On a mission to modernise Lloyd’s

Lloyd’s of London CEO Inga Beale talks to Tim Garratt about creating a 21st century marketplace that embraces workplace culture and practices that are as cutting edge as its insurance solutions

CapitaGreen is a striking, state-of-the-art office tower, rising 40 stories above Singapore’s Downtown Core.

On 4 November, CapitaGreen officially became home to Lloyd’s of London’s new expanded specialist underwriting platform in Singapore, which Kent Chaplin, head of the Asia-Pacific business, described as “an exciting new chapter” for Lloyd’s.

The Singapore platform is an increasingly important hub for the world’s specialist insurance market, and the move to new, larger premises is testament to the ongoing significant growth Lloyd’s is experiencing in the region.

“Lloyd’s is now up to 24 syndicates in Singapore, and we’ve had two new ones just start in the last six months,” Lloyd’s global CEO Inga Beale tells Insurance Business on the eve of the new office’s opening. “The competitive environment here is very tough, but Lloyd’s is actually the number one writer of offshore insurance premiums from around the region into our Singapore hub.”

Beale shares her excitement at the ever-growing contribution Asia-Pacific is making to the total business the market writes worldwide. “Globally, Lloyd’s wrote about US$40bn [A$56.17bn] of business last year, and $4.7bn [A$6.6bn] was from Asia-Pacific,” she says. “Between 2010 and 2014, we’ve seen 27% premium growth from Asia-Pacific.”

Another boost to the market’s regional operations this year came from a decision of the regulator, the Monetary Authority of Singapore, allowing Lloyd’s to sub delegate underwriting authority from Singapore. Chaplin told Insurance Business in July it was expected that the decision to permit Lloyd’s to delegate that authority to third parties would be a significant contributor of revenue to the market.

And it’s not just through the rising volume of business written that Asia-Pacific is becoming a bigger part of the Lloyd’s story, but also through its role in helping to diversify the market’s capital base. “If the latest Japanese acquisitions go through via MSIG [Mitsui Sumitomo Insurance Group] and Tokyo Marine Kiln, Japanese insurers will be providing 16.5% of the entire capital to Lloyd’s globally. I think that’s a really interesting number and goes to show how much things have changed in Lloyd’s history from the days of the thousands of individual investors we used to have.

“Today 11% of our capital is provided by the individual names and nearly 90% is now corporate capital. Couple this change with the interest from countries that haven’t traditionally been a big part of Lloyd’s, and I think it’s a real transformation and I’m pleased with it.”

The soft market
In September, Lloyd’s announced its results for H1 2015. Among the highlights was a pre-tax profit of £1.19bn (A$2.54bn), down from £1.65bn (A$3.52bn) for the same period last year, while total GWP was £15.51bn (A$33.1bn), up from a total of £14.48bn (A$30.9bn) reported for H1 2014.

At the time, Beale said the results demonstrated Lloyd’s success “despite challenging underwriting and investment conditions” and predicted that pressure on pricing in insurance would continue.

So, what advice would she offer brokers about standing out and surviving in the current climate?

“It’s a lot easier to do the same old thing that you’ve always done, she says. “When I look at the figures showing a huge insurance gap around the world  … and it really is huge [Beale points to Lloyd’s research highlighting particularly significant underinsurance in 17 countries], “to me, that presents an enormous opportunity, and I’d encourage any broker to go out, look for the gaps in insurance coverage right now, and seize the opportunity.”

She adds: “We’ve conducted research with risk managers of businesses around the world – so this is also true in mature economies – which shows that less than 10% of the risks they face are covered by insurance. My encouragement to brokers is to work with us to increase awareness, using the studies Lloyd’s publishes around specific risks.”

Emerging risks
Talking about new and emerging risks, like many of her industry counterparts Beale sees huge opportunities around cyber. “We’ve really got to see a surge in demand for cyber risk insurance, because even though the market grew last year globally to a premium volume of US$2.5bn [A$3.51bn], the majority of buyers are still in the US. The US Government really wanted transparency around cyber and data breaches … so it put it on the board agenda, which has driven the demand from businesses to buy cover.

“Outside of the US, we see very little take-up, and particularly in Asia-Pac where there is very little awareness of the real business risks and benefits of cyber risk insurance.”

Lloyd’s also endeavours to drive heightened awareness of exposures around supply chains. “I remember, some years ago, being on the underwriting side, wanting to launch the supply chain product,” Beale recalls. “I think it took about two years for the first policy to be sold. The fundamental reason for this slow take-up was that businesses didn’t fully understand the extent of the potential risks given the complexity of globally interconnected supply chains.

“We’ve got a long way to go, I think, for people to really understand their entire supply chain and how something can break somewhere in the world and have a massive knock-on impact elsewhere. This is one of the hot topics in Lloyd’s emerging risks list. We’re doing a lot more work to create awareness and understanding around supply chain interconnectivity and risk exposures.”

Since September, there’s been greater discussion in the global industry around climate change and insurance, following a speech delivered by Bank of England governor Mark Carney. But at Lloyd’s, conversation about climate change’s impact on insurance is nothing new. “We’ve been quite vociferous actually – before Mark Carney got on the stage on this topic – saying how important it is for under-writers, when they’re modelling and pricing insurance and reinsurance, to make sure they’re taking account of climate change.”

Recently, Lloyd’s launched its City Risk Index, the first-ever analysis of the GDP at risk in 301 major cities as a result of 18 man-made and natural threats over a 10-year period. The research was undertaken by the Cambridge Centre for Risk Studies at Cambridge University’s Judge Business School.

Discussing the research, Beale says it showed windstorms represented the biggest single threat in Asia-Pacific. “It’s a huge issue because it’s a huge threat. Across the region, there’s a potential US$530bn [A$743.9bn] of GDP at risk over the next 10 years from windstorms, and we’ve got to be able to model nat cat threats in Asia-Pac as strongly as we can in other parts of the world. Modelling – getting granularity around data and exposures – really started in the US following Hurricane Andrew in 1992 because the industry was really caught off guard, having underestimated exposures by about 50%. That led to a huge investment in modelling around windstorms … but as an industry, we haven’t spent anything like as much as we need to in other parts of the world.

“I’d like to see much more spent on under-standing those exposures, because they’re changing all the time.”

Vision 2025
Over the next year, much of Beale’s own focus is likely be on Lloyd’s modernisation agenda, encapsulated in its Vision 2025 strategy. “This is a really tough one,” she says. “A lot of what Lloyd’s does in the way it trades is paper based. There’s lots of multiple entry of the same information throughout the process.

“So we’re embarking on a massive five-year modernisation program across the entire market. I’m going to be spending quite a lot of my time in the next six to 12 months on the modernisation piece.”

While modernisation of its systems is high on the list of priorities, so too is modernising the make-up of its marketplace. A key pillar of Vision 2025 is to ensure Lloyd’s becomes a diverse market by gender, age and ethnicity.

Beale is the first female CEO in Lloyd’s 327-year history. Until 1972, women weren’t even admitted to the market’s underwriting room.

Talking about women in insurance, Beale says there’s certainly been progress since she began her career 33 years ago, but some of the statistics continue to be disappointing. “At the director level, on boards, I think we’ve made great progress,” she says. “And if you look around at the Fortune 500 companies, we’ve got something like 18% representation of women, so the stats are improving.

“But it’s when you look further down organisations, and at executive management positions, that’s where we need to improve the representation of women.”

In its own eff orts to address the gender gap, Lloyd’s launched its Inclusion @Lloyd’s initiative last year. “This is a cross-market gathering of all sorts of individuals, from brokers to Lloyd’s syndicates to other company insurers,” Beale explains. “We’ve been working at getting people to understand the benefits of having a diverse workforce. We know there are lots of facts and figures to support why diverse teams are more successful.”

More recently, in October, Lloyd’s staged the inaugural Dive in Festival in the London market. “If you’d asked me when I started this job, would I ever have seen a celebration of diversity happening so quickly, I would’ve probably said no,” Beale says. “We had four days of celebrations focused on gender, ethnic and cultural differences, the LGBT community, and also WorkAbility, which is an area focused on people with disabilities.”

Beale says the aims of the festival extended to trying to remove some of the stigma attached to mental health issues. “People often don’t want to talk about it, and it can really affect them at work. We wanted to celebrate and educate people on the benefits of diversity, and the impact on productivity when people are able to bring their whole selves to work.”

Beale is not just the only woman to lead Lloyd’s. She is openly bisexual and recently became the first female to top a list of the world’s leading LGBT (lesbian, gay, bisexual, transgender) executives. That list was compiled by the OUTstanding network group and the UK’s Financial Times.

Speaking about Lloyd’s efforts to foster a more inclusive workplace, Beale tells Insurance Business: “We encourage employees to seek out role models, and we have run sessions on understanding the unconscious bias issue … I think the more we use words like ‘lesbian’, ‘gay’, ‘bisexual’, the more comfortable everyone will feel and the more welcome and inclusive the whole workplace will be to LGBT colleagues.”

The next generation
Turning the discussion to attracting new talent to the industry, Beale says millennials still find banking more interesting than an insurance career. “Particularly when you think of the financial crisis and some of the reputational damage to banks, it’s quite surprising,” she opines. “So we know we’ve got to do something to improve the industry’s appeal.

“I’ve been to career fairs and spoken to students, and when I start informing them about how we support not only individuals to get back on their feet but businesses, communities, cities, and countries too after a disaster, and how insurance and innovation can stimulate economic growth and investment, I think they see insurance then in a very different light.

“We’ve got to do a much better job of modernising our approach and telling the fabulous story of insurance.”

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