Lloyd's Market Message September 2024 and future growth plans
This quarter's Market Message was delivered by Rachel Turk, CUO of Lloyd's, and concentrated upon the areas of US casualty, cyber and legacy deals.
A video recording of her speech is available here as well as the slides.
A recent recording of Rachel being interviewed by AM Best at the Monte Carlo Rendezvous is available here, talking about the need for Lloyd's to make sustainable profits, viewing this as essential for credibility and sustainable growth.
The emphasis of her Market Message speech was as follows:-
- Is current pricing of US casualty adequate for coping with the growth in US losses caused by increased jury awards and generally inflation linked claims costs - syndicates have been cutting back (as have the large European reinsurers) but without tort reform by all US states there is sceptism that profits will be made and so Lloyd's will review any syndicates' growth plans in this class;
- Legacy deals whereby syndicates buy reinsurance for their back years' liabilities will now have to be screened by Lloyd's before they are signed - they are just as significant as new entrants to Lloyd's in terms of its capital stack;
- New cyber Realistic Disaster Scenarios to be provided for guidance in 2025 for use with 2026 underwriting. Lloyd's will be requesting from managing agents aggregate exposure data to build a picture of Lloyd's exposures.
The very successful remediation of syndicates' worse performing books of business in previous years has put the market in a strong underwriting performance turnaround as this year's half-year results demonstrated with a combined ratio of 83.7%. This "top down" intervention process will not be quite the same going forward with Rachel Turk expecting syndicates to embed discipline internally which will give them the credibility to grow. Lloyd's does not want to lose its top quartile performance during the years ahead and to achieve that syndicates must maintain tough and technical underwriting discipline.
This messaging is supporting the recent remarks by Lloyd's CEO John Neal that as (re)insurers are benefitting by being in a "super-cycle" with premium income growing at twice GDP, (re)insurers can thrive despite being in a uniquely risky world. John Neal wants to see the market attract substantial new players and capital providers, in order to grow the size of Lloyd's to US$100bn from the current US$80bn approximately. Lloyd's has benefitted from a recent upgrade by AM Best to A+