Hugo Crawley welcomes the gradual return to a multi-carrier approach to risk

The past 12 months have reminded the world of the perils of aggregation of risk. Almost every area of the global financial markets has had a sharp lesson in why spreading risk is good – in insurance that came by way of the near-collapse of AIG.

Insurers have become much more wary about giving too much business to one reinsurer. The weak economic environment has exacerbated the trend as buyers focus on financial security and seek to diversify their counter-party exposure.

The prime beneficiary of this is the subscription market, whose structure provides an efficient means of diversifying the risk profile. The Lloyd’s market and its syndicates offer mutualisation and a very strong brand. As the Lloyd’s Review 2009 said: “The recent financial turmoil has further reinforced the advantages to insureds of spreading risk cover through the subscription market."

Broader syndication is proving popular. The London market is gaining business, and that business is probably being placed with a larger number of carriers.

While it is unlikely the market will ever return to the days when a reinsurance policy had 100 lines of 1%, the number of underwriters being used is rising from three or four in recent years to at least double that today. We may even return to having 15-20 markets supporting a reinsurance programme.

Hugo Crawley is chairman of BMS Group