Coming of age in a shifting marketplace
We at Ascot have never been shy to do what we believe is the right thing, and if eyebrows are raised along the way, so be it. Our growth from start up at the end of 2001 to a premium income capacity of £625 million in 2007 was the fastest in Lloyd’s history, and was based on a firm belief in the talents of our Underwriters, in our business strategy and in the opportunities open to us in the market as it stood. The proof of the pudding has been in the results we have achieved over this period.
The level of opportunities we perceive in the current market, absent any very major market catastrophes, paints a somewhat different picture going forward. The industry has had an unsustainably benign couple of years, with the surplus capital generated and rush to diversification creating voracious competition worldwide. Reduced rating levels, coupled with the weakening US dollar, in which a significant chunk of our book is priced, have led us to look ever more closely at what we are prepared to write and how much premium we would expect to generate thereby.
We do not write the variety of classes that many of our peers do, and have no intention of venturing into areas we do not understand. Instead we are concentrating on trying to do what we do even better, and adjusting to the shifts in market dynamics. Hand in hand with key brokers, we are looking closely at our distribution mechanisms, operating locally in those regions where our target business is retained in the local market. These initiatives are growing well and will contribute significantly to Ascot’s future.
At the same time, since late 2007 we have set benchmark and “walk away”, rates for all classes of business. We need powerful reasons to write any business falling beneath these parameters, absent which we are not going to compromise our underwriting discipline and will indeed turn down business we cannot justify. Perhaps even more than many of our peers, our underwriters are focussed on return on capital and we have no intention either of writing business at unprofitable rates or of tying up our investor’s capital against unrealistic premium targets.
Therefore yet more eyebrows may be raised by our decision to reduce our sterling capacity by 28% to £450 million. We are still the 9th biggest syndicate in Lloyd’s, despite this reduction coming at a time when the average among Lloyd’s syndicates is reportedly only 5%. If there had been a couple of large hurricane losses late in 2007, we would have stayed much as we were too, but as things stand we feel this reduced capacity is a much more realistic target. There is plenty of talk about “managing the cycle”, but in practice ruthlessly battening down the hatches is what it actually takes. We have made the tough decision now to keep some of our backers’ financial powder dry for when it can be gainfully deployed in a market with more capacity constraints.
In our own words, prior to 2007, we were an immature, if very successful business. We believe that we have now grown up. We are hugely proud of where we are, and with this aggressive demonstration of discipline and best practice, we can hold our heads higher still. With the strength of our expertise, relationships, brand and new initiatives we are confident that we face continued success in future as a grown up business.