Don’t be wimps: market must up prices post losses

It’s very easy for the market to be critical of Lloyd’s, which undoubtedly has cost challenges, but a mixture of new technologies, capital-efficient portfolios and a more bullish attitude towards pricing can help syndicates adapt.

This is according to Michael Watson, chairman at Canopius, who told Monte Carlo Today that syndicates must adopt a different approach to their business models.

“When there are cat events you have to raise prices, and not be a wimp,” Watson said. “There has been a lamentable response from the market.”

He continued: “A lot of people talk about property-cat as a commodity; I don’t agree with that. How you assemble the portfolios of risk, and how you make a capital-efficient portfolio is the secret sauce.”

Watson noted that Canopius has adjusted its exposures relatively well in relation to its new independent status, after it was sold by Japan’s Sompo Holdings.

In the current environment, Watson believes, technology can be used to help companies better adapt to the market.

“Expense management has never been more vital. If you have manual processes that are massively dependent on spreadsheet, it has cost implications,” he said.

“We need modern tools for our underwriters, for pricing and to help manage claims.”

Watson explained that Canopius has already developed proprietary pricing and risk accumulation tools.

He added that he is a supporter of the Lloyd’s market, and since its inception, Canopius Syndicate 4444 has grown to become one of the top 10 syndicates there. As a group, Canopius writes $1.5 billion in premium, Watson noted.

“Lloyd’s is fundamental to our business propositions—we need the market to prosper,” he said.

“We are pleased to see the announcement of a new chief executive, which has brought an end to a brief period of uncertainty,” he said.

“John Neal will be a very good person to engage with the broking and underwriting community to face up to the challenges.”