Syndicates must take responsibility for own actions and be disciplined: Lloyd’s CUO Turk

Lloyd’s is finally seeing many years of hard work bear fruit in the form of strong results. But the onus must now be on syndicates to maintain discipline and make good decisions based on the information available to them—as opposed to the Lloyd’s Corporation needing to take direct action.

That is the view of Rachel Turk, chief underwriting officer of Lloyd’s. “We may nudge companies. We may make suggestions. But we are providing the market with a lot of high-quality data and insights. That is an advantage of being in Lloyd’s. We want syndicates to take ownership of their own decisions,” she told Monte Carlo Today.

She said the ideal is that Lloyd’s does not need to take direct action, as it has at times in the past. Syndicates have the information to avoid mistakes; Lloyd’s Corporation should not need to step in, she said. Making high-quality data available should allow syndicates to spot trends and act before they become embedded. They need to take responsibility, she said.

One example of where the Corporation has had to step in was around concerns over a mismatch between the price of inward and outwards political violence and terrorism business. In that instance, Turk said a nudge was required.

Another, more infamous, example was around directors and officers (D&O) liability lines a year ago. Patrick Tiernan, Lloyd’s chief of markets, accused D&O underwriters of going from rate inadequacy to a full scale “moronic underwriting approach” and called the market “shambolic”. He warned select Lloyd’s syndicates could be under a supervisory microscope when capacity was next parcelled out. 

“That was a little more than a nudge,” Turk, who once wrote D&O business herself, admitted.

Turning her attention to Lloyd’s recent performance, she describes the results as the result of “a lot of hard work finally bearing fruit”. The market posted a 83.7 percent combined ratio for the first half of 2024, its best in 17 years. Gross written premium (GWP) rose 6.5 percent to £30.6 billion in H1 2024, driven by 5 percent volume growth and 1.5 percent price increases. 

Underwriting profit jumped to £3.1 billion from £2.5 billion, driven by strong rate conditions and a favourable claims environment.

Turk noted that it is rare to see a combined ratio that low in the industry. But she also had a warning: “We simply cannot expect our profit to double again by year end. We still have a long way to go through hurricane season, for example. But we certainly have a good buffer now. It has been a very good performance. It is something we can be proud of, but it is also my job to be cautious.”

“Lloyd’s deserves some credit but so does the market.”

For context on how robust a position the Market is in, she said it could now endure losses in a similar range to 2017’s, when insured losses for the industry reached $132 billion. That year was particularly costly for weather disasters, with 60 percent of global insurance payouts in the year caused by hurricanes Harvey, Irma, and Maria. Turk said that even if a season with similar loss levels were to happen in 2024, the market would still post a combined ratio of 95 percent.

“This is a credit to the discipline underwriters have shown,” she said. “Lloyd’s deserves some credit but so does the market—the bottom line is the underwriting. The Corporation has a role to play, but it is a combination of the two.”

She credited the Corporation for its recent ratings upgrade. AM Best in August revised its financial strength rating to A+ (superior) from A (excellent). AM Best said the upgrade reflects Lloyd’s ability to attract and retain investors due to its unique value proposition. Turk agreed that it helps the Market’s ability to attract investors.

Innovation incentives

On the back of the rating upgrade and such improved results, Turk noted that the Market is getting more enquiries from investors interested in participating in it. Some, she said, are large global players lacking a footprint in Lloyd’s. Others are more monoline players, seeking a niche foot in a market.

“There is strong interest. We have had great results, we are a great place to be. The question should now become: ‘why are you not in the Lloyd’s market?’ as opposed to being the other way around,” Turk said.

“There are benefits from operating through these codes.”

She commented on the importance of the mechanisms that Lloyd’s has to encourage innovation. Innovation ICX is a syndicate class of business that syndicates can use to write up to an additional 5 percent of Syndicate Business Forecast GWP. The TCX risk code will allow syndicates to write energy transition risks, such as cover for novel green technology, up to an additional 5 percent of their forecast GWP.

She is keen to explain the nuance of these risk codes. “The oversight Lloyd’s uses for these is different from the whole book. It allows syndicates more leniency if, for example, a book will take longer to reach profitability by ringfencing it out of the calculations used to assess the business of the whole syndicate,” she said. 

“It removes some of the structural barriers in Lloyd’s and looks to encourage innovation,” she added. “There is a huge opportunity in energy transition, for example. There are benefits from operating through these codes.”

Turk joined Lloyd’s in November 2023 as chief underwriting officer, responsible for the underwriting function at Lloyd’s. She has experience in the Lloyd’s Market following almost 15 years at Beazley where she held a number of roles, including group head of strategy and focus group leader of the London-based US D&O underwriting team. 

Prior to joining Beazley, she worked as an equity analyst for JP Morgan Cazenove, and is also a qualified Chartered Accountant.

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