Tiernan: Underperformers without credible plans ‘may not have a place’ in Lloyd’s
Lloyd’s chief of markets Patrick Tiernan has warned managing agents about submitting 2022 business plans based only on “gorging” on rate increases, while adding that perennial underperformers without credible remediation plans “may no longer have a place in the Lloyd’s market”.
Speaking this morning during the opening session of Insurance Insider’s (Re)Connect conference, Tiernan reiterated the Corporation’s expectations over business plans and how managing agents will need to demonstrate sustainable profitability.
During a fireside chat in which he discussed how the Corporation will tackle consistent under-performers, he said: “We have been clear that underperformance is not going to be tolerated indefinitely. Where there isn’t either a credible plan, or the delivery and execution of a credible plan, the reality is, they may not have a place in the Lloyd’s market.”
When pressed on the number of firms about which his team has concerns over performance, Tiernan said the proportion remains at the 15% he mentioned during the Corporation’s market address in June, which this publication later reflected on.
He said Lloyd’s had undertaken constructive talks with board executives from firms in this segment, emphasising that his team had been impressed by the openness of their engagement.
“Some felt aggrieved, but the results spoke for themselves and we had to have those conversations. We only need to be tough on those who aren’t tough on themselves,” he added.
Tiernan went on to explain that the Corporation plans to focus its energy on those who want to build sustainable and profitable businesses. “Sometimes we get distracted by fixing problems,” he said.
“We don’t want to use blunt tools or knee-jerk reactions – they have the potential to damage hard-fought relationships with customers and brokers by managing agents. It might seem repetitive but we do believe in ‘logical, realistic and achievable’ – that’s what we think a good plan encompasses,” he added.
Growth and rate rises
In discussing how Lloyd’s will assess growth requests in 2022 business plans, Tiernan warned: “I don’t think short-term plans to gorge on ratings increases is likely to be seen as a sustainable business plan by my team.
“Capability and track record are the hard currencies for us. We will continue our focus on that.”
When pushed further on how the performance management team will square that stance with syndicates’ desire to capitalise on rate increases before the market turns, Tiernan replied: “We absolutely understand that firms will take the opportunity when it’s there, but increasing rates doesn’t necessarily mean good and sustainable profitability – an underwriting plan that focuses just on rate is a pretty narrow one.”
When the conversation later turned to Lloyd’s priorities for distribution, he said there will be a renewed focus on its distribution and network strategy in the coming months and years.
Tiernan reiterated the Corporation’s plan to make the Lloyd’s market the “pre-eminent place to do underwriting in the world” and ensure its competitivity.
As the London market is braced for losses stemming from Hurricane Ida, Tiernan opened the conversation with a recognition of its impact on people throughout the US.
He said: “Our thoughts are with families and their loved ones who’ve been affected by these events. While we continue to monitor the situation, particularly the absence of power, this is where our market comes into its own.
“We stand ready to assist customers and are working with local authorities and their agents on the ground, to help those affected cope with the event. We are working with modellers and will have more to say in the coming weeks and months.”
The full (Re)Connect agenda is available here.
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