Dear Friend,

It’s a strange marketplace out there right now — overall rates are softening, but there are curious forces at work that are allowing some sectors to buck the overall trend.

For instance, why is the general liability market holding its own when most other classes of business are seeing competitive pressures build significantly? And the relative strength of rating in general liability seems inconsistent when set against the much softer conditions in the professional indemnity markets, notably D&O (Directors and Officers’ liability).

It must all be down to competition in the primary marketplace — as Keith Hynes, CFO of Max Re explained to me when I was over in Bermuda. Describing the state of the US D&O market he said "The real change came in 2004 when AIG, ACE and XL began competing aggressively. Max Re couldn’t cause a soft D&O market in our wildest dreams — it has to be the big players."

So the big players are competing aggressively for one class of business, whilst leaving another closely-correlated class alone. Thus is also borne out in the stated strategies of most major players today — try to pick the most profitable classes and stay with them.

But the softer D&O goes, the more attractive it makes general liability (GL) look, (relatively speaking, of course!). So don't expect it to be long before this agile market spots an opportunity and GL rates start to break down.

To get to the maritime analogy alluded to in the subject line of this email, in a harbour when the tide turns strange things happen — some boats immediately turn 180 degrees to face into the new current, whilst others keep obstinately facing the opposite way for a while longer.

But given time they all turn in the end.