Hiscox eyes Lloyd’s fallout

Rate increases have tapered off since the January 2018 renewal, with lower, single-digit rate increases in the June and July renewals, according to Megan McConnell, director of underwriting London at Hiscox Re & ILS.

And, McConnell said, Hiscox expects that trend to continue—especially for more commoditised lines of business.

“Across London and Bermuda we are focused on concentrating our growth on places where we feel that we have specific expertise and can leverage that to deliver a unique value for our clients,” she said.

“For us specifically that is in cyber reinsurance, where we are one of the market leaders, and also on the risk excess book, which is a natural extension of the cat lines, but has seen comparatively less capacity flood into it. It’s a bit more of a technical ratings proposition.”

She added that Hiscox is keeping a close eye on the outcome of Lloyd’s Decile 10 business plan (designed to identify the worst-performing 10 percent of the market)—on the basis it might generate opportunities.

Lloyd’s may theoretically shut down underperforming classes of business and even syndicates. McConnell noted that the fallout could result in some potentially attractive pieces of business emerging from otherwise unattractive portfolios. As a result, Hiscox is also optimistic that this process might alleviate some of the surplus capacity in the market.

She also pointed out that carriers are under increasing pressure on expenses and acquisitions costs, so they are wary of anything that might add to these costs. This applies equally to some of the facilities brokers are introducing to the market, which can involve increased acquisition costs.

“The way we have seen facilities so far really doesn’t make sense, particularly given the overall pressure that carriers are under, with underwriting margins already being so thin. Increasing the costs on top of it really starts not to make sense,” she said.

“If those broker facilities are going to be successful and sustainable and add value in the market long-term, they need to be contributing something more than just a simple aggregation of capacity that further undercuts the price for all the deals that are out there.

“I think there is a way that facilities can be useful, but we haven’t yet seen people step up to create them in an innovative, value-added way,” she concluded.