Lloyd’s reloads £3bn after HIM
The Lloyd’s market has received approximately £3 billion of additional capital to restore capital resources to the level prior to the third quarter of 2017 loss events and to cover changes in capital requirements for 2018 underwriting.
This is according to the annual email to the market reflecting on 2017 sent on behalf of Lloyd’s chairman Bruce Carnegie-Brown and chief executive Inga Beale.
“This year has been a year of two halves. The first half saw the challenging conditions in 2016 continue to squeeze the market. The picture changed during Q3 and Q4 with a series of natural catastrophes affecting the US and Caribbean, Mexico and South Asia,” Carnegie-Brown and Beale commented.
“The market’s response to these catastrophes has been phenomenal – working together to pay claims and get businesses and communities back on their feet as quickly as possible. So far you have paid out almost $2 billion in claims for Harvey, Irma and Maria.”
Carnegie-Brown and Beale thanked the market for the way it has approached recapitalisation and made it seem as close to business as usual. No syndicate has ceased trading due to the storms and there is zero impact on the Central Fund, they noted.
“We anticipate some firming of prices into 2018 but that will not solve the challenges the market is facing. The good work on underwriting discipline, modernisation and improved efficiency which was delivered in 2017 to close the performance gap needs to continue throughout 2018,” Carnegie-Brown and Beale said.
The Lloyd’s market has saved more than £1 million in 2017 through a procurement initiative. Furthermore, it has identified a further potential £8 million in savings over the next five years. Overall, the market has been able to reduce the standard market subscription by 10 percent for 2018 – the second year in a row.
A new risk-based approach to market oversight has reduced some of the bureaucracy and has translated into fewer portfolio review classes, fewer minimum standard reviews and less coverholder audits.
The modernisation work under the banner of the London Market Target Operating Model (TOM) continued 2017. PPL, the electronic placement platform, has been launched transporting data through quoting to binding, and beyond. About 10 percent of market business is now being placed electronically and by the middle of 2018 all lines of business will be live. PPL provides benefits to both brokers and underwriters as it limits rekeying.
Structured data capture also went live in 2017. This will eventually allow data to flow directly to carriers’ systems. All market reform contracts and lines of business are now live and further document types (e.g. endorsements and schedules) are under consideration.
For the first time a global data standard for risk information can be used not just in London but across the entire global insurance market. And there is now a data glossary, which is being used by firms across the market.
On Brexit, Lloyd’s continues to move ahead with its plans to establish a subsidiary in Brussels, which will provide access to Lloyd’s for brokers and customers after the UK leaves the EU. The application is currently with the Belgian regulator and Lloyd’s remains on track to open the new company in time for business incepting from Jan.1, 2019.
While the Lloyd’s strategy Vision 2025 had a focus on acquiring new Lloyd’s international licences, feedback from the market suggested that, given current market conditions, the market should focus on doing more with what we have and maximising business opportunities from existing territories, Carnegie-Brown and Beale said.
This change of emphasis means the number of strategic priorities has been reduced from eight to six, with the main focus next year being on three areas:
Market oversight: enabling market participants to thrive and achieve superior operating returns through a risk-based performance framework;
Operations and services: embracing developments in technology, continuing the digitisation of the market and encouraging the broad-scale adoption of new systems developed as part of the TOM;
Customers and distribution: testing new and innovative ways to use technology to improve access to Lloyd’s and to make it more competitive as a global market.
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