Tiernan chastises ‘moronic’ approach to D&O
Situation has worsened since the corporation raised the issue earlier in the year, Tiernan says
Poor underwriting has continued in the class and voluntary pullback is expected, Lloyd’s chief of markets says
Some Lloyd’s syndicates have been taking a “moronic approach” to underwriting directors’ and officers’ (D&O) liability insurance, the corporation’s chief of markets said.
Patrick Tiernan said poor underwriting, including rate giveaways and widening coverage, had worsened since the corporation raised the issue earlier in the year, adding he expected to see voluntary pullback from the class as managing agents start to correct.
“I think we are all running out of adjectives to describe the moronic underwriting approach being adopted by some elements of the market,” Tiernan said in his third-quarter market message.
Speaking later to journalists, Tiernan said his language was “tempered given what’s going on” and the sentiment reflected what many managing agents themselves were feeling, adding most of the market had already started self-correcting.
“I expect to see a voluntary pullback in classes that are struggling from a sensible market that has learned the lessons and doesn’t want to go back to the days of heavy remediation from the corporation’s part. That is at the heart of our cycle management strategy.
“If anybody comes to us to suggest they’ve got a fantastic idea to grow a line we’re sending out these signals on, the bar to demonstrate to us that’s sensible is as high as we made it sound,” he said.
In his market message Tiernan also called on syndicates to prepare for a potential shift in the casualty reinsurance market, saying there are similarities to the uncertainty seen in the property reinsurance market this time last year.
“We’ve got to be pretty aware as to the messages that are coming in from reinsurers, particularly casualty reinsurers, where they see their plans for 1/1 and all of next year,” he said.
Tiernan continued: “It feels like there is a groundswell of movement from casualty reinsurers, they’re certainly an awful lot more bullish announcements over the past few weeks so we just want to be ready because… we don’t want to see folks have to replan through Christmas and New Year to make sure they have enough robustness in their plans.”