European and international casualty will be one of the main battleground classes for the Lloyd's market at the upcoming 1 January renewals, according to director of performance management Tom Bolt.
Speaking to The Insurance Insider at the Baden-Baden reinsurance meeting, Bolt explained that international casualty rates were coming under pressure after a fairly benign year, despite following relatively poor results in 2010 and 2011.
"The pressure seems to be back on to be somewhat more aggressive on rates," he explained, noting that excess capacity and tempered demand were driving prices inexorably downwards.
"You typically can't beat supply and demand - and with so much supply I think it's very tough," Bolt said.
However the Lloyd's gatekeeper was hopeful that market practitioners had learned some of the lessons of past soft cycles.
He noted there had been a successful reallocation of Lloyd's capacity in recent times away from unprofitable property classes to lines where managing agents felt they could achieve better returns.
He took a vigilant but unperturbed stance towards the recent notable reserving shock experienced in some German professional indemnity lines and the potential for aftershocks and read-across to hit Lloyd's.
"Given the diversification at Lloyd's as a whole, do I think it's a game-changing proposition for Lloyd's? No, I do not. But is it an item that deserves monitoring? It certainly does."
Bolt gave an overview of the continuing soft market cycle, noting that market conditions were still likely to get worse before they got better. He said that he and his team were particularly vigilant over deterioration in terms and conditions.
"The real thing you want to watch right now, more than rates, is changes in terms. This is the part of the soft cycle where changes in terms and conditions can be quite meaningful and you need to be looking out for how they will affect the cover you are offering."
"We'll be asking questions from time to time to check, but most agents have some sense of where we are in the cycle," he asserted.
However, Bolt said that he still thought that "the period of maximum vigilance" - denoting the true bottom of the cycle - was yet to come.
"You're seeing a lot of the things that you usually see. For instance, you're seeing different types of cover added into placements, generally for not a lot of extra premium."
Bolt also said that he and his team were beginning to see a return for multi-year contracts, although he noted that "refreshingly" there were currently not as many such deals circulating as near the softest part of the cycle.
"So that may still be to come," Bolt reiterated.
The executive also said that he was beginning to see more of the broker facilities that were such a signature of the 1997-2001 soft market period.
"I think managing agents will resist initially but then they may decide it makes commercial sense for them - I think we'll see," he said.