Liability markets aren’t just softening, they’re fragmenting
Many lines are facing cyclical softening, but what differs this time around is the discipline retention, which is being achieved in many cases by enforced limits.
That is according to Tim Usher Jones (pictured right) and Peter Horrobin (pictured left), co-founders and CEOs at Banyan Risk, who told Bermuda:Re+ILS, during the Business Development Agency Risk Summit, held in Bermuda this week, that this cycle isn’t being defined by pricing, but the distribution of capital.
“The difference between this cycle and the past, and I think this is in almost every line of business, is the limits the average player is putting out,” Horrobin said.
Usher Jones explained that in previous cycles, “companies make their budget with top line increases in limits, doubling the limit and halving the price so the budget stays the same. That didn't happen this cycle.”
Recalling historical limits of $100 million for “one shot”, Horrobin expressed that “even behemoths, like AIG for example, are putting out $7 million limits. That would have never happened before.”
Both were in agreement that this conservation is countering the impact of rate softening, resulting in risk being spread across multiple carriers rather than a reactive limit increase and monopolisation. Large corporate programmes that historically might have been built with a small number of carriers now require an extended panel of participants to pool capital.
The discipline is not being driven by underwriting conservatism alone, constraint appears to be coming from further up the capital stack: “No one is allowing these carriers, intermediaries or MGAs to write big limits anymore because the reinsurance isn’t changing.”
That dynamic highlights how reinsurers, including those operating through Bermuda balance sheets, are exerting a quiet but powerful influence over primary liability markets. Even as headline rates stabilise, limit deployment remains tightly controlled with Usher Jones pointing to different losses and greater exposures causing the market to pause for consideration.
The shift introduces a structural friction into the placement process. Brokers must coordinate a larger number of markets, while carriers maintain smaller positions across more programmes. Capacity becomes more modular and more carefully rationed.
After several years of favourable liability pricing, few underwriters appear willing to expand their risk appetite through larger lines. “As much as people are saying rates are coming down across different lines, the fact that limits are being deployed in such a conservative way is something that we haven’t seen,” Usher Jones iterated.
The industry may be displaying a form of discipline that historically only appeared later in a softening market.
Large limits, once used to preserve premium volume and attract buyers, are not returning. And with reinsurance structures reinforcing that restraint, the mechanism for expansion will need to be strategic.
Usher Jones and Horrobin were both in agreement that this seems to be a lesson learned moment for the industry, with limited restraint maintaining stability in the market rather than threatening to expand protection gaps.
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