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Update on Underwriting US risks
Tom Bolt - Director, Performance Management
25th September 2014
© Lloyd’s
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Agenda
 Market results
 North America business
 Delegated Authority strategy
 Key issues for the market
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Results at a glance
30 June 2014
30 June 2013
£1.67bn
£1.38bn
£14.86bn
£15.50bn
88.2%
86.9%
Investment return2
1.3%
0.5%
Return on capital3
16.5%
14.0%
Profit1
Gross premiums
Combined ratio
Source: Lloyd’s pro forma financial statements, Jun 2014
1
Profit before tax
Actual in first six months. FY 2013: 1.6%
3 RoC calculated on an annualised basis
2
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LLOYD’S - 2013 Global premium
UK + Europe
15% + 18% = 33% 2012
US & Canada
16% + 18% = 34% 2011
41% 2012
16% + 20% = 36% 2010
44% 2011
Europe
(including UK)
43% 2010
45% 2009
US
(including Canada)
16% + 20% = 36% 2009
33%
43%
Central Asia
& Asia Pacific
Rest of
the World
12%
4%
Other Americas
8% 2012
8% 2011
Other
Americas
8%
Central Asia & Asia Pacific
13% 2012
12% 2011
7% 2010
10% 2010
6% 2009
9 % 2009
Source: Market Intelligence based on Lloyd’s Annual Reports: http://www.lloyds.com/Lloyds/Investor-Relations)
© Lloyd’s
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North America figures in 2013
► Lloyd’s total Gross net premium (GNP): £20.22Bn ($33.76Bn)
► Lloyd’s total US GNP: £8.14Bn ($13.6Bn)
► Lloyd’s total MGA GNP: £6.22Bn ($10.4Bn)
► Total Lloyd’s US MGA GNP: £2.12Bn ($3.54bn)
► Total number of Lloyd’s Coverholders: 3,912
► Lloyd’s US Coverholders: 1,025
► Total numbers of Lloyd’s binders: 8,127
► Lloyd’s US binders: 2,853 (35% )
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THE MARKET – 2013 E&S Top 10
Premiums in US$ m and apply to Lloyd’s and domestic US companies only
% change
from 2012
2013 Loss
Ratio
13%
49%
-4%
62%
15%
55%
5%
84%
805
4%
64%
777
-24%
25%
10%
52%
36%
71%
-3%
37%
15%
39%
7,099
4,832
1,440
1,072
732
617
572
547
 Berkshire Hathaway continue to expand their presence in the E&S market, which they entered in May 2013
Please Note: Loss ratios are on a calendar year basis for 2013
Source: Market Intelligence based on: SNL Financials, (June 2014) and U.S Reporting System (June 2014)
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LLOYD’S - Top 10 E&S states
2013 Lloyd’s Market Share of E&S Premium by State
39%
1,400
23%
28%
932
909
21%
32%
25%
29%
46%
29%
17%
1,333
1,200
1,000
Property
800
Energy
Liability
600
Prop + Liab
463
400
333
241
180
200
169
168
141
0
TX
Aviation
CA
General Liability
FL
Marine & Energy
NY
Motor
LA
Other Liability
Please Note: These figures do not include Reinsurance premiums
Gross Signed Premiums as registered by the US reporting system in 2013
Source: Market Intelligence based on SNL financial and Lloyd’s US reporting system (May 2014)
NY
GA
PA & Health
SC
Pecuniary Loss
MA
PA
Property
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THE MARKET - 2013
LLOYD’S
US
US$ 499bn
Licenced
2012 vs 2013
+5%
US$ 34.3bn
2012 vs 2013
+8%
US$ 47.3bn
2012 vs 2013
-2%
Excess & Surplus
lines (E&S)
US$ 212m
2012 vs 2013
+5%
US$ 7.1bn
2012 vs 2013
+13%
US$ 5.2bn
2012 vs 2013
+6%
Reinsurance
Not shown: $1.1 billion Exempt business (interstate railroads, marine builder’s risk, vessels, etc.)
Note – 1) The figures above for the market include only US based entities plus Lloyd’s figures
2) The above analysis does not include exempt business
Source: Market Intelligence based on: Lloyd’s US reporting system, RAA Reinsurance Underwriting report, SNL Financial, (June 2014)
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LLOYD’S - 2013 US profile
Total
US$ 13.6bn
Source: Market Intelligence based on Lloyd’s US reporting system (May 2014)
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LLOYD’S – US premium distribution
120%
100%
80%
43%
43%
40%
39%
60%
40%
20%
29%
29%
30%
29%
28%
28%
30%
32%
2010
2011
2012
2013
Reinsurance
Open Market
Correspondent
Binding Authority
0%
Source: Market Intelligence based on Lloyd’s US reporting system (May 2014)
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LLOYD’S - Premium trends by segment
16
13.6
Premium in US$ bn
14
12.1
12.5
12.3
12.8
12.1
12.1
12.4
12
5
10
9.1
9.2
8.9
9.5
5
5
5
6
5
5
5
Reinsurance
8.0
Exempt
8
6.5
4
4
3
1
4
1
1
1
1
4
6
3
4
1
1
1
1
1
1
1
3
Licenced
1
1
2
E&S
4
4
5
5
0.2
0.2
0.2
0.2
6
6
6
6
6
6
6
0.2
0.2
0.2
0.2
0.2
0.2
0.2
7
2
0
0.2
0.2
0.2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Source: Xchanging LEG720 (Jan 2014)
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LLOYD’S – Coverholders in the US
18
5 5
1
1
-
1
11
2
6
1
1
3
1
-
5
63
39
9
14
4
2
3
116
4 4
4 5
13 14
11 (RI)
4
58
2
11
3
14
10
8
15
12
15
9
11
10
18
9
15 23
22
11
8
8
116
20
11
20
6
3
3
64 (NJ)
8
15
46
25 (CT)
1
1
8
15
29
28
11
11
64
26 (MA)
23
4 (DC)
20 (MD)
2 (DE)
16
39
6
113
Total Coverholders
= 1025 (May 2014)
34
96
4
5


Total premium written by Lloyd’s coverholders (MGA’s) in 2013 was US$ 2.9bn
Joint outreach to this critical distribution force by London and Lloyd‘s America remains a priority in 2014.
Activities include participation in AAMGA and NAPSLO conferences and support of their member education
efforts (AAMGA University, NAPLSO E&S School)
Source: Market Intelligence based on Lloyd’s Delegated Authority Team and country manager (May 2014)
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Class of business % of MGA
premium
Global
US
A&H
£0.59Bn
10%
£0.09Bn
4%
Aviation
£0.08Bn
1%
-
0%
Casualty
£1.70Bn
27%
£0.56Bn
26%
Casualty Treaty
£0.02Bn
0%
-
0%
Energy
£0.13Bn
2%
£0.04Bn
2%
Marine
£0.65Bn
10%
£0.05Bn
3%
Overseas Motor
£0.23Bn
4%
£0.08Bn
4%
Property (D&F)
£2.37Bn
38%
£1.30Bn
61%
Property Treaty
£0.07Bn
1%
0.01Bn
0%
UK Motor
£0.38Bn
6%
-
0%
Total
£6.22Bn
100%
2.12Bn
100%
© Lloyd’s
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LLOYD’S – All lines premium trends
By class of business (Licenced, E&S, Exempt and Reinsurance)
Gross Signed Premiums in US$ m
16,000
14,000
Property Treaty
13,688
12,730
11,950
12,000
11,971
Property (D&F)
12,326
Overseas Motor
10,000
Marine
8,000
Energy
6,000
Casualty Treaty
4,000
Casualty
Aviation
2,000
Accident & Health
2009
2010
2011
2012
2013
 Total Written Premium grew by 11% (US$ 1.4bn) in 2013
Source: Market Intelligence based on Lloyd’s US reporting system (May 2014)
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Planned acquisition cost remained
reasonably constant by method of
placement….
30%
25%
20%
15%
10%
5%
2014
2013
2012
2011
2010
2009
0%
2008
Acquisition cost % of GWP
35%
YOA
Direct Binders Outside
Direct Lineslips
Direct Other
Direct Service Companies
RI Other
Source: SBFs 164 2008 – 2014 approved plans
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…..however change in business profile
causes overall planned acquisition cost
to increase
30%
20%
2010
21%
20%
21%
21%
2014
20%
2013
20%
2009
20%
2012
25%
2008
15%
10%
5%
0%
2011
Acquisition cost % of GWP
35%
YOA
Direct Binders Outside
Direct Lineslips
Direct Other
Direct Service Companies
RI Other
Grand Total
Source: SBFs 164 2008 – 2014 approved plans
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Delegated Underwriting strategy
highlights
► Audit coordination
► Compliance coordination
► Straight through processing
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Key issues for the market
► Capital
► Investment Income
► Underlying Economy
► Broker concentration
► Benign Nat Cat
► Frequency and severity
– Casualty
► Portfolio versus Subscription approach
► Regulatory pressure
– Localisation
– Solvency II
– Conduct Standards
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