COVID-19 could bring 'long-needed culture change' in London Market

The COVID-19 pandemic has cast a shadow over London Market's performance expectations for the rest of the year, despite beginning 2020 generally optimistic with signs of pricing improvement, according to AM Best.

The performance in the London Market has been under pressure for a number of years, driven by a combination of catastrophe losses, soft market conditions and lower reserve releases. The Lloyd’s market has reported an underwriting loss in each of the last three years. The loss ratio exceeded 63 percent last year - almost four points higher than its 10-year weighted average.

AM Best believes that the London Market insurers need to adapt their operating models in order to remain relevant in a competitive marketplace. At the same time, they need to think about an "evolution that allows the industry to operate both digitally and in person interchangeably, to get maximum value for both these elements".

A new report highlights that COVID-19 has accelerated some long-awaited changes to the way business is transacted in the 330-year-old insurance marketplace. Remote working is "forcing a long-needed culture change" in the acceptance of digital solutions, it said.

Moreover, the pandemic has also thrown into sharp focus the market’s modernisation efforts. For example, there has been a marked increase in the use of the e-placing platform, Placing Platform Limited (PPL). In response, Lloyd’s has increased its electronic placement targets for submission.

Am Best added, radical action has been witnessed both at the individual company or managing agent level, as well as at Lloyd’s, but the question now is whether the pandemic will permanently change the way the market
interacts and transacts its business.

Catherine Thomas, senior director, analytics, AM Best, said: “The London Market deals with complex and bespoke business with transactions often negotiated on a face-to-face basis. However, the current situation is forcing individuals and companies to be more thoughtful about the circumstances where in-person interaction might not enhance value, and could be done much more efficiently electronically.”

“It is clear that some in the market have been much more able to make a seamless transition to the new way of working,” Thomas said. “Remote working is forcing a long-needed culture change in the acceptance of digital solutions.”