The Ups and Downs of a Hard Market

28 January 2021

Talbir Bains joins the latest Insurance Insider panel discussion on the challenges of underwriting in a hardening rate environment

How do organisations balance scale versus profitability objectives in the current market? This was the opening question in a fascinating panel discussion entitled “Underwriting in a hardening market” as part of Insurance Insider’s Insider London Live event.

Speaking on the panel, Volante Global’s Talbir Bains said that companies in many ways felt obliged to strive for growth in a hard market, but to achieve that balance between scale and profitability the key was pricing adequacy. “The profitability and scale aspects start with the price per unit of exposure,” he explained. “We have to ask ourselves whether we are charging enough premium per unit of risk?”

He continued: “I feel strongly about the importance of assessing rate strength against pricing adequacy,” adding that he challenged every underwriter at Volante Global on whether the price per unit of exposure was adequate over the long term. “Rates being 100% or 200% higher might sound great,” he warned, “but is that enough?”

Yet by its very nature the dynamics of a hard market make the challenge of achieving balance an extremely difficult one. “We have to be both careful and conservative,” he said, “while balancing that with the need to ensure that we do not miss the market opportunity.”

The focus of the panel turned to how increased interest from private equity and new capital formations might influence underwriting in 2021. For Talbir, this raised two specific questions – firstly, what do the private equity investors believe is different about the companies they are providing capital to; and secondly what is the new rulebook by which these companies are operating?

“Is the rulebook changing and is there a revolution in the underwriting?” Talbir asked, adding that in his view for the entrance of new capital via new vehicles to have a clear market influence, “there has to be a revolution in the pricing approach, pricing adequacy and pricing discipline.”

In a far-reaching discussion that explored the dynamics of the current hardening market from multiple perspectives, the issue of underwriting remediation at Lloyd’s and in the company market became a subject for debate.

Viewing the issue from the MGA perspective, Talbir highlighted how the Lloyd’s remediation drive that started in 2019 had had a clear market influence on how carriers now delegated authority. “Delegated authority today is a far tougher field and rightly so. This is a function of the remediation drive where companies are closely assessing who they give their pen to and how much capacity they delegate.”

“And that process should be tough for an MGA,” he added. “Until they can demonstrate utmost alignment through zero margin fixed commissions and 100% profit commission contingency, it should be difficult for capacity to be delegated to them.”

The panel discussion rounded out with a question on how those not used to the dynamics of a hard market might perform in current conditions. Talbir took the opportunity to bring the conversation full circle. “For anyone working through hard market conditions,” he concluded, “price adequacy has to prevail. Yes, there are often very different and difficult conflicting forces that combine here, but ultimately it comes down to discipline.


Thanks to the team at Insurance Insider for inviting Volante to participate in this panel session and for putting together a great day of speakers for Insider London Live.

All the panel sessions from the event are available on demand to delegates here .

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