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Lloyd’s: An Overview of the Market
Keith Stern: UK Regional Manager
October 2014
© Lloyd’s
1
Agenda
• History
• Market Structure
• Financial Strength
• Financial Results
• Global Reach
• Uk insurance market & Lloyd’s
• Accessing the market
• Coverholders
• Events
• questions
2
© Lloyd’s
History
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© Lloyd’s 2012
From Coffee House…
First known reference
to Edward Lloyd’s coffee
house in Tower Street
(London Gazette 18-21 February 1688)
© Lloyd’s 2012
…To every type of Insurance
1877
1906
1911
1969
© Lloyd’s 2012
PIPER ALPHA
1988
EXXON VALDEZ
1989
HURRICANES
1989
ASBESTOS
1980s- 1990s
© Lloyd’s
…and an appetite for unusual risks requiring innovative solutions
© Lloyd’s 2012
The Lloyd’s market is known for its specialist expertise…
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© Lloyd’s 2012
Market Structure
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© Lloyd’s 2012
Lloyd’s Key Characteristics
► 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 2012
Lloyd’s market structure
Corporation of Lloyd’s
Management
Coverholders
Policyholders
 Direct
200
Lloyd’s
Brokers
56
Managing
Agents
91
Members
 Corporate
Syndicates
 Reinsurance
Service
Companies
BUSINESS FLOW (£26,106m)
 Individual
Underwriting
CAPITAL PROVISION (£60,782m)
www.lloyds.com/directories
© Lloyd’s
A DYNAMIC AND DIVERSE MARKETPLACE
At December 31st 2013, the Lloyd’s marketplace was home to 56 “live” managing
agents that manage 91 syndicates
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© Lloyd’s 2012
Financial Strength
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© Lloyd’s 2012
Lloyd’s Ratings
INDEPENDENTLY
ASSESSED
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In the eyes of leading ratings agencies,go here
Lloyd’s is viewed as enjoying robust
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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 2012
OUR CHAIN OF SECURITY
• LINK ONE:
SYNDICATE ASSETS
(£42,342m)
• Before writing business, a syndicate
must put up funds to cover their own share
of claims
• These funds are the first port of call
when paying policyholder claims
Figures correct as at December 2013
OUR CHAIN OF SECURITY
• 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
Figures correct as at December 2013
OUR CHAIN OF SECURITY
• 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
Figures correct as at December 2013
Financial Results
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© Lloyd’s 2012
Strong U/W Results
Gross written
premiums (mns)
Combined ratio
Investment return
Result before tax
(mns)
Return on capital
2009
2010
2011
2012
2013
35,376
35,469
36,389
40,545
$43,698
£21,973
£22,592
£23,477
£25,000
£26,106
86.1%
93.3%
106.8%
91.1%
86.8%
2,848
1,975
1,528
2,084
$1,406
£1,769
£1,258
£955
£1,311
£839
6,227
3,446
(800)
4,517
$5,734
£3,868
£2,195
(£516)
£2,771
£3,205
23.9
12.1
(2.8)
14.8
16.2
(pre-tax) %
Source: Lloyd’s Annual Report 2013. All figures as at 31 December 2013
© Lloyd’s 2012
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2013 major claims Significantly below long term average
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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
© Lloyd’s 2012
Lloyd’s outperforms peers
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Combined
ratio
Source: Lloyd’s pro forma financial statements, Dec 2013
Peer group formed of 11 companies operating in the US, European and Bermudan markets
21
© Lloyd’s
Global Reach
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© Lloyd’s 2012
2013 Lloyd’s Premiums by region
Europe
(including UK [18%])
33%
US (including Canada)
13% 2012
43%
Central Asia
& Asia Pacific
12%
Rest of
the World
US & Canada
41% 2012
44% 2011
43% 2010
45% 2009
Other
Americas
8%
4%
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
© Lloyd’s
12% 2011
10% 2010
9 % 2009
2014 Lloyd’s Office Network
Europe
North America
Europe
3
2
1
4
1
Type
1
1
3
3
1
1
3
Market Development Scope
3
3
3
1
3
3
3
2
2
2
Territories
Local underwriting with co-located syndicates
(or via a Lloyd’s regulated entity);
Country Manager with Market Development Role
China
Japan
Singapore
3
Country Manager with Market Development Role
Benelux, France, Germany, Ireland, Italy, Poland, Spain, Sweden, Switzerland
UK
Australia, Hong Kong (SAR)
Brazil
Canada, US Northeast, US Southeast, US Central & US West
South Africa,
2
Legal Representative for regulatory requirements
Cyprus, Greece, Israel, Malta,
1
Legal Representative for
minimum regulatory requirements
4
1
1
3
4
3
3
1
4
www.lloyds.com/AMERICA
New Zealand, India
Austria, Denmark, Norway, Portugal, Lithuania
Argentina, Belize, Chile
Namibia, Zimbabwe, US Virgin Islands
© Lloyd’s
2
2
Uk insurance
market & Lloyd’s
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© Lloyd’s 2012
Uk insurance market
Chart: Insurance Market Leaders (2012)
(based on ABI Statistics; UK domestic business only, excluding Lloyd’s; in billion GBP)
0.0
2.0
4.0
6.0
4.9
3.4
3.4
3.2
3.1
2.5
2.0
1.7
1.7
1.7
1.4

Almost 75% of the market is dominated by
these 11 players
© Lloyd’s 2012
Lloyd’s UK Premium income
Lloyd’s Premium Income 2008-2013 by Class of Business
4,000
Accident & Health
3,500
Aviation
3,000
Casualty
2,500
Casualty Treaty
Energy
2,000
Marine
1,500
Overseas Motor
1,000
Property (D&F)
500
Property Treaty
0
2008
Split %
Direct: RI
59:41
2009
55:45
2010
54:46
2011
2012
2013
53:47
51:49
55:45
UK Motor
© Lloyd’s
Swot analysis
STRENGTHS
Brand - results of brand survey are encouraging.
Distribution model - network of coverholders and
service companies.
Ratings and Reserves
Accreditation of new Lloyd’s brokers and
coverholders
WEAKNESSES
Accessibility for regional brokers and MGAs
Competition from the companies market.
Perception issues on claims and contract certainty.
Absence of Lloyd's regional offices.
Lloyd’s in UK
OPPORTUNITIES
Becoming more active regionally.
Some disaffection between regional brokers and
MGAs and the companies market.
Building new relationships - broker networks/cluster
groups (£6.5bn premiums in their control)
Extended programme of events/activities.
99% of UK businesses are SME
THREATS (Challenges)
Volatility of the UK economic recovery.
Continuation of prolonged soft market conditions.
New regulatory regime in UK (FCA & PRA)
Need to stay ahead of the game re: online trading.
Growth of aggregators and comparison sites in
SME sector.
© Lloyd’s
Accessing the
market
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© Lloyd’s 2012
Access to Lloyd’s for EU Brokers
This roadmap is for local Brokers who are seeking access to the Lloyd’s Market for a local client
Placement
Via Local Service Company
Via Local Coverholder
Local Broker / MGA with binding authority, Underwriting
Agency
Via Eu Service Company (crossborder)
Via Eu Coverholder (crossborder)
local Broker / Agent with binding authority, Underwriting
Agency
Via Lloyd’s Broker
Become a coverholder
In countries with established licence – approval via Delegated
Authority Approval Process (contact Managing Agent and
Lloyd’s Broker)
Become a managing agent approved broker
Become a non Lloyd’s Registered Broker - approval via
individual Managing Agent registration process (direct contact)
Become a Lloyd’s registered broker
- approval via Lloyd’s Broker Approval Process
Lloyd’s
Managing
Agent
Lloyd’s
Managing
Agent – direct or
via a Lloyd’s
Broker
Lloyd’s
Managing
Agent
Lloyd’s
Managing
Agent – direct or
via a Lloyd’s
Broker
Lloyd’s
Managing
Agent
Lloyd’s
Managing
Agent – via a
Lloyd’s Broker or
direct
Lloyd’s
Managing
Agent
Lloyd’s
Managing
Agent
Risk Carrier
How to access this channel
Contact local Country Manager
>www.lloyds.com/offices
Syndicate(s)
Access Service Company details in the Coverholder Directory
> www.lloyds.com/directories/coverholders
Contact local Country Manager
> www.lloyds.com/offices
Syndicate(s)
Access the Coverholder Directory
> www.lloyds.com/directories/coverholders
Contact local Country Manager
> www.lloyds.com/offices
Syndicate(s)
Access Service Company details in the Coverholder Directory
> www.lloyds.com/directories/coverholders
Contact local Country Manager
> www.lloyds.com/offices
Syndicate(s)
Access the Coverholder Directory
> www.lloyds.com/directories/coverholders
Contact local Country Manager
> www.lloyds.com/offices
Syndicate(s)
Access Directory of Lloyd’s Registered Brokers
www.lloyds.com/directories/brokers
Contact local Country Manager
> www.lloyds.com/offices
Syndicate(s)
Access information for prospective Coverholders
> www.lloyds.com/coverholders
Contact local Country Manager
> www.lloyds.com/offices
Syndicate(s)
Access information on Managing Agents – non Lloyd’s Brokers
> www.lloyds.com/nonlloydsbrokers
Contact local Country Manager
> www.lloyds.com/offices
Syndicate(s)
Access information on becoming a Lloyd’s Registered Broker
© Lloyd’s
> www.lloyds.com/brokerregistration
coverholders
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© Lloyd’s
Improvements to the coverholder model
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)
© Lloyd’s
Coverholders (& Service Companies): Regional Distribution
www.lloyds.com/directories
Number of Service Companies
August 2014: Total 90
Number of Coverholders
August 2014: Total 1649
South East:
London:
East:
South West:
West Midlands
East Midlands
North West
Yorkshire
Wales
Scotland
North East
Jersey
Guernsey
Isle of Man
Northern Ireland
Isle of Wight
Coverholders
363
295
241
138
137
124
119
75
59
34
28
7
6
4
15
4
Service Co
South East:
London:
East:
South West:
7
42
10
0
West Midlands
8
East Midlands
North West
Yorkshire
Wales
Scotland
North East
Jersey
Guernsey
Isle of Man
Northern Ireland
Isle of Wight
1
8
5
0
5
1
0
2
0
1
0
© Lloyd’s
Source: Market Intelligence based on: Lloyd’s Delegated Authorities
Events
where can you meet lloyd’s underwriters
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& brokers?
© Lloyd’s
2015 events schedule
► 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 keith.stern@lloyds.com
© Lloyd’s
Questions?
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© Lloyd’s