Lloyd’s warns: Don’t sacrifice underwriting discipline for diversity

Lloyd’s franchise performance director, Rolf Tolle, has warned underwriters not to sacrifice underwriting discipline in the drive for portfolio diversity.
Tolle was interviewed prior to his appearance at an annual meeting. His remarks were posted on Lloyd’s Web site.
In his posted remarks, Tolle said: “Following the hurricane losses of 2004-05, the insurance industry has been encouraged by the rating agencies to adapt a multi-line model approach to diversify their portfolios. This is in contrast to not so long ago when it was viewed as advantageous to adopt a mono-line approach.
“This has resulted in some firms prioritizing diversity over strong, disciplined underwriting.”
Tolle acknowledged that rates in the catastrophe-prone sectors, particularly in the United States, remain high. Nevertheless, he said, “other geographic areas have seen pricing levels remain flat or have experienced downward movement.”
In some classes, Tolle observed, without naming them, “levels are now at a point where they are lower than the levels prior to September 11 2001.”
Tolle emphasized that “underwriting discipline must remain a key factor. The market must have the courage to make tough decisions and walk away from certain business if the price, terms and conditions aren’t right.”