Accident and health business is a growing part of the London market. Andrew Briant explains the role that underwriting agencies are playing in that growth.

In recent years many new agencies have been founded in the London market and in particular the accident and health (A&H) sector has seen above average growth. Historically, many underwriting operations did not regard A&H well. However, a study of the results of Lloyd's syndicates over the last five years shows that a high percentage of the top 10 best performing syndicates have significant amounts of A&H written in their accounts.

The predictable profitability and ready availability - though radically reducing through 1999 - of reinsurance for A&H is now attracting the interest of many insurance and reinsurance companies who wish to balance the volatile nature of the catastrophe classes of business. The most convenient way for companies to enter this new market is to utilise the services of an underwriting agency, which gives access to existing class expertise and a pre-built infra-structure to handle the day to day technicalities involved in underwriting the account, thereby achieving a significant cost saving.

Brokers have tended to view agencies with some suspicion and have in the past only used them for exceptional, specialised and exotic risks, or as security of last resort. The thought remained that agency underwriters were second best, having failed to find a position in an insurance company or at Lloyd's. But the situation is changing.

Today, with the consolidation and contraction of the Lloyd's insurance market, many talented and respected professionals are finding that underwriting agencies offer a viable alternative to the traditional underwriting vehicle.

This increasing interest in the agency concept, combined with this contraction, has given rise to a new breed of underwriting agency - key market professionals underwriting mainstream classes of business and being treated as premium markets offering first class service and security.

Many leading Lloyd's A&H underwriters have opted to go the agency route, seeing this as a natural extension to their careers, and in so doing have moved the focus of underwriting excellence away from Lloyd's, effectively forcing brokers to follow them.

These new operations are confident that they will perform far better than some of the previous property/casualty agencies, some of whom relied too heavily on pooled capacity. These usually had too many members - many of whom were not the best security and gave rise to a number of cases of failure to pay valid claims. Pools are also harder to sell to clients and with the A&H agencies more commonly linked to just one carrier, there is tighter management control between the carrier and the agency - which makes for far fewer problems when dealing with contentious issues or claims.

Overall, the A&H agencies have learned some valuable lessons and are committed to not repeating the mistakes of the past. Though greed and a general lack of proper management has meant recently that a number of agencies produced some terrible results arising out of one US account, it is important to realise that these operations are not mainstream and do not represent the general high level of professionalism that is currently present in the market, and we should not be tarred with the same brush.

The situation has changed to such an extent that new specialist A&H agencies have been established, a number underwriting for a consortium of Lloyd's syndicates.

A walk along Lime Street shows how popular A&H and, in particular A&H related underwriting agencies, have become in the London market. Early transfers of A&H specialists away from Lloyd's proved to be a precursor to the general exodus that has followed.

The formation of underwriting agencies was seen by some as an obvious step, since when they have been able to compete for and win some valuable business.

Allied to the decreasing number of Lloyd's syndicates and the availability of professional talent, much of the expansion and positive change in the underwriting agency sector of the market can be seen to stem from North America. The continuing domination of the ever growing A&H market by underwriting agencies demonstrates the versatility and strength of this style of underwriting. It also shows that a professionally run agency can match, and often beat, a more traditional syndicate or insurance company.

The situation is now showing major signs of change. Syndicates now find themselves obliged to enter into underwriting arrangements with agencies in order to compete and to access brokers. Such syndicates have found that they have to do this to write premium and make profits that a few years ago they would have seen as being theirs by right. Lloyd's loss is the market's gain.

Andrew Briant is managing director of IGI Underwriting Agencies Ltd, part of the Nottingham based IGI Group, IGI Underwriting Agencies Ltd was formed three years ago to move the company into the A&H market. Tel: +44 (0)171 398 0100; fax: +44 (0)171 398 0109: e-mail: