Lloyd’s explains its vision for 2022

The insurance giant's chief of markets pinpoints his focus and his priorities

Lloyd’s explains its vision for 2022

Cyber

By Mitchell Scrimgeour-Brown

Lloyd’s is putting its under-performers on notice.

During a press briefing hosted by the insurance giant’s chief of markets, Patrick Tiernan, and chief financial officer, Burkhard Keese, Tiernan discussed the company’s market and financial priorities for 2022 and beyond.

Noting that Lloyd’s is “well placed for a sustainable future,” he said the events of the past year have placed the London-based market at an “inflection point” for profitable growth.

“I’m acutely aware of the challenging backdrop in which our market and our people are operating,” he said. “Notwithstanding the progress in unlocking the economies where the majority of our customers and staff reside, the outlook is decidedly uncertain from a pandemic, macro-economic and geopolitical perspective.”

As an example of the kind of uncertainty that is forcing insurance markets to adapt quality to new realities, he pointed to figures showing the rapid rise of cyber crimes and cyber terrorism in 2020.

“The global market for cyber is predicted to grow from just under US$8 billion in 2020 to just over US$20 billion in 2025,” he said. “At the same time, the number of ransomware incidents worldwide are reported to have been nearly 200 million in the first three quarters of 2020, an increase in the US of nearly 145% and across the world 40%.”

With Lloyd’s estimating that it will be writing about 20% of the world’s cyber premiums in 2021, this means it’s going to have to do more to increase the market’s capacity for dealing with ever more complicated risks and scenarios, Tiernan said.

“We need to have a better understanding of how the market should function, and how its underwriting claims sophistication needs to grow in order to respond to market changes,” he continued “It also means we’ll be increasing our oversight and taking more action on cyber at Lloyd’s.”

Increased oversight was a theme during the presentation, particularly when Tiernan talked about trends that Lloyd’s was seeing in its syndicates.

“The team and I are encouraged by the trends we’re seeing in the majority of syndicates,” he said, adding an increasing number of syndicates can look forward to “a supportive planning and oversight environment… to allow them to get on with growing their businesses where they see favorable conditions.”

Conversely, though, he is “genuinely concerned” about persistent under-performers who are holding back the overall market.

“Frustratingly for all, there continues to be a minority of syndicates who are holding back overall market performance,” he said.

“For the bottom 15%, it’s just not a good story. These syndicates are poorly performing and have not made sufficient improvement over the last three years. This is not sustainable and continues to be a risk to Lloyd’s. If we’re not seeing significant performance improvement during the current market conditions, this is a case for genuine concern.”

For those syndicates, he said, Lloyd’s will “elevate the principal engagement to board level” so that there is clear responsibility for delivering sustainable business plans. To ensure a more stable footing for those under-performers, Lloyd’s will ask to see a three-year plan that demonstrates how each group performance syndicate will improve to sustainable levels.

“We’ll agree to key milestones within those plans and monitor delivery against them,” he said. “If these milestones cannot be met, the discussions are going to become more existential in nature.”

Overall, Tiernan was optimistic about what the future will bring for the insurance market.

“To my mind, this is a market of great opportunity,” he said. “Fast evolving customer needs and under-insurance in key areas, in even developed economies, provide such opportunities for growth.

“I believe we can do big and exciting things for the market in the coming months and years, and here at Lloyd’s we’re going to work at pace to deliver an efficient marketplace where world-class insurers want to do their underwriting, and world-class brokers want to bring their customers.”

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!