Dear Friend,

On Tuesday I went down the road to the Association of Lloyd’s Members (ALM) conference. It was fascinating gathering of remarkable people, who between them have centuries of experience providing capital to the world’s oldest specialist (re)insurance market.

Perhaps understandably the average age was high and the demographic and gender mix would have had an equal opportunities commissioner’s blood boiling, but once you get over the shock of the old world rigid formality of the gathering, you start to warm to the charm of these old gentlemen. That they still exist is a monument to the resilience of the human spirit.

Who else would give Scott Moser or Equitas a hearty round of applause? (It would have been a standing ovation if only members were thirty years younger!) “Are you a name?” asked the man next to me in a brisk Home Counties drill, clearly failing to spot the press badge prominently displayed on my lapel.

What a question to ask a young man — but it did set me thinking. If I had a million pounds spare (which of course I don’t) and I had a hearty appetite for risk, I could do a lot worse than take a punt on one of these new Limited Liability Partnerships.

After all, shares have underperformed for 5 years and look to be completing a rather feeble rally, bonds aren’t yielding anything and the property market looks like a massive accident waiting to happen. And this time names have got Rolf Tolle (also at the conference) looking out for their interests.

But I just don’t know – right now cash looks the most attractive asset class to be in —but if I ever made it to these venerable old gentlemen’s age with half their guts, I’d be happy indeed.

Dear Friend,

It’s a strange marketplace out there right now — overall rates are softening, but there are curious forces at work that are allowing some sectors to buck the overall trend.

For instance, why is the general liability market holding its own when most other classes of business are seeing competitive pressures build significantly? And the relative strength of rating in general liability seems inconsistent when set against the much softer conditions in the professional indemnity markets, notably D&O (Directors and Officers’ liability).

It must all be down to competition in the primary marketplace — as Keith Hynes, CFO of Max Re explained to me when I was over in Bermuda. Describing the state of the US D&O market he said "The real change came in 2004 when AIG, ACE and XL began competing aggressively. Max Re couldn’t cause a soft D&O market in our wildest dreams — it has to be the big players."

So the big players are competing aggressively for one class of business, whilst leaving another closely-correlated class alone. Thus is also borne out in the stated strategies of most major players today — try to pick the most profitable classes and stay with them.

But the softer D&O goes, the more attractive it makes general liability (GL) look, (relatively speaking, of course!). So don't expect it to be long before this agile market spots an opportunity and GL rates start to break down.

To get to the maritime analogy alluded to in the subject line of this email, in a harbour when the tide turns strange things happen — some boats immediately turn 180 degrees to face into the new current, whilst others keep obstinately facing the opposite way for a while longer.

But given time they all turn in the end.