Would adoption of a single policy form for multicarrier, excess liability coverage give Bermuda a competitive advantage, or commoditize the product and dilute the value individual insurers bring to the table?

That was a key point of contention here earlier this month at the Professional Liability Underwriting Society's “Bermuda Perspective” conference.

In struggling to keep differentiating Bermuda as a unique market, while striving to standardize coverage terms and conditions to save time and money, some Bermuda players are backing the single-form concept for multiple layers of coverage provided by a group of excess carriers.

The process–pioneered here by Aon, but soon to be picked up by competing brokers–offers a new opportunity for Bermuda to streamline the placement process and cut costs in a softening market, its backers contend.

“With our regulatory environment, we can accomplish something here you cannot do in the United States,” said Amy Baranoucky, senior vice president of Willis (Bermuda) Ltd., during a panel discussion on “Bermuda's Moment Of Truth In The Soft Market.”

The single form being marketed right now is not a quota-share arrangement, like the syndication of risk offered at Lloyd's, where individual underwriters take a percentage of the same risk and split the premium and claims accordingly.

Instead, with the single Bermuda form, “you build a $100 million tower, with each player taking a subsequent layer, say, of $10 million each, one above the other,” explained the panel's moderator, David Bell, senior vice president of Allied World Assurance Company Ltd. in Bermuda.

“Traditionally each carrier in the tower had its own form, which must be individually negotiated, then compared by the broker and client to all the others,” he said. “Now you can have an islandwide form. Under what scenario is this not right for the buyer?”

Ms. Baranoucky said the “advantage” of a single form is that “there are no coverage gaps from one carrier to the next.”

Arguing that “excess [directors and officers] coverage is already a commodity,” she said the single-policy concept offers “a real, true value proposition in that we have 10 markets in Bermuda that will subscribe to the same form,” no matter what coverage layer they write.

Nicholas Greet, senior vice president of Aon (Bermuda) Ltd., noted that “when we put the form together…we dumbed it down as much as we could. We wanted one consistent form for many markets, so if there is a claim, we won't waste time or money arguing the subtleties of one carrier's form language against another's.”

However, Nick Bower, vice president of London-based Marsh Ltd., asserted that “clients want their own tailored forms. A broker can continue to secure price reductions and coverage enhancements throughout the process.”

He also disputed the notion that a single form would preclude arguments over payments to insureds when losses occur down the road. “Where the concept falls short is that no one is surrendering their claims control,” he said.

He asked: “What happens if one of the carriers disputes the claim” based on their interpretation of the form's terms and conditions? “How does that claim get paid?”

Others complained that Bermuda carriers run the risk of undermining the strength of their individual brands if they all sign on to a single, generic coverage form.

“Trading on one particular carrier's brand is very valuable, but you might not necessarily benefit from the power of your name and reputation under a multibranded form,” said Jason Trueman, vice president of Bermuda-based AIG Excess International.

A debate then broke out with a member of the audience who had sat on an earlier PLUS panel about the non-D&O market in Bermuda. Tony Hay, senior vice president of Arch Insurance, called the single form a “red herring” that “commoditizes a product that is not a commodity.”

“My concern,” he added, “is that the single form will make this all about price.”

Mr. Hay then suggested that a single-form approach “removes the advantages that individual carriers can market in terms of underwriting skill, claims handling and customization of coverage.”

Mr. Trueman interjected that the single form “removes one complication and turns it into a competitive advantage.”

Mr. Bell added that if the single-form option “makes the [buyer's] choice Bermuda or not Bermuda, it will benefit the market.”

David Gutteridge, a vice president at ACE (Bermuda) Ltd., asked: “Are we doing this to help place business in Bermuda, or to help the insured?” He suggested that the single-form option “might be right for the right risks, but it is not the be-all and end-all for everyone.”

Mr. Trueman added that, while he has some doubts about the concept, “it doesn't have to be one way or the other. But it is one thing we can do that the U.S. market can't.”

Ultimately, the market will decide the value of the concept, according to George Leite, a principal at Integro (Bermuda) Ltd.

“This is a great sales and marketing tool for Aon, and hats off to them,” he said. “In a [request for proposal] situation, it shows innovation. But I am not quite convinced it's attracting new business [to Bermuda]. Time will tell.”

Special Reports /

Top Bermuda Players Split Over Wisdom Of Adopting Single Excess Policy Form

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