create headaches for the market’s back office and the efficiency with which claims in a subscription market can be managed. Differential terms might be one indicator that some reinsurers have concluded further amendments to coverage or retentions are unsustainable,” he added.