In recent weeks, the Lloyd's hierarchy has given a clear and resounding warning to its franchisees that they must focus on disciplined underwriting.
Since it announced record levels of capacity in January, both the Lloyd's chief executive, Richard Ward, and franchise performance director, Rolf Tolle, have talked about the importance of syndicates not writing business just because they can, but having the sense to utilise that capacity if the underwriting can be done profitably.
It seems a rather obvious message to give, and one that every management board is no doubt telling its underwriters to abide by.
But, at a time when everyone agrees that, outside of the US catastrophe business, the market is softening, there still appears to be a collection of players who insist on dipping in and out of unprofitable lines of business.
Gary Head, director of professions and specialty commercial division at Hiscox, believes the barriers to entry for established markets are simply too low, which only goes to encourage people to expand into areas where they have little understanding of the market and little ability to price risks accurately.
Chaucer's decision to enter a general liability market on the assumption that it will improve in two years time is a "huge gamble", according to Head, and will only serve to further destabilise the market.
The concept of "waiting for a hard market" is not one that sits comfortably with some, and as predictions on when the hard market is likely to happen move further and further away, the question is how can the industry manipulate and turn a difficult market?
Some suggest a change in reinsurance rates will help turn the cycle, while others opt for a dramatic claims experience. The remainder believe it is down to the industry to be brave by changing rates or simply walk away from unprofitable business.
That, however, is easier said than done. Hiscox took that "brave" step when it declared that rates in the solicitors' PI market were inadequate and that it intended to put up premium levels.
No one followed and, as a result, Hiscox's 8% share of the market plummeted to 0.1%, the equivalent of £300,000 worth of business, because others insisted on writing the business at a lower rate.
"My philosophy is, if people want to write business at an unprofitable level then let them. Hiscox will still be here when rates go back up," insists Head.
"If you charge £100 when you should have charged £110 then you will, over time, erode your asset base and that will eventually lead to a lack of profit and ultimately insolvency."
The solution, Head suggests, is strong management and an understanding of the long-term nature of the business that is being written, particularly in long-tail liability.
"To improve our standing with the consumer and to improve the brand image of the insurance market, we shouldn't be going for the boom or bust concept, but rather investing for the long term and pricing business fairly," adds Head.
Before the market hardened last time, the FSA launched a review of liability insurance over concerns that consumers could be paying extreme premium levels from one year to the next.
That review appears to have done little to nullify people's appetite, with plenty of capacity still about and increased interest from new players, such as Chaucer.
Predictions of a less extreme cycle this time around may leave those betting on larger margins, in late 2008 early 2009, with slightly less than they bargained for. IT
