In a Turbulent Market, London's Top Insurers Seek Growth Beyond the City

In a Turbulent Market, London's Top Insurers Seek Growth Beyond the City: "he top London market insurers weathered storms both financial and natural in 2008, showing results that are not too bad, all things considered.

The financial risks posed in 2009 by a continuing global economic downturn looks like it will provide some underwriting opportunities, but investment risks will force the likes of Chaucer, Hiscox and Brit to balance on a knife's edge, testing their respective skills as perhaps never before. With all business decisions on the table, these insurers are hinting that London's position as a global insurance center might itself be on the line.

In a variety of ways, all three are looking to expand beyond London's trading floors in a business world in a great deal of flux.

Holding Fast Chaucer Holdings plc reported a pretax loss of 26.2 million pounds in 2008, compared with pretax profit of 89.4 million pounds a year earlier. Gross premiums rose 26.9%. Chaucer reported investment losses of 71 million pounds opposed to gains of 41.7 million pounds in 2007, For Brit Insurance Holdings, pretax profit fell 54% to 89.2 million pounds, as gross premiums rose 4.2%. Brit managed investment returns of 7.4 million pounds, compared with 137.4 million pounds a year earlier.

Hiscox plc was also profitable in 2008, though pretax profit fell 55% to 105.2 million pounds. Gross premiums fell 4.3%, and Hiscox reported an investment loss of 80.6 million pounds, compared with investment income of 99.7 million pounds in 2007.

All three insurers see good prospects for rates in their major property/casualty line in 2009, though tight capital markets may make it difficult to take advantage of some opportunities. Brit predicted that the international insurance market will be affected by ?capacity concerns,? which it believes will likely drive rates up.

?Insurance capital has been eroded by the combined elements of significant catastrophe related claims during 2008 and by the varied and significant effects of economic turbulence,? said Brit.

Chaucer sees ?very encouraging? underwriting prospects, and said it is hoping for an average 2009 premium increase of 5.4%. ?The hardening market should gather pace through 2009 and 2010,? Chaucer said, adding that rates should rise in energy, marine, U.K. automobile and catastrophe-exposed property lines.

Loosened Bonds Brit also said it is looking into redomiciling in the Netherlands, citing unfavorable business conditions in the United Kingdom. According to Brit Chief Executive Dane Douetil, the U.K. government has been in the position to assist U.K. businesses, but ?they haven?t done so,? he said. ?And, more particularly, they haven?t created a stability of long-term planning.? Hiscox also suggested the center of gravity may be moving away from London. In its 2008 statement, Hiscox said its Global Markets team 'has recognized that business no longer flows to London as a right, and in 2007 invested in creating teams who were located mainly in Paris and New York.' The Global Markets had since last September 'taken advantage of the disruption caused by the financial crises by recruiting people and working with our USA business' to open new offices in Boston, Kansas City, Lexington and Miami. Hiscox expects to open an office in Los Angeles this year.

Hiscox added that it still considers the London market important in an overall international strategy, but hinted that continued activity through London would have to be justified by cost-cutting and efficiency improvements. 'The key to success in London is a continued investment by Hiscox, and the market as a whole, in efficiency and improving infrastructure,' the insurer said. But this, Hiscox means the hoped-for success of the newly announced Lloyd's Exchange, an electronic trading platform.

Among the goals Chaucer states in its 2008 statement are plans for 'further distribution channel development to complement the Lloyd?s presence in both major and growing markets with our own presence.' The insurer noted that it has successfully done this in Singapore, where 'we continue to support the Lloyd?s Asia platform, which saw further development in 2008.' Chaucer further noted that 'the broking fraternity has followed suit and we have benefitted from the influx of both London and local broking talent to Singapore. The addition of new lines of business, supported by the appointment of a specialist lines underwriter and a property and power team, should support further development of Chaucer Singapore in 2009.' Chaucer also acknowledge that it 'has received a number of take-over approaches,' all of which it is examining. Like fellow London market insurer Kiln, which was acquired last year by Japan's Tokio Marine, Chaucer may find its horizons broadened by a new parent or partner."

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