London vs. Bermuda: Right brain vs. left

Via Business Insurance, some stories are just too interesting….

At Monte Carlo this week, the Insurance Intellectual Capital Initiative released a study comparing underwriting at the Lloyd’s and Bermuda markets. (The organization is a bunch of Lloyd’s-related companies that want to mesmerize me personally, and maybe accomplish something tangible.)

Here’s the nut:

London underwriters, being just a friendly stroll away from the market, tend to value face-to-face communication. Bermuda underwriters, an ocean away from everything but bars and golf, go by the numbers. Succinctly: Lloyd’s syndicates employ the underwriters’ underwriter. Bermuda employs the – forgive me – actuaries’ underwriter.

Perhaps I oversimplify. But here’s Business Insurance quoting the study:

“Lloyd’s is characterized by face-to-face communication, which is associated with long-term relationships that enhance expert judgment,” according to the report. “Because Bermuda is an isolated market, operating between time zones, trading has more typically been conducted through electronic communications. Bermuda is therefore a market characterized by electronic communication and associated with scientifically modeled bases of judgment.”

Flashback, 2005: An underwriter explains to me that, no, he didn’t like the program we were looking at, but turning it down would take about five weeks. He had to show (read: pretend) that he was looking seriously at the program. He didn’t want to irritate the broker who brought him the business. That broker was a good relationship, and he had worked hard to arrange meetings, supply data and generally supplicate. So we couldn’t piss him off.

That meant we had to analyze, or say we were analyzing, a dog of a program. Then he would put off the broker for a couple more weeks. Then say, gosh, in the end we just couldn’t make the numbers work.

Clearly, he was thinking like a London underwriter.

As I listened him spell out more than a month of make-work analysis ahead of me, I could only think: This Old Yeller is rabid. Shoot it, Travis!

Clearly, I was thinking like a Bermuda underwriter.

Business Insurance continues:

“In Lloyd’s, the initial ‘gut feel’ or intuitive impression comes from the face-to-face submission, during which the broker explains the firm-specific, regional or historical context in which this program and cedent are situated and which should be considered in subsequent analysis,” the study found. “The Lloyd’s market is good at evaluating programs in context. This is why Lloyd’s is able to make judgments on unusual or complex programs, even those with lower margins or hard-to-model qualities.”

In Bermuda, however, “underwriters form their initial ‘gut feel’ when they look at the modeled results. If the analysis is not favorable, the underwriter calls the broker for more information” and asks a risk analyst “to remodel in light of that information.” That process is a reason that Bermuda underwriters “have traditionally struggled to write information-scarce, hard-to-quantify risks,” the study found.

Dog metaphors aside, this also explains why Bermuda has companies like Renaissance Re, which has taken cat modeling to an art, while Lloyd’s can write Troy Polamalu’s hair.


To improve efficiency in each market, the study recommends steps including selective use of face-to-face interactions, avoiding duplication of paper and electronic information, developing focused broker intermediation and identifying and minimizing ritualistic use of face time, such as signing coverage slips.

Perhaps. But perhaps the world is best served by each market developing its niche. Where there’s a lot of data, Bermuda reigns. Where there is none, Lloyd’s is peerless.

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