We spoke with Inga Beale, Chief Executive of Lloyd’s of London at the Monte-Carlo Reinsurance Rendezvous this week, to discuss the current events affecting the market as well as her views on a number of key market issues.
We began by asking what the Lloyd’s CEO thinks about the impacts of hurricanes Harvey and Irma, what plans the Lloyd’s market has for such catastrophic events and her views on the market’s stability at a time of stress.
“Given the series of events unfolding it could have a huge impact and we will be getting out our monthly turning event plans and putting them in place. Particularly in this era of Solvency II and capital modelling it is important for any regulator to make sure everyone is going to be able to pay their claims,” Beale explained.
“From a Lloyd’s perspective we’ve done a lot of modelling around the exposures, we feel very comfortable we’ve got great financial strength, our capital base can be relied on and that’s not a concern. But we also want to think about what would it do for the market and could there be a series of losses that could trigger a market turning event? What are the repercussions and how could the market benefit out of that, after of course it’s fulfilled its liabilities in such tragic events,” she continued.
There is a considerable amount of discussion about the potential for rate rises in reinsurance and with Lloyd’s likely to take its share of the losses we asked Beale about the chances of a period of hardening emerging.
“We saw some time ago with the introduction of modelling that you’re pricing for the exposures you’re taking on,” Beale explained.
“Fundamentally it’s because we’re modelling specific exposures that we’re taking on region by region [that rate movement tends to be localised]. And therefore if it’s US that’s had loss experience that’s going to be hit more than say Europe, and that’s already started to happen. But with reinsurers being global, there might be a certain impact that is on a global basis.”
With some capacity likely to be drained from the reinsurance market as a whole, companies and their backers, as well as institutional investors will be looking for ways to reload or enter the market.
Lloyd’s has done a significant amount of work on how it responds to losses, and Beale explained that in a post-event environment the market stands ready to help people access risk related returns and provide stability to the underwriters operating there.
It is key to Lloyd’s and its participants that the capital base of the market can be relied upon and Beale believes there won’t be any trouble topping up where losses may have drained some of the capacity at Lloyd’s.
“Lloyd’s mechanisms allow people to be up and running relatively quickly [if capital comes in post event],” commented Beale.