Lloyd’s: An Overview of the Market

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Lloyd’s: An Overview of the Market

Keith Stern: UK Regional ManagerOctober 2014

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Agenda• History• Market Structure• Financial Strength• Financial Results• Global Reach• Uk insurance market &

Lloyd’s• Accessing the market• Coverholders• Events • questions

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< Picture to go here >History

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From Coffee House…

First known reference to Edward Lloyd’s coffee house in Tower Street(London Gazette 18-21 February 1688)

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…To every type of Insurance

1877 1911 19691906

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PIPER ALPHA1988

EXXON VALDEZ

1989

HURRICANES1989

ASBESTOS1980s- 1990s

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…and an appetite for unusual risks requiring innovative solutions

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

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Market Structure

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► Lloyd’s is a market, not a company

► The Lloyd’s market insures complex and specialist risks and SME business

► London based international business (UK is our second largest market = £3.5bn)

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

► Products are distributed via Lloyd’s brokers, coverholders and syndicate service companies.

Lloyd’s Key Characteristics

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Lloyd’s market structure

Members

Policyholders Direct

Reinsurance

56Managing

Agents

Management

91Syndicates

Underwriting

200 Lloyd’s Brokers

Service Companies

BUSINESS FLOW (£26,106m) CAPITAL PROVISION (£60,782m)

Corporate

Individual

Corporation of Lloyd’s

www.lloyds.com/directories

Coverholders

http://www.lloyds.com/directories

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A DYNAMIC AND DIVERSE MARKETPLACEAt December 31st 2013, the Lloyd’s marketplace was home to 56 “live” managing

agents that manage 91 syndicates

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Financial Strength

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INDEPENDENTLY ASSESSED

In the eyes of leading ratings agencies,Lloyd’s is viewed as enjoying robust capital reserves:

Standard and Poor’s: ‘A+’ (strong)

Fitch Ratings: ‘AA-’ (very strong)

A.M. Best: ‘A’ (excellent)

` Lloyd’s Annual Report 2013

Lloyd’s Ratings

Figures correct as at December 2013

OUR CHAIN OF SECURITY

• LINK ONE:SYNDICATE ASSETS(£42,342m)

• Before writing business, a syndicatemust put up funds to cover their own share of claims

• These funds are the first port of callwhen paying policyholder claims

• LINK TWO:MEMBERS’ FUNDS AT LLOYD’S(£15,242m)

• Every member (corporate or individual) must provide sufficient capital to support their underwriting

• These funds are held in trust for the benefit of policyholders and used only if the syndicate assets have been exhausted



• LINK THREE:LLOYD’S CENTRAL FUND(£3,198m)

• The Central Fund includes members’ annual contributions and funds issued by the Corporation of Lloyd’s

• If a syndicate has failed to meet its liabilities and the two previous links proved insufficient, the Central Fund can provide a final reserve to cover those outstanding liabilities



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Financial Results

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Strong U/W Results

2009 2010 2011 2012 2013

Gross written

premiums (mns)

35,376

£21,973

35,469

£22,592

36,389

£23,477

40,545

£25,000

$43,698

£26,106

Combined ratio

86.1%

93.3% 106.8% 91.1% 86.8%

Investment return 2,848

£1,769

1,975

£1,258

1,528

£955

2,084

£1,311

$1,406

£839

Result before tax

(mns)

6,227

£3,868

3,446

£2,195

(800)

(£516)

4,517

£2,771

$5,734

£3,205

Return on capital

(pre-tax) %

23.9 12.1 (2.8) 14.8 16.2

Source: Lloyd’s Annual Report 2013. All figures as at 31 December 2013

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Source: Lloyd’s 2013 Annual Results (March 2014) Claims in foreign currency translated at the exchange rate prevailing at the date of loss

2013 major claims Significantly below long term average

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Lloyd’s outperforms peers

21

Combined ratio

Source: Lloyd’s pro forma financial statements, Dec 2013Peer group formed of 11 companies operating in the US, European and Bermudan markets

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< Picture to go here >Global Reach

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Europe (including UK [18%])

33%

Other Americas

8%

Central Asia & Asia Pacific

12%Rest of

the World

4%

US (including Canada)

43%

US & Canada

41% 2012

44% 2011

43% 2010

45% 2009

13% 2012

12% 2011

10% 2010

9 % 2009

Other Americas

8% 2012

8% 2011

7% 2010

6% 2009

Europe + UK

15% + 18% = 33% 2012

16% + 18% = 34% 2011

16% + 20% = 36% 2010

16% + 20% = 36% 2009

Sources: Lloyd’s Annual Reports (2008 – 2013): http://www.lloyds.com/Lloyds/Investor-Relations

2013 Lloyd’s Premiums by region

http://www.lloyds.com/Lloyds/Investor-Relations

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1

1

1

1

222

2

33

3 3

33

33

1 1

1

1 1

4

44

33

3

32

4Local underwriting with co-located syndicates(or via a Lloyd’s regulated entity); Country Manager with Market Development Role

Europe

3 Country Manager with Market Development Role

2 Legal Representative for regulatory requirements

1 Legal Representative for minimum regulatory requirements

Type Market Development Scope Territories

Europe

Austria, Denmark, Norway, Portugal, LithuaniaArgentina, Belize, Chile Namibia, Zimbabwe, US Virgin Islands

Cyprus, Greece, Israel, Malta,New Zealand, India

South Africa,

Australia, Hong Kong (SAR)Benelux, France, Germany, Ireland, Italy, Poland, Spain, Sweden, Switzerland

Brazil

ChinaJapanSingapore

North America

www.lloyds.com/AMERICA 3

UK

Canada, US Northeast, US Southeast, US Central & US West

2

2014 Lloyd’s Office Network

1

http://www.lloyds.com/AMERICA

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Uk insurance market & Lloyd’s

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Chart: Insurance Market Leaders (2012) (based on ABI Statistics; UK domestic business only, excluding Lloyd’s; in billion GBP)

Almost 75% of the market is dominated by these 11 players

4.9

3.4

3.4

3.2

3.1

2.5

2.0

1.7

1.7

1.7

1.4

0.0 2.0 4.0 6.0

Uk insurance market

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Lloyd’s Premium Income 2008-2013 by Class of Business

Split %Direct: RI 59:41 55:45 54:46 53:47 51:49

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2008 2009 2010 2011 2012 2013

Accident & Health

Aviation

Casualty

Casualty Treaty

Energy

Marine

Overseas Motor

Property (D&F)

Property Treaty

UK Motor

55:45

Lloyd’s UK Premium income

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Swot analysis

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Accessing the market

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Via Local Service Company Lloyd’s Managing Agent

Syndicate(s)

Contact local Country Manager>www.lloyds.com/offices

Access Service Company details in the Coverholder Directory> www.lloyds.com/directories/coverholders

Access to Lloyd’s for EU BrokersThis roadmap is for local Brokers who are seeking access to the Lloyd’s Market for a local client

Via Local CoverholderLocal Broker / MGA with binding authority, Underwriting Agency

Lloyd’s Managing Agent – direct or via a Lloyd’s Broker

Syndicate(s)

Contact local Country Manager> www.lloyds.com/offices

Access the Coverholder Directory> www.lloyds.com/directories/coverholders

Via Eu Service Company (crossborder)

Lloyd’s Managing Agent

Syndicate(s)


Access Service Company details in the Coverholder Directory> www.lloyds.com/directories/coverholders

Via Eu Coverholder (crossborder)local Broker / Agent with binding authority, Underwriting Agency

Lloyd’s Managing Agent – direct or via a Lloyd’s Broker

Syndicate(s)


Access the Coverholder Directory> www.lloyds.com/directories/coverholders

Via Lloyd’s Broker Lloyd’s Managing Agent

Syndicate(s)


Access Directory of Lloyd’s Registered Brokers www.lloyds.com/directories/brokers

Become a coverholderIn countries with established licence – approval via Delegated Authority Approval Process (contact Managing Agent and Lloyd’s Broker)

Lloyd’s Managing Agent – via a Lloyd’s Broker or direct

Syndicate(s)


Access information for prospective Coverholders> www.lloyds.com/coverholders

Become a managing agent approved brokerBecome a non Lloyd’s Registered Broker - approval via individual Managing Agent registration process (direct contact)


Syndicate(s)


Access information on Managing Agents – non Lloyd’s Brokers> www.lloyds.com/nonlloydsbrokers

Become a Lloyd’s registered broker - approval via Lloyd’s Broker Approval Process


Syndicate(s)


Access information on becoming a Lloyd’s Registered Broker> www.lloyds.com/brokerregistration

Placement Risk Carrier How to access this channel

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< Picture to go here >coverholders

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Prior to July 2010►No applicant coverholder had been visited by a Lloyd’s representative

►No Lloyd’s networking opportunities for coverholders

►Restricted access to the Lloyd’s brand

►Lack of best practice guidelines

►UK Population: 700 coverholders

Today►Visited all applicants (ex-City of London) since 2010 - 95% have been approved

►Held coverholder conferences

►A number of enhancements have already been made - faster turnaround times, branch approvals, broker sponsored approvals, and more informative welcome packs

►Greater access to the brand, a coverholder toolkit and enhanced guidelines online.

►Monitoring how we compare to the companies market (‘gap’ analysis) and enhancements to the rules on sub-delegation/internet trading

►UK Population: 1600 coverholders (‘grand-fathered’ 600 restricted coverholders this year)

Improvements to the coverholder model

© Lloyd’sSource: Market Intelligence based on: Lloyd’s Delegated Authorities

Number of Service CompaniesAugust 2014: Total 90

Number of CoverholdersAugust 2014: Total 1649

Coverholders (& Service Companies): Regional Distribution www.lloyds.com/directories

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Events where can you meet lloyd’s

underwriters & brokers?

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► Compass Broker Services (Whittlebury Hall) – 25th/26th February 2015 – 4 underwriters

► BIBA (Manchester) – 13th/14th May – 10 underwriters

► AIRMIC (Liverpool) – 15th/16th/17th June – 22 underwriters and brokers

► Broker Expo West (Bristol) – 24th Sept 2015 – 4 underwriters

► Lloyd’s Meet the Market (Birmingham) – October – 100 market practitioners

► Broker Expo North (Coventry) – 12th November – 5 underwriters

► BIBA Scotland – November – 4 underwriters

► Contact me at [email protected]

2015 events schedule

mailto:[email protected]

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Questions?

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Documents

Lloyd’s: An Overview of the Market