Rates in the financial institutions (FI) market in London renewed flat to up 5 percent at the key 1 July renewal date, despite a number of market exits and scale-backs in recent months.
Nevertheless, even though the renewal was only “just about positive”, this is an improvement on the double-digit reductions seen in previous years, sources said.
Sources said a number of markets in the FI space were re-engineering their portfolios after years of falling rates had coincided with new loss emergence and a Lloyd’s crackdown on lines with marginal profitability.
FI claims can take five years or more to come to fruition, and there are a handful of large claims in the market notified around 2011 and 2012 for which insurers are now being told to increase reserves, underwriters said.
Meanwhile, Lloyd’s performance management director Jon Hancock highlighted bankers’ blanket bond and crime insurances as classes of business where carriers had been pursuing unprofitable growth over the past five years in his recent presentation to the market. The two products are typically included in an FI bundle, alongside directors’ and officers’ insurance.
Withdrawals from the London market in the past year include Novae, which dropped the class as part of a wider review of underperforming lines, and Canopius, which said FI, along with professional indemnity, did not fit with its new underwriting philosophy.
A number of both Lloyd’s and company markets which traditionally have been big players in the FI space have also chosen to scale back their exposure by cutting their lines or pulling out of certain geographies, sources said.
Traditionally lead FI markets are also looking to push rate on primary layers, they added.
However, while a lot of the traditional market are reviewing their FI books, a growing number of MGAs are looking to expand in the class, which is replenishing capacity in the market.
“It’s a funny dynamic where the new markets are generally following the push from the more established players for rate increases for renewal business, but then undercutting on new business,” one underwriter said.
Underwriting sources said they were hopeful FI rates would stay in positive territory, but, without some sort of major market dislocation, it was unlikely rates would see any sort of upwards surge.
“There’s just too much capacity around,” one underwriter said.
CFC is among the MGAs that have recently started writing the class, after hiring Neil Beaton from Newline as its FI practice leader in November.
As the publication also revealed in June, Volante is also set to launch an FI-focused MGA on its platform led by former Barbican head of financial and professional lines Andrew Pearson.
