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Lloyd’s ‘open for business’ despite capacity crackdown

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Lloyd’s says it is “open for business” in Australia, despite market concerns that securing capacity is becoming a challenge.

After recording a £2 billion ($3.73 billion) loss in 2017, Lloyd’s made it clear earlier this year that it would walk away from “bad business”.

The new approach is having an impact on underwriting agencies in Australia, with Lloyd’s capacity not as accessible as it has formerly been.

As insuranceNEWS.com.au reported on Friday, brokers attending the Underwriting Agencies Council expo in Sydney expressed disquiet at the development, pointing out that the market has previously been able to offer capacity when local insurers’ risk appetites are low.

But Lloyd’s General Representative in Australia Chris Mackinnon told insuranceNEWS.com.au the “performance gap” needed to be tackled.

“While there is no doubt that some [Australian] coverholders have been impacted by the portfolio review process and consequential changes in syndicate business appetite, Lloyd’s remains open for business with significant capacity available for both existing portfolios, and also for new and innovative business, which is able to demonstrate sustainable profitability,” he said.

“Lloyd’s is committed to its policyholders and it is that commitment that drives us to tackle the performance gap in the current challenging market.

“The combination of improving long-term profitable performance and delivering innovative products and services to our customers more efficiently is at the heart of Lloyd’s strategy to ensure the market thrives and remains focused on the future.”

Mr Mackinnon says Lloyd’s has enjoyed consistent premium growth in Australia over the past five years, pointing to the latest Australian Prudential Regulation Authority statistics that show premium placed with Lloyd’s underwriters has risen 22.4% to $2.45 billion for the year to December 31.

In a speech earlier this year CEO John Neal described Lloyd’s 2017 performance as “totally unacceptable”.

“It’s not acceptable that between 2015 and 2017 unprofitable syndicates have eroded 87% of the market’s profit,” he said. “The view that it will ‘all come out in the wash’ has been harmful for the collective.

“The old adage that every business has a price is wrong: bad business is simply bad business, and it shouldn’t be happening in this marketplace.”

Mr Neal also flagged a “new geographical focus”, prioritising developed markets with the greatest potential for further growth, “such as the US and new opportunities in Europe through Lloyd’s Brussels”.

Underwriting Agencies Council CEO William Legge says the impact on the Australian market is no surprise and most agencies had time to prepare.

“[Lloyd’s] has had some horrendous results and it doesn’t take much nous to realise things were going to have to change,” he told insuranceNEWS.com.au.

“After many years of saying, ‘Just go to Lloyd’s and get it done,’ it isn’t that simple and they are asking a lot more questions.

“Finding capacity is a bit of a challenge, but that is what we do in this business. Local markets are seeing much more business being offered to them.”

Mr Legge says the impact is being felt across all lines of business.

“They are going through the syndicates’ books and asking, ‘Are you making money, and if not can you turn it around?’ If the answer is no, then they are being told, ‘Just don’t do it any more.’ It has created a challenge, but it was foreseeable.”

Mr Legge says last week’s Underwriting Agencies Council expo in Sydney broke all the attendance records, with 105 exhibitors and 520 brokers at the new Hyatt Regency venue.

“There was a great attendance and good vibes from both exhibitors and brokers,” he said.