“Lloyd’s performance and capital are strong, positioning the market to meet the challenges of an ever more complicated global risk environment… A healthy marketplace is critical to enabling innovation and meeting clients’ complex needs,” suggests Rupert Moore, UK CEO, Reinsurance Solutions, Aon.
Moore’s comments stem from a new Aon report on the Lloyd’s market, in which the firm noted that the senior management team at Lloyd’s deserves credit for successfully steering the market through recent challenges, while at the same time remaining focused on its own agenda.
Aon suggested that the focus on performance management has been maintained and there have been some significant recent enhancements to the Lloyd’s oversight regime.
The firm wrote, “Price improvement has been reported for the last 20 consecutive quarters. Gross and net premium volumes are up by almost 40% since 2017. Underwriting results have outperformed the broader market over the last two years; the 2022 combined ratio stood at 91.9%, despite Hurricane Ian.
“Reserving appears robust, despite inflationary pressures, with an overall margin of 7% in syndicate net earned reserves at the end of 2022. Capital adequacy is strong under risk-adjusted regulatory and rating agency capital models; total net resources have increased by almost 50% since 2017.
“The plan for the 2023 year of account anticipates a 15% increase in gross premiums to £56.7bn, a combined ratio below 95% and a total investment return of more than 3%.”
Aon also highlighted that engagement with, and adoption of the Blueprint Two solutions from 2023 is anticipated to maintain downward pressure on the market’s expense ratio.
“London Bridge 2 creates the potential for significant new capital resources to be drawn to Lloyd’s to support future growth,” the firm added.
Aon stated that some unresolved questions remain, notably around the ultimate cost of insured losses stemming from Russia’s confiscation of aircraft, the pace of digital modernisation and how Lloyd’s plans to address the loss of treaty reinsurance market share observed over the last decade.
Though, from a broader perspective, the recent drive for innovation is “welcome against a backdrop of seemingly continual elevated risk”, and there is “potential for it to be harnessed to significantly greater capacity if London Bridge 2 succeeds in capturing the imagination of institutional investors.”
Rupert Moore, added, “We are encouraged to hear John Neal expressing his belief that Lloyd’s treaty reinsurance book could, and should, be 50% larger.
We will be working with the leadership team to find ways additional to support this and recapture market share and market leadership.
“Foundationally, insurers need to define their growth strategy and enhance operational, underwriting and capital efficiency – and then execute with advice on new entrants, sourcing capital for syndicates and structuring legacy transactions. This is underpinned with reinsurance to deliver required reinsurance capacity, managing earning volatility and capital needs.”
Mike Van Slooten, head of business intelligence, Reinsurance Solutions, Aon, said, “Lloyd’s has strong forward momentum under a senior leadership team that has successfully guided the market through a very challenging period and is thinking very strategically about its global role.”
