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Performance managementNavigating the way ahead
Jon Hancock, Performance Management Director at Lloyd’s17 September 2018
Houston Marine & Energy Insurance Conference
2Classification: Confidential
Contents―Market environment― Impacts on Marine class― Impacts on Energy class―Lloyd’s strategic initiatives:
― Performance Management― Innovation― Customers and distribution― Talent― Brexit
―Lloyd’s strengths for now and the future
3Classification: Confidential
Market environment― Insurance market performance increasingly challenged in recent years
― Protectionism, low interest rates, urbanisation, new technology, the changing climate
― Combined ratios generally higher― Attritional loss ratios― Expenses
― 2017 losses are driven by natural catastrophe losses― but that is not the whole story
― We now know what happens ”post event”― Capital re-loads relatively quickly and seamlessly― Pricing reacts modestly
― The market remains competitive, despite heavy losses
4Classification: Confidential
Marine – challenges and impacts
―Excess capacity
―Increasing competition
―Changing world trade patterns
―Larger Cargo losses
―US Marine decline in profit
5Classification: Confidential
US Ocean Marine direct written premiums($
Bill
ions
)
Source: NAIC data, sourced from S&P Global Market Intelligence.Note: U.S. and territories
$3.2
$2.9$2.8 $2.8
$2.9
$3.1$3.1 $3.1
$3.0 $3.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 20172.6
2.7
2.8
2.9
3.0
3.1
3.2
Ocean marine premium volume fell during the global financial crisis . . . but is falling again
6Classification: Confidential
0.021%
0.023%
0.015%
0.015%
0.016%
0.017%
0.018%
0.019%
0.020%
0.021%
0.022%
0.023%
0.024%
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
Has the market bottomed out?
Sources: Federal Reserve Economic Data; NAIC data, sourced from S&P Global Market Intelligence
Economy grows faster than premium – 30% decline since 2006 peak sign of soft market?
(US ocean marine DWP as % of GDP)
7Classification: Confidential
US marine results, 2007-2017
Com
bine
d ra
tio a
fter d
ivid
ends
Source: Ocean and Inland Marine combined. A.M. Best’s Aggregates and Averages, 2017
88.2
95.6
89.6 88.8
97.999.1
87.085.2 86.1 86.2
93.4
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 201780
85
90
95
100
105
Rate pressures create drag on results
8Classification: Confidential
Energy – some challenges for insurers―Excess capacity
―No meaningful price correction
―Insurer and sector consolidation
―Low oil prices
―Greater self retention
―Changing risk landscape ―cyber attacks up 82% in 2017
9Classification: Confidential
Offshore energy
Source: Willis Towers Watson
If capacity increases, how long can rate firming last?
10Classification: Confidential
Lloyd’s strategic initiatives
Performance Management Innovation
Customers and
distributionTalent
Brexit
Ensuring the market is focused on the future
11Classification: Confidential
Performance Management at Lloyd’s
Risk based oversight
Fit for the future
Sustainable and profitable syndicates and portfolios
Working with regulators
Profitable and innovative growth
12Classification: Confidential
Innovation @ Lloyd’sNew risks such as
cyber and the sharing economy
Changing landscape
drives need for new products
Lloyd’s Lab is an
innovation pipeline
13Classification: Confidential
Customers and distribution
Electronic
Placement Global Data
StandardsCoverholder
Matching
Portal
Regulator
engagement
14Classification: Confidential
Talent at Lloyd’s
Need to compete in global labour pool
Apprentice and graduate schemes
New recruitment practices
Diversity
15Classification: Confidential
Brexit – Lloyd’s Brussels
Licence approval received – May 2018
Lloyd’s insurance company in Brussels
Executive team and Board operational
Same financial ratings as Lloyd’s – June 2018
On track to open 1 January, 2019
16Classification: Confidential
Lloyd’s strengthsUnrivalled specialist underwriting expertise
A well-earned reputation for innovation
An ability to adapt and change throughout our 300 year history
Global reach, with licences in some 200 countries and territories
An industry leading brand that is recognised around the world
Strong financial ratings and strong capital reserves
Potential and capability to grow in developed and emerging markets
Any questions?
Jon Hancock, Performance Management Director at Lloyd’s17 September 2018
Houston Marine & Energy Insurance Conference