Lloyd’s has committed to cutting its market subscriptions by 10% and to making other adjustments to its business model as it battles to remain competitive.
In a letter sent to managing agents, Lloyd’s chief executive Inga Beale and chairman John Nelson discussed 2016’s tough market conditions and how the insurance giant plans to adapt.
“By any measure, 2016 has been pretty extraordinary, with Brexit and the US election catching many of us by surprise. In insurance terms, we have seen the really tough market conditions continue to deteriorate this year,” Beale and Nelson wrote.
“That said, barring any major catastrophe claims in the next two weeks, the market will have shown a strong performance, despite the tough operating environment. However, the strength of these results masks a deteriorating and worrying trend: that current year underwriting is not profitable in aggregate at the moment. This is a matter of great concern to us.”
Beale and Nelson wrote that Lloyd’s had worked hard to “maintain prudent underwriting discipline” in 2016, and that they anticipated that “the need for continuing review of underwriting plans will be necessary throughout 2017.”
Beale and Nelson also wrote that Lloyd’s was continuing to review its costs in order to operate as efficiently as possible.
“To this end, we are making changes to our organisational structure with effect from January 01 2017 as part of the Corporation Operating Model Programme,” they wrote. “Further changes will be announced in due course.” Lloyd’s will also reduce 2017 market subscriptions by 10%, they wrote.
Despite the challenges, Beale and Nelson wrote, “new markets business continues to grow – for example, Lloyd’s China now has 32 syndicates on the platform and in October we appointed the first coverholder there.
“We are also working hard to grow business in our established markets,” they added. “In the United States, our most important market, E&S business has grown by 9% through Q3 2016 compared with the same period last year.”
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