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Underwriting improvement must stem from managing agents: Hancock

Lloyd's managing agents need to take more decisive action in ensuring their own underwriting performance is up to scratch, the Corporation's performance director Jon Hancock has said.

Speaking to The Insurance Insider after the publication of Lloyd's 2017 results, Hancock said there was "a lot more to be done" on the part of managing agents to improve the underwriting profitability of the market as a whole.

"Of course, there are some brilliant underwriting firms that will do the right things without our intervention, and then there are some that need a lot of help," Hancock said. "But actually, as a whole market there is a lot more to be done."

The second-half catastrophes had caused many syndicates to scrutinise the performance of each of their classes of business, and determine where some lines were subsidising others, the executive explained.

"If a line of business - or even a whole business - has been under water for each of the last five years, doing more of the same cannot be the answer," Hancock said.

He continued: "I am not trying to be the chief underwriting officer at every managing agent, but this is more than just monitoring. This is driving the right performance and being prepared to step in where we don't feel those portfolio decisions are being made."

Hancock admitted that it was "too difficult and too cumbersome" to do business at Lloyd's and the Corporation had a huge opportunity to make it simpler.

"In terms of our oversight responsibilities, the quasi-regulator role, we could be more targeted," he said. "I think we can give better oversight by actually doing less activity and less transaction, that's certainly the mantra I am [working to]."

Some of that would include focusing on the parts Lloyd's is concerned about and where action from the performance management division could make a real difference in results, Hancock explained.

However, the executive also highlighted better communication with insurance companies at a group level - rather than at a syndicate level - and with the UK regulators, to avoid duplication.

"We can do less activity and [provide] our oversight better," Hancock. "Again, our job is not to be the CUOs. If everyone takes the right action, then we can be a light-hand at the tiller."

When questioned on what Lloyd's was actively doing to address expenses, and in particular the level of acquisition costs in the market, Hancock said the performance management directorate needed to collect data to be "more forensic" on where the costs were coming from.

"It's easy to blame the top three or four brokers, but the dynamic between the biggest brokers and the tier-two brokers, and the coverholder and MGA model, also needs to be examined," he said.

Lloyd's would like to set sensible rules and frameworks around acquisition costs based on reasonableness and transparency, Hancock said.

"What it should not be is capping and collaring commissions - I don't think it is our role to do that. That would be anti-competitive and needs to be an individual broker and policyholder decision."

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