Underwriting discipline is not a fixed rulebook but a mindset that is tested most when market conditions become easier, according to Carl Day (pictured), deputy chief underwriting officer (CUO) at Apollo Underwriting. As the Lloyd's market moves further into a softening rate environment across several major lines, discipline begins long before a renewal lands on an underwriter's desk.
"It starts from understanding the risk you're involved with, your margins, the pricing environment, the terms and conditions, the true product that's on offer and how you approach it," Day said. "If you do that well, then you understand what you can and can't give."
Blanket management rules can easily backfire. He described seeing firms impose rigid restrictions, for example, requiring approval for any reduction or any reduction beyond a set percentage, and warned this can quietly skew a portfolio in the wrong direction.
"I've seen management say anything that's a reduction has to be approved," he said. "I disagree with that because you can end up actually selecting – pushing your underwriters almost to select against themselves – because high-quality business with a great track record may have a reduction and the worst business might not."
The psychology of a softening market creates another challenge. Underwriters accustomed to years of rate rises often resist the first few reductions even though, counterintuitively, those early cuts tend to come at the point of highest price adequacy.
The pattern is already visible in market data. Lloyd's has warned of rapid rate softening across casualty and cyber, while Beazley and Hiscox both reported renewal rates down 4%, with Hiscox seeing double-digit declines across major property and commercial lines.
Underwriters can make opposite mistakes at different stages of the cycle. Early on, they may reject good business because they are reluctant to concede on price. Later, as negative rate changes become the norm, they can become increasingly comfortable accepting larger reductions.
"People potentially throw out good business as the market starts going down from a point of high adequacy," he said. "Over time they get used to negative rate and are allowing even bigger negative rate changes at a point of low adequacy further down the cycle."
The greatest pressure to compromise tends to emerge in four areas: new business, delegated authority, new product launches and adjustments to terms and conditions.
New business is often "someone's lost business or declined business" rather than genuinely fresh opportunity, meaning underwriters can apply looser standards than they would to a renewal. Delegated authority poses a similar risk in a falling market.
"In a falling market, it's very tempting – say you're 200 to 300 grand down in premium, which could be 10 risks – to find a new delegated [arrangement] that can do that in one risk," he said.
Such arrangements only make sense where the delegated underwriter has a proven track record, pricing is adequate, acquisition costs are transparent and the business is genuinely accretive rather than simply replacing lost premium.
New product development also becomes a warning sign "when you can't find the income out of the products you understand" and start designing new ones purely to plug a premium shortfall.
The fourth area is terms and conditions. Underwriters who adjust coverage without properly assessing the pricing impact, or who deliberately overlook it, can erode discipline just as easily as those chasing new business or delegated deals.
Two assumptions are particularly dangerous: that history reliably predicts the future, and that "this time it's different."
Modelling built on past events does not always account for today's global interconnectivity and transaction speed, while claims that a market cycle will somehow defy the basic mechanics of supply and demand rarely hold up, a dynamic already highlighted in analysis of the Lloyd's and London market's transition into a softening phase.
Competitors offering apparently uneconomic terms are not necessarily behaving irrationally, he argued. Different firms simply operate with different agendas and commercial motivations, whether that is a new entrant absorbing start-up costs or a rival with a different legacy claims profile or reinsurance structure.
That perspective is reflected in the numbers. Lloyd's reported an overall profit before tax of £10.59 billion in 2025 and a combined ratio of 87.6%, yet its casualty combined ratio deteriorated to 100.8% from 91.6% a year earlier, according to S&P Global's analysis of Lloyd's annual report.
Instead, the more useful approach is understanding a competitor's position rather than dismissing it, while continuing to invest in client relationships, since even a well-explained decline "can add value" over time.
