Lloyd’s bosses vow to tackle bad business, laddish culture
Lloyd’s bosses vow to tackle
bad business, laddish culture
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He added that it was not the market’s
intention to drive rates up through that process.
“That was an output rather than an aim,
but it coincided with other big players doing
the same thing and that has been helpful.”
Hancock said that losing £4 billion of
business was never a target, rather it was the
natural outcome of the business planning
process, and that removing poor business will
remain a continued focus for the market.
He said that (continued on top of page 4) >>
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MORE UNPROFITABLE BUSINESS WILL
be forced from Lloyd’s as part of this year’s
performance review, although it will also take
a more nuanced approach and implement
what it called a risk-based approach to
regulatory oversight, according to its senior
Chairman Bruce Carnegie-Brown, chief
executive officer John Neal and performance
management director Jon Hancock held a
roundtable press briefing in Monte Carlo
yesterday at which they elaborated on some
of their plans for the market in terms of
performance and changing its culture.
They said that, as they move into the
2020 planning cycle, they will continue to
focus on the poorly performing bottom
segment of the market, which is dragging the
whole down, while encouraging syndicates
performing well to do more of what they are
“We lost £4 billion of business last year;
this year’s planning process will be more
nuanced but there remains plenty of work to
do,” Carnegie-Brown said.
HELPING GOVERNMENTS MOVE RISK
off their books can provide the risk transfer
industry with a big opportunity for growth—
but a collaborative approach is required,
Charles Cooper, chief executive of reinsurance
at AXA XL, told Monte Carlo Today.
He said that a growing number of
initiatives have come to market with this goal,
including US flood risk, US mortgage risk
and UK terrorism risk—on top of a number
of US wind pools that have used reinsurance
for many years.
As governments increasingly struggle to
meet budgets and balance the books, more
opportunities will emerge.
“We think this is the right thing to do for
both the world and for the industry to achieve
growth,” Cooper said. (continued on page 4) >>
Shape the future
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‘No crystal ball’
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More flood risk
can go private
“We will allow the top performing end of
the market less oversight and focus on the
He admitted that last year’s planning
process had been tough—and a shock to some
in the market.
“There was support from the market, but it
was also a case of people saying ‘it’s the other guy,
not me’. We encouraged people to look in the
mirror. We lost £4 billion of business, but that
was to create the opportunity for £7 billion.”
In association with:
SEPTEMBER 11 2019
<< (continued from top of page 1) while the
market’s overall combined ratio for 2018 was
104.5 percent, this disguised a very wide range
in performance: the top 20 syndicates posted
a combined ratio in the low 90s; the worst 20
performers posted a combined ratio of more
than 130 percent.
“It is a question of getting syndicates to
do more of what they are good at and less of
what they are not good at,” he said.
“More business will be removed, that is a
continuous process of improvement. We are
not focused on portfolios that have had one
bad year but those that drag the market down
year in, year out.
“If they do not improve, we will remove
them—while encouraging the top end as
well. The bottom decile is destroying value
in the market and having a disproportionally
negative effect on the whole market.”
Hancock also confirmed that its regulatory
approach will reflect performance. “We will
be taking a risk-based approach to oversight.
Where syndicates are performing well, if they
deliver on what they promise, we will look at
what appropriate regulation should look like.”
Drive to diversify
Some market observers have suggested that
one of the causes of Lloyd’s problems has
been a drive to diversification in syndicates,
driven by Solvency II capital efficiency rules
that reward diversification. Neal was quick to
dismiss this notion.
“That is utter rubbish,” he said. “People
have a responsibility to write for profit. I get
the intellectual point but to me it is a weak
excuse. At the end of day, you need to be
writing profitable lines of business.
“If we are going to be best in class
globally, we need to be rigorous in seeking
bad performing businesses and promoting
good performing business—while also
demonstrating innovation and performance.
“Underwriting is a complex business and
price is only one factor. We want to get under
the skin of what makes good underwriting
and how to manage the cycle.”
Carnegie-Brown, however, added:
“Solvency II probably has pushed people to
diversify and we are aware that the market’s
strength has always lain in its specialised
underwriting. We are thinking thoughtfully
The executives also discussed the challenge
of changing the market’s male-dominated
culture, which has been subject to much
criticism this year. At its annual Dive-In
Festival, which focuses on diversity, later in
September, the market will reveal the results
of a survey it commissioned in May designed
to understand the working cultures that exist
in the market. It will also unveil plans to
change the market’s culture for the better.
“The results will not be surprising, but they
are sobering,” said Carnegie-Brown. “We want
to call out and address these issues. I suspect,
as we do that, we will experience a few bumps
and certainly more negative sentiment.
“It may appear we will go backwards before
we go forward, but that will also be part of the
He added that he believes the process of
change would be helped by dealing with some
cases very publicly—to warn the rest of the
market certain behaviour will not be tolerated.
“It would be good to find a few to hang—
that would change the mood,” he said. “We
want a proper process and it needs to be fair,
but we also want to send a powerful signal to
Neal backed him up. “If we do not take
tangible action, I am not sure we will make
the difference we want to achieve,” he said.
“When the scandal first broke, there was
regret but there was a sense of denial—we
really want to set the right tone now. That is
essential because we also want to attract the
right talent; if we do not do that, we will not
AXA XL homes in on government de-risking opportunities
<< (continued from bottom of page 1)
“Governments are increasingly seeing the
value of this, and how it can speed up recovery
in the aftermath of a disaster.”
AXA XL has released a report on this
issue, Government de-risking which examines
the opportunity in this sector. It notes that
despite the issue being talked about for
decades, “it seems we’ve hardly made a dent”.
According to a 2018 Lloyd’s report on the
subject, the underinsurance gap was $162.5
billion in 2018, which is only a 3 percent
reduction during the past six years. Emerging
economies account for 96 percent of the total
global insurance protection gap, with two of the
world’s most populated countries, China and
Monte Carlo Today Day 4 Wednesday September 11 2019
India, having the largest gap in dollar terms:
$76.4 billion and $27 billion, respectively,
followed by Indonesia with $14.6 billion.
The private re/insurance market can
provide the necessary cover to help close
the protection gap, Cooper said. He believes
the re/insurer is better positioned to do this
now it is part of the (continued on page 9) >>