© Lloyd’s 1 © Lloyd’s 1 Lloyd’s and the next 327 years Entrepreneurial Insurance Symposium...

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Lloyd’s and the next 327 years Entrepreneurial Insurance Symposium

Hank Watkins, President, Lloyd’s North America

September 1, 2015

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1. What is Lloyd’s?

2. What do we insure?

3. Lloyd’s in the US

4. Modernizing Lloyd’s

5. Emerging Risks and

innovation

6. Q&A

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What is Lloyd’s?

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The best known, least understood brand in

(re)insurance

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Lloyd’s key characteristicsLloyd’s is a market,

not a companyWe have a longhistory of helping clients manage risktaking, datingback to 1688

The Lloyd’smarket insurescomplex andspecialist risks

London basedinternationalbusiness

Lloyd’s expertise is based on 327years of experience and a PerformanceManagement Directorate that overseesresponsible risk taking

Regulated by the Prudential RegulatoryAuthority (PRA) and the Financial Conduct Authority (FCA)

Products aredistributedthroughbrokers andcoverholders

Lloyd’s key characteristics

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96 syndicates

of specialist underwriting

expertise

4,500

327 years of

underwriting experience

200 countries and

territories for over…

219brokers

bringing business from…

coverholdersoffering a local route

to Lloyd’s

Footprint of the business

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The world’s leading specialist (re)insurance market

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Lloyd’s + London Company Market = Total premium of US$83.62bn in 2013

US$43.33bn

Source: IUA, London Company Market Statistics Report, October 2014Exchange rate as at 31 December 2013 - £1 + $1.66

Overall London company market

US$40.29bn

US$43.33bn

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The Lloyd’s market:58 managing agents running 96 syndicates

Lloyd’s is a marketplace of independent businesses whose combined experience and expertise deliver risk transfer solutions to an increasingly complex world.

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Lloyd’s syndicates - backed by some of the best known names in global insurance

Source: Lloyd’s Annual Report 2014

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Lloyd’s global reach

15% 18%

11%

8%44%

4%Source: Lloyd’s Annual Report 2014

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Classes of business by region – 2014

Source: Lloyd’s Annual Report 2014

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Financial Results

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bn 2010 2011 2012 2013 2014

Gross written

premium

$34,759

£22,425

37,339

£23,337

40,025

£25,173

39,959

£25,615

41,717

£25,283

Combined ratio 93.3% 106.8% 91.1% 86.8% 88.1%

Investment return $1,950

£1,258

1,528

£955

2,084

£1,311

1,309

£839

1,724

£1,045

Result before tax $3,446

£2,195

(800)

(£516)

4,517

£2,771

5,320

£3,205

4,931

£3,161

Return on capital

(pre-tax) %

12.1 (2.8) 14.8 16.2 14.7

Five year overview of Lloyd’s performance

Source: Lloyd’s Annual Report 2014

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Lloyd’s ratings Three of the world’s leading rating agencies validate Lloyd’s robust

capitalisation and the market’s financial strength.

As all Lloyd’s policies are backed by mutual security, the following ratings apply to the entire market.

Source: Lloyd’s Annual Report 2014

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What Can be (Re)insured at Lloyd’s?

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The Lloyd’s market is known for its specialist expertise…

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…and an appetite for unusual risks requiring innovative solutions

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Accident & Health

Agriculture

Bloodstock

Construction

Cyber

D&O

Event Cancellation

Entertainment

Fine Arts

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Intellectual Property

Kidnap & Ransom

Political Risk

Professional Liability

Reputational Risk

Sports (including

disability)

Trade Credit

Transportation

Weather

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Lloyd’s in the US

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Breakdown of Lloyd’s 2014 total US business

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19

1

7

13

310

10

15

112

9

3

15

11

34

6

22

24 39

23

16

111

4

5

64 1511

6

-

8

-

5

28

4

39

523

65

2314

-

19

1

7

13

310

10

15

112

9

3

15

11

34

6

22

24 39

23

16

111

4

5

64 1511

6

-

8

-

5

28

4

39

523

65

2314

-

Rich MagrathWestern Regional DirectorLos Angeles

Pat TalleyCentral Regional Director Frankfort, KY/ Chicago

Rodney SmithSoutheast Regional DirectorAtlanta

Hank FeuerzeigGeneral RepresentativeUS Virgin Islands

US Virgin Islands

Atlanta, GA

3 Chicago, IL

4 Frankfort, KY

1

5 Los Angeles, CA

6

7

New York, NY

Locations

2 Boston, MA

Glenn DorrNortheast Regional DirectorBoston

Hank WatkinsPresident, NA

New York

Joseph GunsetGeneral Counsel, US

New York

Kiran BhovanSenior Manager

CommsLondon

32 members of the team in total

Lloyd’s America regional structureYour key contacts

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School of Risk Management

Industry partners Next Generation CSR

Engaging with our communitiesTrade, business, educational and philanthropic organisations

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Accessing Lloyd’s from the US

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Business streams at Lloyd’s

Business flow Capital flow

(Re) Insured

Retail broker

Coverholder/ Wholesale

broker

Members

Corporate and Non-corporate

Corporation of Lloyd’s

59Managing

agents

94 Syndicates

Lloyd’s broker

Reinsurance broker

Figures as at 31 December 2014

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Modernizing Lloyd’s Target Operating Model

(TOM)

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‘London Matters’ highlighted the threat to London's position as the global centre for commercial (re)insurance

The London Market is the largest global centre for commercial and specialty risk and is in a position of strength

Ongoing investment in making the market more accessible and

efficient

Continued strong brand with financial strength ratings

reaffirmed, outlook revised to positive

Continued focus on our collective vision and goals

Increasing retention of risk in high growth developing

markets

Higher acquisition costs make London a more expensive market to deal with than its

competitors

An inflexible business servicing model that is inefficient and

slow to change, reducing London’s competitiveness

These challenges are recognised by the market and there is acceptance of the need to change

However, the world is changing which is challenging London’s position

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We are seeking to move from a model with many inefficiencies and frictional costs to one that enables an efficient and accessible market of choice

Design principle

One touch data capture

Enhanced central services

Current operating model

Inefficient and paper based

Inflexible

Fragmented

Target operating model

Highly effective and accessible

Enhanced data sets

Economies of scale for

common activities

Design principle

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Responding to emerging risks:

our role in an

increasingly

innovative industry

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Lloyd’s defines an emerging risk as…

“an issue that is perceived to be potentially significant but which may not be fully understood or allowed for in insurance terms & conditions, pricing, reserving or capital setting”.

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Emerging risks management

Identification

Horizon scanning

Awareness

Thought leadership

Assessment

Decision-making resources (scenarios)

Quantification

For product innovation & exposure management

Evaluation

Judgment of significance

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Emerging Risks Survey 2014(Lloyd’s Managing Agents)

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Emerging Risks

View all reports at www.lloyds.com/emergingrisks

Latest Lloyd’s reports

►Drones take flight: Key issues for insurance

►Business Blackout: The insurance implications of a cyber attack on the US power grid

►Food system shock: The insurance impacts of acute disruption to global food supply

►California Flood: Central Valley risk analysis

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Until next time…

Global Underinsurance

Risky Cities

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Bridging the Gap - The cost

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Launching on September 3, 2015. Visit www.lloyds.com

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New risks provide new opportunities!

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Source: Lloyd’s 2012 Annual Report

Classes of business in 2014 Primary class of business in 1680’s

Reinsurance 38%

Property 21%

Casualty 18%

Marine 8%

Energy 7%

Motor 5%

Aviation 3%

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Email hank.watkins@lloyds.com Website lloyds.com/america

T Thank you! Stay in touch.

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