Strong portfolio management is becoming an increasingly important tool in the London Market to deliver underwriting profit, according to a new report by Lloyd’s of London and Willis Towers Watson (WTW).
The two organisations conducted a study of senior executives and underwriters in the London Market to better understand the impact of portfolio management on business performance.
By comparing performance to 2018 profitability, they established a clear link between good portfolio management and the likelihood to deliver sustained underwriting profit.
“First-class underwriting performance is a critical foundation upon which Lloyd’s strategy to build the world’s most advanced insurance marketplace is based,” Caroline Dunn, Head of Underwriting at Lloyd’s.
“The highest underwriting standards are essential to protect customers, the market’s reputation, the central fund and our credit rating, as well as ensuring the long-term sustainability of the Lloyd’s market,” she continued.
“Despite this, relatively few companies have looked in depth at what constitutes best-inclass portfolio management and what advantages there are to adopting best practice. This is particularly relevant for underwriting, where the roles are evolving to become more rounded, managing portfolios rather than being just single-class specialists.”
Richard Clarkson, Head of London Market Consulting at Willis Towers Watson, also commented: “We identified three strategic drivers impacting the London Market today – performance remediation, market modernisation and culture, including skills needed in the future.”
“Portfolio management is a critical capability that operates across all these drivers and will become even more important as insurers move to adopt new business models as the market modernises,” Clarkson went on.
“The report findings should benefit Lloyd’s market participants by describing what constitutes a strong portfolio management capability, which may allow them to systematically fully understand and improve the performance and financial sustainability of the different parts of their business.”
“Portfolio management supported by more accurate data makes a huge difference to today’s market. Until recently, this latest set of renewals would have seen blanket market pricing across various business lines versus what we have today, which is very specific pricing to each client depending on loss record, portfolio composition, strength of management team and broader corporate relationships,” said Clarkson.