Underwriters must be adaptable

Managing the cycle and maintaining underwriting discipline remains critical to the long-term health of the sector. However, there is something else that underwriters must focus on; the property market is changing and we need to adapt our approach accordingly.

The UK property sector is entering a new phase in which globalisation, outsourcing of processes and technology are changing the inherent nature of risks. All of these factors, combined with the additional impact of climate change and increased building in flood zones and brown-field sites, means that underwriters need to take a lot more into account.

As a result, any underwriter could find life difficult in future if they work on the basis that all they have to do is sit out the soft market and wait for rates to go back up: better training of underwriters and greater sophistication of risk selection and pricing have become essential to successful underwriting. On the plus side, the new generation of mapping tools and other similar analytical mechanisms means that underwriters can be better equipped than ever not only to understand, select and price risks but also to build balanced portfolios of risk. The only thing that remains is for them to embrace this technology.

Let us not forget the client in this whole equation. The more prevalent rating techniques in use today still group businesses into broad averages, typically by trade. This can mean that some clients are getting a raw deal. By embracing the analytical tools now available, underwriters can provide clients with as accurate a price as possible for their individual risk in their individual circumstances.

One winning factor is placing considerably more emphasis on geography as a rating factor. The underwriters with the best chance of success will be those genuinely underwriting their risks - the insurers that develop educated, informed, well-drilled, disciplined and empowered underwriters that are supported properly by the right tools.

Bernard Mageean, managing director for property, QBE.