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Lloyd’s Chairman Carnegie-Brown highlights shift towards risk-based oversight

22nd March 2018 - Author: Staff Writer

In an annual investor call last year, Lloyd’s Chief Executive Officer (CEO), Inga Beale, reiterated Lloyd’s efforts towards making market oversight increasingly risk based as well as a new approach adopted by account managers in which portfolio assessment identifies worse performing portfolios and syndicates.

Now in a recent letter to the market, Lloyd’s Chairman Bruce Carnegie-Brown has again highlighted Lloyd’s 2018 focus on a shift towards a risk-based oversight approach to address evolving market conditions.

“Throughout this year we will focus on using a risk-based approach to ensure our oversight is appropriate in giving the right level of prudential protection and to help achieve sustainable growth on modernising operations and services and on exploring new ways in which we can use technology to improve access to Lloyd’s,” he wrote.

The Lloyd’s market is undergoing a widespread overhaul and revamp of its modus operandi as it shifts gears to rev up for the technological changes impacting the wider re/insurance industry, Carnegie-Brown said “this will include an Innovation Lab, which will enable new concepts and ideas to be tested in a fast-track, fast-fail environment with the support and active involvement of the Lloyd’s market.”

In Lloyd’s 2017 annual report, Lloyd’s Performance Management Director, Jon Hancock, detailed the steps taken by the re/insurer to rewrite its market oversight, capital setting and risk management.

“Following the industry ‘market turning event’ dry run exercise in 2016, we issued guiding principles to the market in early 2017, setting out a framework on both crisis management and the business opportunities that would likely follow.

“Many syndicates took the opportunity to resubmit their 2018 business plans after the Q3 catastrophes, in the expectation that market conditions would improve.

“We introduced a new account management approach for both oversight and development activity, that we anticipate will lead to more structured, cohesive and commercially intelligent outcomes for our managing agents.

“We will continue with our plans to reinforce our risk based approach to market oversight, ensuring that we spend our time in the right places. We will seek to remove duplication of effort experienced by our managing agents where this is feasible, without compromising Lloyd’s security. We will also seek to make the syndicate capital and planning process more efficient and more focused on poor performers and high risk businesses. We will continue to focus on any areas of underperformance, ensuring the underlying business performance is robust.”

The century old re/insurer outlined in its 2017 report that its market oversight agenda for 2018 would entail: targeted portfolio reviews of underperforming classes and segments, a range of thematic reviews to identify cross-market risks and opportunities, monitoring the performance of managing agents and syndicates against plans and Lloyd’s minimum standards, and embedding the new oversight manager function into the Corporation’s interactions with managing agents.

Key performance indicators for 2018 include no new Central Fund dependent members other than as a result of a significant event and no managing agent issues resulted in a financial or reputational loss to Lloyd’s that should have been prevented or mitigated through the market oversight framework.

By the end of 2020 Lloyd’s oversight aims to enable market participants to thrive and achieve superior operating returns through a risk based performance framework.

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