The structure of a program underwritten by several insurers, where a lead negotiates the terms that followers accept by matching their share to it.
In a shared-subscription market such as Lloyd's or the market for large industrial risks, an insurance program is often carried by several insurers who split the risk on a quota-share basis. The leading underwriter negotiates the contract terms directly with the broker and the insured, rate, clauses, deductibles and exclusions, and typically takes the largest share of the risk; the following market then agrees to add its own capacity on the same terms, without individually renegotiating every clause, which considerably speeds up placement of a complex program. This structure rests on the trust placed in the lead's underwriting expertise, whose reputation and claims track record directly influence how quickly followers agree to fall in line, which is why certain underwriters recognized for technical discipline, notably at Lloyd's, exert an influence on market pricing well beyond their own share of capacity. A lead's disagreement on a claim can also carry followers along with it, the follow-the-settlements clause being common in reinsurance precisely to stop each follower from independently relitigating the claims analysis.
A large industrial group places a property program worth several hundred million dollars. A lead underwriter negotiates the terms with the broker, then about ten followers add their capacity on the same terms without renegotiating.
leading underwriter, following market, chef de file, marché suiveur