Slide show for 26th Mar 01 analysts mtg

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Current Issues in General Insurance29th April,
2002State of the London MarketDavid
LangLimit Underwriting Limited
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1. Introduction

• Where the London Market has been
• Where the London Market is now
• What is the future of the London Market?

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2. Background

• 1993 to 1996 - excellent underwriting
  conditions and good loss experience
• 1997 to 2000 - softening in terms/conditions and
  poor loss experience
• 2001 - 11th September 2001 Terrorist Attacks

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3. Warren Buffet observations

• Berkshire Hathaway Inc. News Release 9th
  November 2001
• WTC loss of US2.3bn
• Three basic rules to running an insurance
  company
• 1) Only accept risks you are able to properly
  evaluate
• 2) Limit business accepted so that not exposed to
  aggregation of losses from one event or related
  event that will threaten your solvency
• 3) Avoid business involving moral risk

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4. Premium rate movements - 31 December
2001 Renewal Season
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4. Premium rate movements - 31 December
2001 Renewal Season
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4. Premium rate movements - 31 December
2001 Renewal Season
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5. Policy terms and conditions

• Terrorist exclusion
• Aviation reinsurance - moving to LOD
• WTC - policy wordings agreed as early as possible
• WTC - highlights need to have tight unambiguous
  policy wording
• LMP

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6. Exposures/Aggregate monitoring

• WTC highlighted need to be focused on
  exposures/aggregates
• Critically the aggregation of retentions from
  single event impacting several books of business
• Match of inwards exposures and outwards
  reinsurance protections
• Solvency/security of reinsurers important

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7. Flight to quality

• Premier reinsurers (Munich Re, Swiss Re,
  Berkshire Hathaway) were very much in demand for
  security reasons
• Increasing line sizes by these entities to take
  advantage of this situation
• More selection over which insureds prepared to
  offer cover for

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8. Influx of new capital

• Corporate investors waiting for this point of
  insurance cycle to provide fresh capital
• Bermuda did this in 1993 and attempted to repeat
• Servicing of this capital caused market to soften
  in certain areas between Christmas and New Year
  2001

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9. Lloyds market

• Chairmans Strategy Group
• Continuation of market in current form

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10. Risks to improvements continuing

• Excitement at hard market
• Good loss experience over short period
• Memory span short for bad experience/results
• Technology speeds up knowledge and decision
  making
• Desire to please clients/brokers

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11. Conclusion