On a mission to modernise Lloyd’s

On a mission to modernise Lloyd’s

On a mission to modernise Lloyd’s 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 evergrowing 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 subdelegate 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 Tokio 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.”
 

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