The Lloyd’s planning process has not been one-size-fits-all
The Corporation of Lloyd’s has taken a huge amount of flak for the way it has gone about its efforts to close the performance gap.
There is no shortage of disgruntled market executives willing to decry Lloyd’s in private for the crackdown.
Lloyd’s has been uncommercial in its approach, they say. It has lacked flexibility. Clients will think the market is closed for business, they complain. And competitors will say it is closed for business.
They acknowledge that Lloyd’s has a loss ratio problem and an expense ratio problem, but lower premium levels will hit the expense ratio and higher capital levels will narrow already compressed returns.
And immature businesses that have already sunk money into creating Lloyd’s platforms are stuck in limbo – given the permission to carry on but in many cases unable to grow to reach critical mass.
Then there are the complaints of the top performers – which are often the most vocal in their criticism.
The Corporation has had a cookie-cutter approach, they fume, with the top performers being punished for the sins of lesser syndicates whose problems could be foreseen years ago. The best businesses kept their growth in check through the soft market and should be allowed to grow where they see opportunities, they fulminate.
This has clearly been a very difficult business planning process across the market, and its final stages and the run-up to coming into line will also be challenging for syndicates looking to source additional trade capital as supply shrinks.
No doubt there is truth in some of what the market’s complainants are saying and what its external detractors are purveying.
But I think the criticism that Lloyd’s has not differentiated between its weaker and stronger performers is probably overdone.
Lloyd’s will shrink in the aggregate in 2019, whether that be by 7 or 10 or 12 percent remains to be seen. But there will be pockets where growth is permitted – typically because of a combination of innovation and relatively strong performance.
Aegis said last week that it had been approved with a 5 percent increase in planned premium levels. Much of this growth will come from its broker-access digital platform.
Beazley has been given permission to grow the stamp capacity of its beta syndicate from $50mn to $133mn in its second year of operation.
And Apollo was given approval to launch a new special purpose arrangement with as much as £130mn ($167mn)of stamp capacity because it is devoted to servicing the sharing economy.
None of that is to say that these businesses had an easy time passing through the planning process. Beazley Beta was slated to be much bigger earlier in the year. Aegis restructured and scaled back its accident and health account.
But, although these businesses have been given a hard ride, they are being allowed to grow. For poorer performing syndicates proposing to do more of the same, that will absolutely not be the case for 2019.
So, although the planning process has been tough for every managing agent, it has not been a case of one size fits all.