Lloyd's top brass warn on “deteriorating and worrying trend” of unprofitable underwriting
John Nelson and Inga Beale, the chairman and chief executive of Lloyd’s respectively, have warned that the solid performance the market has enjoyed this year, barring any major catastrophe claims in the next two weeks, simply masks a deteriorating and worrying trend: that current year underwriting is not profitable in aggregate at the moment.
“This is a matter of great concern to us,” they wrote in a joint year-end statement.
They noted that 2016 has been pretty extraordinary year, with Brexit and the US election result catching many by surprise. But in insurance terms, “we have seen the really tough market conditions continue to deteriorate this year”, they said.
Though the market will have performed well this year, despite the tough operating environment, they expressed concern “that the strength of these results masks a deteriorating and worrying trend: that current year underwriting is not profitable in aggregate at the moment.”
Lloyd’s is trying to address this challenge, they said, by looking to maintain prudent underwriting discipline through a portfolio review during the middle of this year, preparatory to signing off business plans. They thanked the market for the “collaborative spirit” with which participants have entered into these discussions.
But they said they anticipate the need for a continuing review of underwriting plans throughout 2017 noting that they have issued the latest version of the Lloyd's Market Oversight Plan for 2017, which sets out their ongoing focus on market conditions, as well as emerging risk areas such as cyber security.
They also commented on the modernisation of the market and said progress on the Target Operating Model (the TOM) stepped up a gear in 2016. “It is encouraging to see the market embrace new technology,” they said.
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