A market survey by the Lloyd’s Market Association in conjunction with PwC has identified pricing, cost reduction, change management, market modernisation, and competition as the top five risks facing Lloyd’s.
For Chief Risk Officers within Lloyd’s managing agencies, these internal factors rank ahead of external factors such as cyber risk and climate change and reflect a shift in focus from specific macro issues towards fundamentals.
85% of respondents agreed that the relatively high level of delegated business in the market is unsustainable unless the risks from these channels are managed more effectively.
Meanwhile, almost half believe that the prevalence of corporate capital at Lloyd’s means future product innovation will take place outside the market, initiated by individual companies. The other half were undecided.
In terms of talent, respondents said underwriting faces the greatest challenge relative to other industries, closely followed by data analytics.
“In effect, these findings take us back to Risk 101: whereas we have focussed on macro-risk issues in recent years, we are now considering the bread and butter of risk management as the greatest threats,” said Phillippa Smith, Chair of LMA CRO Committee and Group Head of Risk Management at Barbican Insurance.
“More widely, due to potential market fatigue on big topics like cyber, Lloyd’s CROs are focussed more on the operational implications. That vein of operational risks has flowed through to the risks identified in the survey.”
Paul Davenport, LMA Finance Director, added, “The timing of the survey, only a couple of months after a bruising business planning process, is likely to have strongly influenced views.
“But we believe the survey results are reflective of current risk issues that the boards of our member managing agencies are grappling with on an ongoing basis.”