Bermuda is now in the enviable position where it can attract the "star" underwriters from around the world.

The underwriters that are being trained in Bermuda are in the fortunate position to train under "master underwriters" who have underwritten and survived many insurance cycles.

The reason why Bermuda can attract the star underwriters is because of the superb job the incumbent carriers have done in helping to establish the favourable insurance infrastructure here. Companies like American International Group (AIG), OIL/OCIL, XL Capital, ACE, Centre Solutions, Renaissance Re, Partner Re, IPC Re, and the list goes on about those companies that are here for the long run to train underwriters and put Bermuda's name on the global insurance marketplace's map.

Two industry veterans, Mr. Paul Ingrey and Mr. Michael Morrison have been brought out of retirement to spearhead two of the largest insurance companies to incorporate in Bermuda after September 11; Arch Capital and Allied World Assurance Company (AWAC).

Both men have weathered at least four underwriting cycles and are here to make sure their new companies are well equipped to deal with the new insurance marketplace as a result of devastating 2001 results.

Morrison, according to the February 2002 issue of Reactions magazine, is very concerned about the "lack of underwriting expertise, which he says is a direct result of companies disregard of underwriting discipline in the soft market." He was then quoted as saying, " In the industry as a whole, there is a lack of talent. This is because there are a lot of underwriters who have not underwritten. Instead they have had to take orders. This has to change. Underwriters need to start to use underwriting discipline."

During the World Insurance Forum held at the Southampton Princess in February, Mr. Paul Ingrey head of Arch Capital, said, "Because of September 11 insurers must now learn to underwrite horizontal risk." The question insurers must now ask is how do they stack up across many risks ie an earthquake in California will result in losses in the life, personal lines, property, liability, and workers compensation. All of these risks have to be managed in a broad way from a single event. This is the new challenge for underwriters to make sure they get the formula right.

Brian Duperreault, head of ACE said at this same forum, "dichotomy of risk and perception of risk is what insurance is all about. There are shocks in the system. September 11 is the test case for making the insurance industry global in the way it perceives risk. No one jurisdiction should look at a risk any differently from the other anymore. The industry is now faced with finding new and improved underwriting methods for analysing risks."

While underwriters are grappling to find the right formulas for pricing accounts on a go forward basis, clients are concerned that they are not being listened to and that they are being penalised for poor underwriting judgements. Stacy Regan, Deputy Treasurer - Insurance for General Electric could not have been any more honest than in her discussion at the World Insurance Forum about how insurers could provide better service to their clients.

Regan stated that in all of the industry discussions about the effects of September 11, not once did she hear any talk about "customer focus". She says insurance tends to be "inside out when it should be outside in. Clients often feel that when they finally grasp what their real issues are, the insurance industry excludes them leaving clients to wonder, what's left - where is the value for buying insurance?"

She emphasised that underwriters need to know their clients - know what to ask and how to ask it. "Customer focus is where insurers and insureds work together. Risk managers are the stewards of their companies' shareholder funds." They are beginning to question whether they are buying something real or illusionary. Now is a good opportunity for the insurers and the insureds to work together. "There is a huge disconnect with expectations between buyers and insurers."

Some say that ACE and XL were responsible for putting the clients in front of the underwriters so that the two could discuss and understand each other's businesses. But most importantly the underwriters and clients were able to form relationships without displacing the broker. Therefore, it can be inferred that Bermuda is responsible for "client/underwriter relationship underwriting".

When the market became soft, the underwriting meetings began to drop off because clients no longer felt they needed to explain their risks because they were getting the prices and coverages they needed without having to meet with their underwriters. Maybe this is another area where the market went wrong. Both sides lost the personal interaction that is so key to continuity. This is the area, which should not be taken lightly in the future.

Based on the very seasoned talent that has been recruited to Bermuda and the established insurers already here, Bermuda can play a pivotal role in the future of the insurance industry because all eyes will be on what the new carriers are doing in Bermuda. It is my hope that they will concentrate on putting the discipline back into the underwriting process.

Bermuda's role in the future of the global insurance industry is to provide the balance needed between brokers, clients and insurers. Clients love to know that they are being listened to and understood.

Taking the time to show an interest in clients and fostering the relationships underwriters have built up with their clients will go a long way in abating some of the clients concerns and keeping them loyal to their underwriters.

Bermuda also has the foresight and vision of company heads who have seen it all and done it all in the industry. They will play a key role in training underwriters to listen to their clients' needs, to properly underwrite and not just follow someone else's lead because after all as Warren Buffet so succinctly pointed out, "predicting rain doesn't count; building arks does."

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Cathy Duffy is a Chartered Property Casualty Underwriter (CPCU) and is now a freelance writer. She is a former executive of Zurich Global Energy and has 15 years experience in the insurance industry. She writes on insurance issues in The Royal Gazette every Monday. Feedback crduffycwbda.bm.