Lloyd's faces challenges
A new report on the Lloyd’s of London insurance market published by Guy Carpenter & Company, LLC, has found that Lloyd’s is seeking to improve its global competitiveness despite mounting challenges, which include low investment returns, record catastrophe losses, subdued economic growth in development markets, and uncertainty over the future of the eurozone. The report, Lloyd’s: A Vision for Targeted Growth, provides an analysis of Lloyd’s operational performance and growth within the sector, and explores how changes to the market’s strategy could impact on key players within the insurance industry. Furthermore, the report provides details about how emerging market expansion, coupled with consolidation of its presence in established markets, will be the key driver in positioning Lloyd’s to remain as a global hub for specialist insurance and reinsurance. According to details of the report, Lloyd’s recorded a pre-tax loss in 2011 of £516 million, representing a negative 2.8 per cent return on capital. The report notes, though, that with 2011 currently regarded as the second-costliest year for natural catastrophe claims in the insurance sector, Lloyd’s itself faced a record-breaking £4.6-billion bill for claims related to such losses. In 2011, around three-quarters of Lloyd’s business was centred in developed markets, but as part of the organisation’s long-term strategy, it plans to expand its presence in growth markets such as China and Latin America. Guy Carpenter’s report goes on to address Lloyd’s capital and solvency, showing that despite the large losses resulting from 2011 disasters, capital levels at Lloyd’s remain robust, and actually have significantly increased over the last five years. Of note is the reference made to Solvency II, with the report stating: “The protracted implementation of Solvency II continues to add uncertainty to the industry and may reduce competitiveness and profits in the short to medium-term as insurers adjust their structures to comply with new capital adequacy levels that have yet to be confirmed.” It went on to say that the Lloyd’s marketplace will continue to lobby the UK’s Financial Services Authority to ensure that Solvency II and other planned regulations are right for the market, and to fully understand the impact such regulations would have on the Lloyd’s business.
A new report on the Lloyd’s of London insurance market published by Guy Carpenter & Company, LLC, has found that Lloyd’s is seeking to improve its global competitiveness despite mounting challenges, which include low investment returns, record catastrophe losses, subdued economic growth in development markets, and uncertainty over the future of the eurozone. The report, Lloyd’s: A Vision for Targeted Growth, provides an analysis of Lloyd’s operational performance and growth within the sector, and explores how changes to the market’s strategy could impact on key players within the insurance industry. Furthermore, the report provides details about how emerging market expansion, coupled with consolidation of its presence in established markets, will be the key driver in positioning Lloyd’s to remain as a global hub for specialist insurance and reinsurance. According to details of the report, Lloyd’s recorded a pre-tax loss in 2011 of £516 million, representing a negative 2.8 per cent return on capital. The report notes, though, that with 2011 currently regarded as the second-costliest year for natural catastrophe claims in the insurance sector, Lloyd’s itself faced a record-breaking £4.6-billion bill for claims related to such losses. In 2011, around three-quarters of Lloyd’s business was centred in developed markets, but as part of the organisation’s long-term strategy, it plans to expand its presence in growth markets such as China and Latin America. Guy Carpenter’s report goes on to address Lloyd’s capital and solvency, showing that despite the large losses resulting from 2011 disasters, capital levels at Lloyd’s remain robust, and actually have significantly increased over the last five years. Of note is the reference made to Solvency II, with the report stating: “The protracted implementation of Solvency II continues to add uncertainty to the industry and may reduce competitiveness and profits in the short to medium-term as insurers adjust their structures to comply with new capital adequacy levels that have yet to be confirmed.” It went on to say that the Lloyd’s marketplace will continue to lobby the UK’s Financial Services Authority to ensure that Solvency II and other planned regulations are right for the market, and to fully understand the impact such regulations would have on the Lloyd’s business.
Matthew Day, senior vice president and Europe, Middle East and Africa business intelligence practice leader for Guy Carpenter, said of the report: “Lloyd’s has remained resilient in spite of challenging global market conditions and significant catastrophe losses, but will need to continue to expand its global reach in order to maintain this competitiveness. Now, perhaps more than ever, it is essential to balance this need for growth and diversification while diligently managing risk.”