Global insurance marketplace Lloyd’s of London’s gross written premium (GWP) is expected to reach £48.9 billion by the end of 2022, but expects additional revenue growth of 14.3% next year.
If this is achieved, the total Lloyd’s GWP for 2023 would reach £56bn GWP.
That prediction came according to Lloyd’s of London Chief of Markets Patrick Tiernan: “These are extraordinary times and this is evidenced by the new past period of wrestling with the current pressures we are facing.”
These stresses were defined by the fourfold combination of high inflation, rising interest rate.
We are pleased with the work that the market has done on inflation from an underwriting reserve and capital perspective. Lloyds market forecasts peak inflation towards year-end 2022 and tapering through 2023.
Lloyd’s of London Chief of Markets Patrick Tiernan
If this tapering does not materialize, Lloyd’s expects the market to take action to further fight inflation.
This expectation is not a performance focus for 2023, but rather an attempt to ensure the market is operating at optimal levels to compete with peers outside of Lloyd’s.s, increased catastrophe losses and uncertain capital flows.
Russia-Ukraine, on the other hand, remains a manageable financial event for Lloyds – with an estimated £1.1bn net loss, according to Tiernan.
Lloyd’s had already announced in September that it expected a price correction or a complete unbundling of certain special coverages from the composite rating contracts.
Tiernan explained: “One of the later emerging features of this renewal season, however, is that increasingly exclusive wording is appearing in contracts that can lead to coverage gaps with the underlying coverages.
“As a result, we expect syndicates to work through net exposure retentions, unanticipated aggregations, revised interest rate requirements, structures, potential liquidation of an economic line of business and the resulting impact on capital and diversification factors.”
Growth, inflation and interest rate changes are pretty much consistent with Lloyd’s book as a whole, although it doesn’t lessen its focus on this critical area.
Cyber remains the fastest growing class at Lloyds – we remain aware of our role in the maturing of this market as we manage over 20% of global premium
On the other hand, D&O was the only major business that saw a mix of positive course changes but negative work. “As a result, we have not supported the growth of this class overall for 2023. I know a blanket statement and global D&O wasn’t particularly helpful, so obviously there are regional nuances,” Tiernan added.
Lloyd’s will also seek to understand in detail compliance with the newly introduced FCA rules relating to the fair value of insurance products.
Peter Montanaro, Lloyd’s Market Oversight Director, said: “We will also seek to understand how managing agents will adopt the Consumer Duty Paper published by the FCA this year. Importantly, consumer duty principles were taken into account when putting together the Rio framework.”
The Rio project was launched in early 2022 – Rio stands for the redesign of supervision. The project intends to explore changes to the Lloyd’s framework and work towards a more connected approach.
We need to ensure that management agents are able to receive and use relevant information [management information] and data to demonstrate good customer outcomes and increase consumer understanding of their products
Peter Montanaro, Lloyd’s Market Oversight Director
With over 600 market leaders attending from both the Lloyd’s and London market, it was a great way to come together to discuss our collective progress, and the support and adoption required to deliver the programme over the next two years.
The progress event opened with a keynote from John Neal, CEO of Lloyd’s, covering the initial vision for the transformation programme and the journey we have been on to get to where we are today. He talked about the overall ambition of Blueprint Two, making the Lloyd’s and London market a better, faster and cheaper place to do business. We know the work is far from over, but we’re making great strides in delivering the programme; now is a pivotal moment in our market’s transformation.
by Yana Keller
