Still a fun challenge

Name: Neil Maidment

Job Title: Chairman of Group Underwriting Committee, Beazley PLC

When did you start in the business? In 1984, straight out of Oxford. I joined Sturge Syndicate 210, underwriting non-marine treaty business. It was just before 'Big Bang' and there was a real buzz around working in the City. I found out about Lloyd's and the tradition of the market, its reputation for underwriting large or exotic risks, and its face-to-face trading, sounded like a lot of fun so I applied for a job.

What was the market like then? There was still a very strong sense that this was 'The Society of Lloyd's'. All capital was private and the market was still operated in a very formal, hierarchical way. Personal computers were virtually unknown and most processes were paper driven.

The market was also just starting to harden after a number of catastrophes, such as Hurricane Alicia (which hit Galveston in Texas) and the Munich hailstorm. Looking back at these disasters it is revealing to see how far the market has moved on in terms of the cost of claims. These were market turning events - and yet each event only cost around $1bn to $1.5bn.

Alicia was the hurricane that taught my generation to be wary of Texas, a lesson of which we were all forcibly reminded when Hurricane Ike devastated the coastline last year.

What is the hardest market you have ever known and why? The casualty crisis of 1985/1986 has to have been the hardest market - when the costs of all the prior year losses on asbestos and pollution came home to roost. When Time Magazine runs a front cover that says 'Your insurance is cancelled', then you know the market is in pretty dire straits.

The result was a systemic shift in the market. Not only did prices soar, but there were new wordings and exclusions. The other big shift was the birth of the Bermudian market, with the creation of Ace and Xcel, who came into being with the sole purpose of addressing the casualty capacity problem.

Hurricane Andrew - eight years later and costing around $20bn dollars - ran it a pretty close second.

And the softest market? The end of the 1990s saw prices dropping sharply across all lines of business - and the casualty market had been softening pretty consistently for several years.

What is the strangest bit of business you have been involved in over the years? At Sturge, we used to have some livestock risks, which included a number of yak in Mongolia. Regrettably they were all burnt to death in a brush fire - which does give a whole new meaning to a Mongolian barbeque!

If you had not been an underwriter, what other career might you have followed? I have been incredibly lucky. I wanted to work in the City and I found a sector in it that has retained all the fun bits over the years, so I have never really contemplated anything else.

The best bit is that while all other financial services have become increasingly impersonal and screen traded, Lloyd's has stayed a face-to-face market with all the advantages of real, human interaction.

What is the biggest challenge that underwriters face today? The challenge today is a perennial one for the insurers - managing the cycle. The condition of the market at the moment is highly unusual. On the asset side there is an absence of any investment income, a fact which should help businesses to focus very closely on their underwriting results. This, in turn, should help prices to continue to harden over a more sustained period.

However, the coming and going of capital, premiums and claims does make it hard to deliver consistent returns to investors over the medium term. But for the industry to attract new capital it needs to do just that.

Equally challenging is the need for the entire industry to re-calibrate its attitude to modelling. There must be less reliance on things that are only a guide and do not provide the full picture. The results need to be seen as just one part of an overall risk management perspective.

What do you miss, if anything, about the "good old days"? Nothing - there is no doubt that Lloyd's is on a real high at the moment. It offers great products, the market is full of strong businesses and its reputation and image are rehabilitated - especially in light of the recent banking crisis.

There have, as we all know, been a number of points in the last two decades when none of this was the case - and I don't miss them at all.

What would be your advice to a young underwriter starting out today? In reinsurance underwriting, there is not always a right or wrong answer. The key is to understand the reasoning in your own mind and then to make a decision.