Dear friend,

Here’s a run-through of the order history of the excess layer of fairly unpleasant but well run-waste disposal firm’s public liability cover, reinsured facultatively into London in the 1990s.

1993 Order 100%, placed 78%
1994 Order 100%, placed 95.6%
1995 Order 100% placed 100%
1996 Order 95% placed 105%
1997 Order 90% placed 120%

By 1998 I could have placed an almost unlimited amount, except my client had just got some chump to remove a major treaty exclusion and was apparently only interested in income. And this account certainly had plenty of income.

– order 48%.

Ouch — the premium was half and now so was the order — a quarter the brokerage. Bang goes the bonus!

Here comes the other dynamic of the reinsurance market coming into play at last after a long absence — demand.

Willis Re mentioned the dreaded D word for the first time in today’s 1st July renewal report.

The ultimate sanction for any buyer of any product is to walk away.

And there is nothing like chopping an order down to size to get reinsurers’ attention and sharpen their pencils:

Underwriter: “Take it or leave it!”

Reinsured: “Okay, I’ll leave it”

Pause of a couple of weeks
Underwriter: “There seems to be a bit of a misunderstanding — when I said ‘take it or leave it’ I really meant – ‘we really value our mutual long-term relationship and have appraised the account and would be pleased to offer you a one-off discount of 25% this year”

Reinsured: “40% discount”

Underwriter: “What?”

Reinsured: “40% discount ‘take it or leave it’”

One or two of those and even the underwriter who has spent five or six years getting everything his or her own way soon learns that the boot is now firmly on the other foot.

Welcome to a proper soft market — where shrinking demand meets increased capacity.

The punchbowl is loaded with hooch – let the party begin!