Brokers praise Lloyd’s progress
Leading (re)insurance brokers Willis and Guy Carpenter have released reports praising recent progress at Lloyd’s in what was a challenging year for the industry.
In its report “The Lloyd’s Market in 2005”, reinsurance specialist Guy Carpenter highlighted the durability of the world’s oldest insurer in posting a profit for the year, despite heavy catastrophe losses.
The broker’s president of Non-Americas Operations Geoff Bromley commented: “There was a time when a year of record natural catastrophe insured losses would have spelled trouble for Lloyd’s. However, the market has been able to demonstrate a new-found resilience, posting a pre-tax gain of £1.36bn for 2004, despite absorbing £1.19bn of additional catastrophe losses, relative to 2003.”
Bromley pointed to “three very positive indicators” for Lloyd’s policyholders in the last year, with the upgrade from “A-” to “A” by AM Best, the ability of the market to raise £506mn of subordinated debt to strengthen central assets that “demonstrated its enhanced financial flexibility”, and a “welcome level of underwriting discipline”, as 2005 capacity was cut by 9 percent.
“Continued underwriting discipline is key if the market is to maintain its record of improved operating performance through the soft part of the cycle,” said Bromley.
The report also noted the substantial change affecting the London market as a whole as the new capital regime kicks in, the deadline for contract certainty approaches, and the issue of broker remuneration is resolved.
“Progress on much-needed business process reform has been slow to date, but there are signs that recent regulatory interventions have finally provided some real impetus. Lloyd’s is well-placed to take a leading role in tackling these issues and this can only be to the benefit of our clients globally,” Bromley added.
World’s third largest broker Willis in its latest Lloyd’s Briefing Note praised the Franchise Performance initiative, “which demands respect for the much-needed central cohesion but awareness of the movement of business in and out of the sphere of central control”.
In the note, Willis highlighted the strength of the market. “The security underpinning the market leaves no doubt that the reservations expressed five and ten years ago have been substantially rebutted,” adding that raising the risk based capital ratios “has transparently strengthened both the market’s financial platform and the resolve of underwriting management teams to deliver real returns on capital employed”.
“The analysis and observations within this document are clearly encouraging for the future,” said Grahame Millwater, chairman and CEO of Willis Re.
“However, simply being well positioned is not necessarily enough. Lloyd’s will need the full depth of its remarkable range of skills to navigate the pressures ahead,” he warned.