The UK Financial Conduct Authority (FCA) has said that “questions remain” about whether the modernisation initiatives at Lloyd’s of London do enough to address underlying issues in the market.
The regulator noted that the London Market’s operational expense ratio is 9% higher than similar global re/insurance centres, highlighting an urgent need for modernisation.
Lloyd’s has confirmed that this is also the case for its marketplace, which makes up significant portion of the overall London market, and where operating expenses have remained roughly the same since 1990.
The FCA acknowledged that Lloyd’s has begun to implement efforts to improve expense ratios as part of its new Future at Lloyd’s strategy, but also expressed some doubts about whether the reforms go far enough.
These comments come ahead of the planned release of the first update to Lloyd’s Blueprint One, which outlines the first phase of the marketplace’s changes.
As part of the update, Lloyd’s has said that it will be narrowing its focus to prioritise just three key targets in 2020, meaning some of the goals it outlined in September will already be put on the backburner.
The FCA went so far as to say that the London Market’s position as a global re/insurance hub could be jeopardised by its slow adoption of technological solutions to reduce high expense ratios, as well as by some complex distribution chains that do not contribute to the value of the product.
However, it added that maintaining London’s competitiveness is not one of its objectives, and is instead focused on making ensuring that it remains a “well-functioning” market.