The world of regulation is becoming a major issue for the trade finance industry, but has it yet got as far as the insurance world? GTR gathered together industry players to talk about how insurers are dealing with the changing regulatory backdrop and what effect this has had on their business.


Roundtable participants

  • Steven Kent, head of international, trade credit, AIG (chair)
  • Ray Massey, head of underwriting, risk & commercial, QBE Trade Credit Europe
  • Alexandra Paton, chief market officer, Equinox Global
  • Philip Prunty, multi-national practice leader, Marsh Trade Credit
  • Shaun Purrington, executive director, credit and political risks, Arthur J Gallagher
  • Ewa Rose, divisional managing director – trade credit, Markel International
  • Andrew Share, director of enhanced information, collections and claims, Coface


Kent: Who wants to kick off? What impacts have there been as a result of regulation over the last couple of years, and how are we seeing things from a trade finance perspective?

Rose: There are two sides to the regulation. In a positive way, I think regulation has brought a lot of business to our market, if we are talking more about bank regulation rather than insurance regulation, because, while we are all a lot busier dealing with things like Solvency II and producing lots of statistics and data for our actuarial departments, at the same time, banks have been compelled to share some of their risk with other markets. More and more, we are seeing that, as a result of that, the whole market is benefiting from income generated from banks laying off risk. Additionally, because of the increase in competition in the banking sector, banks are looking to lay off risk to non-competing entities, so they are looking at the insurance market more and more, rather than participating out to other banks.

Certainly from my personal viewpoint, I know our actuarial departments have been incredibly busy working on Solvency II and making sure we comply with the necessary requirements, but I work for a multiline company. To date, that has not affected our side greatly; it has affected us somewhat, but it may be different for the monolines.

Share: I tend to agree. I think the current regulation that has come in has really not impacted the trade credit insurer particularly. It has brought in welcome degrees of compliance with know your customer and treating customers fairly, so it has brought some further legitimacy to the business with regards to how we treat customers. I totally agree on the banking side; it has brought more business through that, but, as a trade credit insurer, has it overburdened us day-to-day operationally? No, I do not think it has.


Kent: I think you are absolutely right. One of the other points to discuss on the agenda is where are we seeing business being generated from? Participation in a line from a bank or syndication have been key areas of business generation this year, and probably at the back-end of last year, with banks looking to lay off some of those risks.

Prunty: I think it has brought a lot more work in terms of trying to explain an insurance instrument to a bank. That is what we found ourselves dragged into more, where banks are used to negotiating these syndicated deals line-by-line almost, rather than taking an insurer’s wording. The frustration that we found is being sucked into the drafting of these agreements, as if it were a bank-syndicated deal as opposed to an insurance instrument. I am spending an awful lot of time on that, and, quite frankly, there is an awful lot where it is big chunks of capacity being asked for from underwriters that are priced extremely finely.

That is not necessarily the underwriter, but it is the banks themselves driving the price. It is ferociously competitive, which is all well and good. Some of the numbers are big and quite attractive, but huge chunks of capacity can be going out of the insurance market, particularly carrier, in one go. Some of these are incredibly finely priced, which, of course, within the context of a banking deal, can make sense, but that means that capacity could have been given elsewhere in the normal trade credit market at much healthier margins.

Massey: I agree with Eva. There is great opportunity. There is business there that is flowing into the trade credit market on the back of banking regulations, particularly. I think there is far more to come. I do not think we are anywhere near that wave of business that is out there, if we want to take it. It is a pricing question. There is a question that it is absolutely risk-transfer. There is no element of risk-share with the banks; their job is to get it off their balance sheet in its entirety, so you have that issue. Business opportunities are great; you can always look at them and say ‘no’ individually if you do not like that.

As a potential risk, as an industry, I am not sure we have asked on a collective basis, if the banking regulation requires them to get it off their balance sheet, whether it is a good idea to put it on our balance sheet. You all make your own decisions: do I like this? Is there a trade behind it? Is it trade-related? I am not sure, as an industry, we have thought too much about what we should and should not be doing. We are undoubtedly, individually, going to be stretched to do more and more stuff that is perhaps less trade-related than we have always insisted on in the past, because the pressure is on the banks to get it off their balance sheet. We do not, in five years’ time, want to find that all we have done is shifted it from theirs to ours and the risk inherently remains. We will all have earned premium for that, but, medium term, it is probably not a great solution.

Share: The risk remains somewhere, with someone.

Paton: I completely agree with that. We are seeing more and more structures where the bank is asking us to insure 100% of the risk and they do not want to retain even 10%, or they want to pass 10% to the vendor or to the seller. At the same time, at Lloyd’s you can see that the rules on trade-relatedness are a bit more relaxed than they used to be two or three years ago when the crisis hit. That is also a sign that they are trying to accommodate more business from the banking side. As an industry we should gather together.
Massey: Maybe we should have an ABI forum or some kind of forum on the back of those Lloyd’s changes, because they are looser, you are right. We should all think about how far we have gone, need to go and should go in pushing, because we will all be continually pushed for that. They want pure finance deals, not trade finance deals.

Prunty: Absolutely, and that is the instrument they have traditionally been used to dealing with, to a certain extent. Each time we are approached on a deal like this, it is a whole set of relationships that start again, with different individuals within the banking department, each time trying to determine whether you are trying to educate the individual or just trying to play dumb. To a certain extent, they are almost looking for an unconditional guarantee with every wording change you could ever imagine.

The most frustrating aspect of the whole thing is not the price of the cover, necessarily; it is, once that has been agreed, then sorting out the wording. That is a whole different ball game, because we are used to slight little changes that are particularly required for trade-specific stuff, but this is almost a dot-by-dot process. It is getting somebody into bank legal departments when you are arm-twisting on wording, and what they are trying to do is push the envelope further and further on every single occasion to remove all conditionality, absolutely. Then, the next morning, the phone rings – a different bank – and you go through the same thing again with a different set of people. It is extremely time-consuming, but these are very large deals; that is the interesting thing. It is difficult not to be seduced by it, but perhaps you are right; I sometimes wonder: as an industry as a whole, fast forward five years, are we walking into a few things that perhaps we are not too aware of? I do fear for that.

Purrington: There certainly seems to be a case for improving the co-operation perhaps by creating some standard wordings, as an industry, around bank-led transactions. It has always been an issue: how do we get the banks to tune in to the insurance markets? How do we work with them in a more effective way and in a commercial partnership?

Rose: It is not necessarily banks driving that. My experience is that it is lawyers, at the end of the day, in order to get the Basel II, Basel III compliance certificate for a wording. It seems to be very individual, so I am not sure we will ever achieve any sort of standardisation over wording. My experience is that it is not even bank by bank; it is deal by deal where things can change very dramatically. It is the external lawyer sitting by the side of the banks, saying ‘yea’ or ‘nay’, and that is who drives the wording. It is not even the banks per se, so it can be a very dangerous place to be unless you know what you are doing.

Massey: As you say, it is quite ironic, because, for years, the credit market has moaned about not getting closer to the banks and not getting business offered to them by the banks as you do in other markets.

Rose: I think it will only become exacerbated. We saw the US$9bn fine on BNP Paribas last week. That is no small amount of money, even for a large international bank. Those types of fines, which are imposed by the regulators, will only increase pressures on capital, so there could be even more interesting days ahead.


Kent: Basel III implementation comes out over the next three-and-a-half, four years or so. It is going to increase significantly the number of banks looking to the insurance sector to participate, and there will be a desire to have no conditionality; it will be absolute certainty from a legal perspective, and that is where some of that difficulty will likely come in. From a Lloyd’s perspective, do you think there will be further relaxation then?

Rose: I think Lloyd’s is also allowing a lot more capacity in our market. Everyone needs income, and I assume the syndicates will be driving for more and more relaxation on that basis.

Prunty: I see that is where the opportunity is for some of this, because some of the capacity is hugely difficult for some of the bank deals that we see. As an insurer, it is trying to find a group of partners that are willing to act as a syndicate to pull this capacity together. Lloyd’s has a slight advantage, because, as an industry as a whole, their sort are used to working that way. A couple of the other larger trade credit parties, if they cannot do it themselves, get another three or four together, and it just gets messy and starts to fall apart. Lloyd’s has the opportunity, I think, and the other players can, if they familiarise themselves a little more with working together as a syndicate.

Paton: I think by allowing more syndicates to write this class of business – I am talking more about the PRI side – it is driving down prices, and everybody is desperate for the same capacity. As a result, some people are doing more dangerous deals in the market, which are less trade-related and so the definition is becoming a bit more blurred.

Rose: Those syndicates that were traditionally more PRI-focused are now perhaps more credit focused. The credit to contract frustration balance has reversed, which may change again, of course, now, because the world is becoming more politically risky. Whereas a year ago we were all talking about economics, now we are all talking about political risk, so there may be more demand for political risk solutions being generated as a result. Certainly, though, the current balance is much more in favour of CR than CF.


Kent: We should look at that capacity side of things as well. Talking about the opportunities for banks and bank-related business, is there any slowing down of new entrants to the market? With the opportunities that are probably going to be there over the next couple of years, I do not see any contraction. People that do not necessarily have a political or a credit line are looking to open those up, because there is real support from reinsurers and there are huge opportunities.

Rose: Absolutely, and the loss ratios, historically, are pretty good overall, and it is an attractive business line in that it does not require, certainly for the political risk or single-situation business, a huge amount of investment. Again, sitting as a multiline insurer more than a single-line insurer, we hear this from every single other business line, be it marine, aviation, and whomever else. There is a huge amount of capacity coming into the market generally. Everybody talks about overcapacity and dropping rates; I cannot think of a single line that has anything but that.

Massey: Yes, I cannot see the number of players in the UK doing anything other than going up. There is no indication to me. We moan about the market and rates and things, but the fact is that it has been profitable business for the whole credit market, certainly in total, and pretty much everyone individually, I suspect, has made good money and good margins. You can see why, as a general insurer, you would be quite interested in a credit and PI book. I cannot see the numbers going down, I have to say.


Kent: There is no real trend from a claims perspective either indicating that a certain market or sector within a region is failing to perform significantly. I suppose we’ve all looked to Russia and Ukraine over the last couple of months, but we have not seen a significant drop-off in terms of payment performance over that time. I do not know how you guys have seen it, but loss ratios are continuing to be solid, and there is no real indication of a change.

Prunty: Political events like that, though, were most welcome, because, to a certain extent, it is always good to have a justification for selling the message of uncertainty, particularly to people that have not insured for credit or political risk previously. A fresh risk like that coming into emergence at reasonably short notice was the good news part of this whole thing. Rather than trying to talk down economic uncertainty in individual countries or trade sectors, getting that big headline news was something that sold it for itself, really.

Rose: Absolutely. I think it showed how quickly things can change. No one out there saw the threat of ISIS. It just was not picked up at all, interestingly. Again, no one foresaw Ukraine and the invasion of the Crimea at that point in time, so it shows how quickly things can change, and we know economically things can change very quickly, as we all recall from the late 2000s. Yes, definitely, that was a good reminder of how uncertain the world continues to be.


Kent: Do you think there could be that convergence, again, of premium and claims because of the capacity that is in the market? Would one smaller failure, from a financial perspective, have more of an impact and cause some of those issues again.

Rose: There is always the potential for that. Going back to regulation, this is exactly what the regulation is supposed to prevent, but the best regulation in the world will not prevent a massive fraud occurring, as we have seen. Going back to the BNP Paribas issue, apparently some of the problems that arose were pretty current; they do not stem back to five or 10 years ago. Regulation was supposed to eliminate all of that.

Market economics were dampened by governmental interference over the last few years. With quantitative easing, we all thought there would be inflation, and there was not, so perhaps some of that economic cycle has been a little dampened by regulation and governments stepping in, but, yes, I think it could happen. Going back to the point we were making, are we opening ourselves up to risks by taking on too much business from banks? That is a potential issue, definitely.


Kent: From the ABI stats that have been produced, you do not see the number of clients coming back to the marketplace. The premiums that are being written are probably at about 2007 levels, both insurable turnover and earned premium, but it’s on 3,000 fewer policyholders.

Prunty: And capacity is back to pre-crisis levels.

Kent: Absolutely. We are not able to attract people back in.

Share: That is the dilemma for the industry going forward. How do you grow that pool of companies that, first of all, understand trade credit insurance, and then obviously understand how it works? That is the challenge for our industry. There was a question as to where we see the greatest amount coming from. Well, the greatest amount, really, is probably coming from the SMEs of medium size, but how do you tap into that?


Kent: It is an exceptionally difficult area of the market. Is there an innovative product out there to entice people back?

Purrington: I think those numbers that you mentioned from ABI are misleading for our market, because one area linked to the deal flow from banks is the asset-based lending, factoring and invoice discounting market space that continues to grow rapidly. There is a lot of private equity and increased funding, and they will want credit insurance to support lending growth. Then you have different dynamics. It is not then about good quality, investment-grade risk being put into the credit insurance market; it is about true, non-recourse factoring, trying to get risk mitigants at that working layer of trade finance.
I think the market is doing better than those ABI stats and other recent surveys set out. There is more growth in that SME sector than we realise, notwithstanding the fact it is hidden within lending portfolios. There is probably double the published numbers using, yes, that is the challenge – five years ago, 10 years ago, 25 years ago. How do we get more companies buying and staying with trade credit insurance?


Kent: AIG have launched something recently, which is trying to do something similar to try to pull some of those people back in. We have gone away from a traditional AIG structure, but we have used the Global Limit Manager tools we have to underwrite credit limits on an automated basis, based on credit processes. It has had a great deal of impact in the market, and we expect it to work.

Prunty: That is interesting, because the whole conversation so far has been at the two extremes: the SME traditional volume and then the other extreme, which is massive syndicated deals. The reality is that it is all well and good to start looking at the SME end, but all you need is one bank deal and that is equivalent to a whole year’s worth of small-end stuff. There are an awful lot of reasons that brokers and insurers have been strongly attracted by these big bank deals. They are big; they are substantial; they take up a lot of capacity, but to a certain extent it is just one deal, and then you have the equivalent of maybe 100 much smaller cases, so, if you are looking at innovation, time and resource, it does tend to be in the larger end.

With that come risks, which, as Eva said earlier, I am not entirely comfortable everyone has really thought through in this feeding frenzy on these big cases. We know the traditional market; we know the SME market, and the industry is getting towards looking after that. This other end we find ourselves dragged towards, I am not sure, but are we going to do anything about it? I would not have thought so, because trying to attract some of the small-end market needs an awful lot of investment, and the complexity of the product has always been such that it is a little off-putting for sheer volume, one-hit sell, which does not really work.


Kent: One of the other points for discussion was around the structured credit side of things. Where people are withdrawing, is it for any specific reason, or is it a change in underwriter or in business stance?

Rose: I think the market is very confused by these exits. I think some of the underwriters are quite confused as to why it has happened.

I do not think the motivation behind it is very clear. Certainly as far as I understand, the three entities mentioned here in the agenda [Zurich, CV Starr, Chubb] were all making money, had solid underwriting results and have very good underwriters on the teams.

Paton: I think they are all unrelated and I cannot really see a common trend. Each company has its own internal reason to stop writing this class of business.

Purrington: There is so much capacity flowing into the market: the withdrawals haven’t made any difference to the market dynamics.

Paton: One thing for sure is that, if your book is growing in a multinational company, you become the subject of a lot more scrutiny from investors who are questioning the business. If the book stays quite stable and small, maybe you can be under the radar screen, but as soon as it hits a certain size you get a lot more questioning from investors, maybe, at a company like Zurich or Chubb.

Rose: Zurich has been such a major player for so long. They went through really bad times and came out of those pretty well. They carried a huge amount of market capacity.

Massey: The slightly ironic thing is that I am sure there will be a number of deals closed in the market today that were being done as finance-driven credit deals, which a couple of years ago were being put through as STPR structured deals. There is probably a lot of the same business being done with a slightly different banner on it now.


Kent: From a capacity perspective, is the market big enough for everyone that is there at the moment, and how much will we see coming in from a banking perspective? Will there be some consolidation, or will people drop out of the market? I do not know what the views are on whether or not this will change, because there is certainly reinsurance appetite, and the loss ratios remain acceptable. There is a lot of desire and competition for the attractive deals, and there is no sign of that competition abating.

Rose: Everyone has their own business model, and they do whatever is appropriate within the context of it. Pricing definitely continues to be under pressure, and, going back to the banking market, a lot of that is driven by the fact that banks are suffering from more and more competition, and their pricing is also being driven down, so I do not think there will be an abating of that, but we must have reached a level from which there is hopefully only a way up. As we were saying earlier, in the world as it is at the moment, everyone is still profitable, so we are not writing unprofitable business. That is the point when you put yourself out of business.

Massey: Rates are probably the one thing that stand out more, certainly in the trade credit world, moving away from structured credit. As Shaun said, we are probably doing better than the ABI numbers suggest. 2007 was the peak for total premium written in the UK, for number of policies and so on, and we
are back at least to the total premium written, if not higher. The number of policies is down, but I think there is a reason for that. The striking thing is the average rate and the rate movement in the years since, and you have the increasing dichotomy between the premium written and the amount of exposure. That has gone like that because the average rate has gone down.

Prunty: The thing is, what corrects that? What actually changes that? It is just a change in the risk environment, so it is either done before things occur, which it never is, or it is just a readjustment?

Massey: In that way, we are quite a traditional market. it is very hard to sit in front of a client with a 0% claims ratio for the last four years and argue a rate increase because you are worried about the next six months. You are just not going to get that, so inherently you follow rather than lead the economic performance. You start putting rates up once you had paid claims, inherently as a market. I do not know how we are ever going to change that or get clients to really believe that they want to pay you more money now even though they have not made a claim for four years, so, you are always going to be following it. It will come back to the point where, as an industry, we start paying a few more claims, and we will see rates moving the other way.

Share: Obviously, the clients will say: ‘Should we self-insure? We have been loss-free for x amount of years. Why should we bring in insurance?’ It is always an issue of education, again.

Purrington: The market has a feel of 2007 to it: very aggressive, very price competitive for good business and at times a willingness to ignore history. Not all customers chase the price down; that is the reality, but, where there are pricing concessions, the industry seems to be much more intelligent this time around. There are trade-offs in terms of contracts being signed for two, three and five years. You have better approaches to risk-sharing with the client. It has a feel of a truly competitive market, but not a crazy market where policy underwriting discipline goes out of the window. For me, it feels like there is justification in the prices being softer because of claims and an improving risk outlook, but it also feels like a much more professional intervention by the insurers to say: ‘We can do something, but we are in it for the long term, looking for a partnership. Let’s talk about the value added, as opposed to the pricing and the rate.’ Most customers buy into that.


Kent: How is the broker market? Is it as cut-throat as it feels for an insurer at times?

Prunty: I would not say it is cut-throat, but it is reasonable for a business who is fighting for every resource in every department they can think of to look at stability in pricing or cost-reduction.

I have not seen a client for a long time who is not looking at reduction somehow. How that is then achieved is up to the different brokers to decide, but, just as insurers fight among themselves for attractive business, brokers do as well. Brokers are trying to get new business. All well and good, it can be new business, but chances are it is likely to be held by somebody as well. It is a competitive arena, and if a client is seeking cost reduction and somebody has that on the agenda as the focus to be achieved, they will get that audience.


Kent: How do fees and commissions impact on your business?

Prunty: All I have seen, in a multinational arena, is it does tend to have a relationship that is not just focused on trade credit, but they are doing business in markets with Marsh across many lines, and that does tend to mean that the client already has a fee agreement in place. Everybody is then quoting net at brokerage, and then Marsh, as a whole, centrally, will negotiate a fee. That then thrusts the discussion and debate internally, which can be a lot more heated than with the client, because we are fighting for a greater share of an overall fee compared to colleagues in different lines of business. For the larger cases, it does tend to move to a fee, but that is not just because it is trade credit; it does tend to be because there is a broader relationship among other lines of business.

It has been good, because we have noticed, when we were plotting turnover evolution of our clients, there have been years, particularly if you go back three years, when there were good balancing adjustments at the end of each year – some trade centres more than others – but you could always see, if the minimum is normally 80% of the estimated, you would be getting an extra 20%, 30% or 40% in some industry sectors as a good healthy balancing adjustment. That is most certainly not the case this year or indeed last year. People were coming in around the minimums, and the growth we as a business were getting was as a result of bringing in new business, large bank business in particular, that would then bridge that gap that hitherto the extra turnover had been making up for.


Kent: When you look back to 2008/09, one of the catalysts for rate increases was the lack of reinsurance or unwillingness from reinsurers to maintain support at previous levels. Insurers had to pass on that direct cost increase. There is no indication that that will be the case any time soon, and I am not aware of any reinsurance problems or anyone having issues placing their treaty.

Paton: It is more the opposite. The reinsurance capacity in the market is plentiful at the moment. It is difficult to feed everybody in the market and there is a danger that some reinsurers may back the wrong deals because they are after capacity.

Rose: We are all buying less reinsurance. I have not seen the statistics on it, but Allianz made an announcement last year how much less they were going to buy for Euler Trade Credit. Every single other large insurer is buying less reinsurance. At the same time, there is more market capacity. There are lots of new entrants coming in, again, all great people coming from good homes and setting up new shops, but, as we all buy less: they struggle.


Kent: Could that lead to people coming out of the market?

Share: Probably not, because there is too much competition. I doubt that that would be a factor.

Rose: The really interesting driver is the interest rates. You saw the prediction this morning that interest rates in Europe will remain at rock-bottom levels for years and years. In the UK, we have seen what has happened to the pound in the last couple of weeks, because the UK has indicated that we will increase interest rates. Again, going back to economics, no one could have ever anticipated such a long period of incredibly low interest rates. We have all heard about zombie companies. Apparently, one fifth of businesses in the UK would suffer greatly if interest rates went up substantially. Can they meet their interest payments? There is money sloshing around the world looking for a return in a low-interest environment.

Forgetting our market, when the Greek government issued some five-year bonds recently, that was massively oversubscribed. That is obviously not due to the risk perception. They were oversubscribed by something astronomical. Are companies able to borrow at the moment because of people looking to not so much banks, but private equity and other forms of finance, looking to generate those returns? We have seen some incredibly punitive rates out there, yet money being pumped into businesses, because, presumably, they are hoping to make a return before the business falls over.

I think a low-interest environment is causing a lot of money to come into our industry, as into a lot of other industries, just to try and generate a return. If that was to reverse, maybe that is going to be one of the factors that changes: money flows somewhere else eventually, and comes out of insurance.

Share: I think there will be a hiccup. You mentioned the zombie companies. When interest rates do start to rise, you mentioned one in five companies, but the stats I looked at were something like 750,000 businesses were at risk, and they are just servicing their debt. When it comes around this year, next year, and coupled with an interest rate rise, no matter how small or gradual, they are going to be reviewing their cover and loan structure, and that is when they come unstuck. That is when we will potentially see some failures. How large the hiccup is going to be, who knows, but there will most definitely be some casualties. It is not always easy to predict where they are. There are certainly instruments and more intelligent ways for them to look out for these companies to try and know where they are, but, at the end of the day, we should be saying to our clients and prospects that there are still risks out there, risks in the UK, not just in Europe. That is certainly something we as Coface are looking at, and I am sure you all are.

Massey: As underwriters, with risk-monitoring and risk-management, the majority of investment in credit insurance has probably gone into the risk rather than the product development and marketing side, so you ought to be on top of that. Hopefully you should not get the spike. If there is a small insolvency increase from small companies that you are not necessarily that close to, that should do a little bit to people’s claims ratios if nothing else, and start triggering a bit more justification for talking about rates.

Share: There is still risk out there. You only have to look at the insolvencies, and they are still higher than they were pre-recession. As the UK goes, we are still higher than 2007 levels of insolvencies, so, yes, they are plateauing at the moment. There is no steep decline curve in insolvencies, so we have to be mindful. That is something we need to remember.

Rose: The other issue, which a lot of the insolvency practitioners I know have, is that there is a far higher incidence of fraud at the moment than there has been for a long time. They are apparently making money dealing with fraud and personal bankruptcy, rather than insolvencies, which are very high on the agenda.

Prunty: It is kind of indicative of businesses under pressure. That is when fraud starts to occur.

It is exactly the same with a lot of the bank finance business that we do, invoice discounting and factoring. There are no particular spikes in the claims in their policies, but they are finding that there is an awful lot of time spent not on buyer failure but their client fraud. That is just desperate times, desperate measures. There is a lot of debate as to whether their internal alert systems have got more finely tuned and are picking up stuff they would not have before, but the finding we got from two large players so far is it is just an increase in what is happening.


Kent: When it comes to innovation, as we have said, it is technology-driven and targeting the right sector. If you are going to invest significantly to make SME work, is that through a white-label product with a portal into a bank or an invoice discounter?

Share: It is about where you add value. Yes, there is the intrinsic covering of risk, but, as we briefly mentioned, it is about how we guide customers and provide that credit management support. It is adding that, and how you discuss the portfolio of a client with them, and putting enhanced value to it. That is what we, as an industry, need to be more mindful of how to still make it an attractive proposition.

Massey: I think, between us, the market covers most things. You cannot be complacent, but, as an individual insurer, you try to have a portfolio of products that can cover most things. As a market overall, we cover just about every possible eventuality, which is why there are so many players in the London market, I guess. You would like to think that, if someone is coming to the London market with something that is a bit different or unusual, if it was not already on the table as a pre-packaged product, you would do it; you would find a way, between the market, of doing it.

Rose: One final point I would add, as we are being very positive, is that we are all much better at working together. We co-insure a number of deals. Our general partnership deals with more difficulty, be it the market the client operates in or the size and nature of the risks. Sharing the risk and benefiting from each other’s expertise is incredibly important, and a very positive message.

Prunty: That really is needed, because for some of the bank-driven deals, we are looking at some very substantial exposures. They are not particularly risky, but for one underwriter could take out practically all the capacity they have, which is just not going to happen, so the solution is syndicating it. Some are a lot more familiar with the process and happy to do it than others. Overall, people do need to get that sharpened up, otherwise they will lose these opportunities.

Paton: We will see more London market players emerging, but now all the monoliners are comfortable syndicating as well. We see this as a big change of mentality compared to a few years ago, where they refused to syndicate.

Prunty: There are still some insurers that are slower than others to express their willingness to syndicate. Some of these risks are very substantial in size, and, once you get more than two, some people find it quite uncomfortable. They may have come, to a certain extent, further than they were five years ago, but it is a long way from what the London market would be prepared to do, where you could have easily half a dozen. For some of these risks, it does need greater participation and willingness to engage on that at an earlier stage than perhaps they have done.