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Hiscox has significant credibility and if it says conditions look worse, other syndicates will listen

What a difference a year makes.

Last October, Hiscox asked Lloyd’s for a 39 percent increase to Syndicate 33’s stamp to take advantage of an expected “widespread market turn” following 2017’s trio of hurricanes.

Fast-forward to this year, and Hiscox is this time requesting to reduce its capacity, curtailing it by 12.5 percent to £1.39bn ($1.82bn).

The biggest revisions are in property and special risks, where the London-listed carrier plans to write 32.3 percent and 17.6 percent less respectively, but all lines are broadly down except for reinsurance, which is basically flat, and casualty, which was up 2.8 percent.

On the face of it, one – albeit highly prominent – syndicate deciding to shrink its book for the year ahead isn’t that surprising. Given the lacklustre rates at the 1 January and summer renewals, it’s almost to be expected. And no one ever really writes their full stamp anyway.

While all of that is true, the fact that it’s Hiscox does make it more interesting. This, after all, was the carrier that effectively attempted to call a hard market last year with its dramatic £450mn pre-emption.

Hiscox wasn't saying it was going to write almost 40 percent more business in 2018. But it was saying it wanted to be at the front of the queue if the market turned and that it needed to secure a stamp that would give it the scope to write more business if the fundamentals made sense.

But now the mood music has changed. Hiscox has significant credibility in the London insurance market and the global reinsurance market, and if it says that the conditions look worse than before, other syndicates will listen.

The development isn’t entirely unexpected. Hiscox struck a cautious note on the London market outlook in May, with CEO Bronek Masojada lamenting that “discipline and good sense [was] receding”.

It’s also possible that Lloyd’s has had a hand in this as it cracks down on market performance.

Lloyd’s performance management director Jon Hancock told The Insurance Insider in Monte Carlo last week that the Corporation would not hesitate to firmly push back on plans that predicted growth based on unrealistic expectations of pricing, distribution or ultimate profitability.

Hancock also said it was “rarely a good idea” for syndicates to use top-line growth to address expense ratios, and that the market could see a smaller but more profitable Lloyd’s in the short term.

Given all this, it is likely that Hiscox will be a good bellwether for where the rest of the market will head for the 2019 year of account.

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