Yes, the market is tightening . This means the prices are going up and certain coverages will not
be obtainable. This hasn’t happened in a very long time. In fact I would venture to say that most
of the practitioners in the insurance community were not in the last severe hard market. There
have been a few short stints but nothing sustainable. Well it is uncomfortable for all parties
concerned. The underwriter has a hard time delivering the harsh message, the broker has a
hard time convincing their client that this is the best we can do. The client feels placed in an
untenable position of being hit in the face all of a sudden with the consequences of the market.
The client is right there should be a more responsible way to handle this matter. The fact is
based on the difficulties above everyone wants to do the best for their clients they can for as
long as they can.
The advice I can give at this time is number one: get a handle on your losses. Be in a position to
retain some loss. The better your comfort level is the more comfortable you will feel controlling
your own destiny. In times of hard markets the insurance community acts very emotionally. Yes
they have had losses and yes there is very little interest on the premiums but the emotional
wrath with which the market turns is quite severe. In most cases this is a good thing. Unless you
are one of the worst offenders loss wise, there is a very good chance there is a large difference
between your experience and the new market price.
Example
Historically your loss experience or pick is at 60% of premium
Historical premium $100
Historical losses $65
New premium $ 200
Arbitrage $135
So the emotional new premium says there is a number I can be somewhat safe managing
differently. Be open to innovation and be comfortable with the control you have.