The implementation of claims as a Lloyd's hurdle principle is one of the most significant regulatory developments in the market in recent years. Done well, it could fundamentally alter how syndicates approach claims management and position claims as a strategic differentiator rather than a back-office function.
In addition, on the wider global stage the success of this elevation of claims could be a driver of future business products, as well as a major selling point for Lloyd’s.
However, as with many regulatory changes, although the aspiration has been well received, the process has not always gone smoothly, and the situation has been further complicated by the issue that many in the market are still awaiting feedback for their first claims hurdle attestations to Lloyd’s.
The change came into effect on 1 January 2025 but becomes binding on 1 January 2026, elevating claims to become the fifth hurdle principle for all Lloyd’s syndicates. It joins underwriting, reserving, governance and culture, which already determine syndicate ratings and business plan approvals.
The shift to a hurdle principle means that claims performance will now directly impact syndicate ratings, with potential consequences for business volumes and market positioning.
The overall syndicate rating cannot be higher than the lowest rating given to any hurdle principle, which in the worst cases can potentially lead to restrictions on its ability to underwrite business.
“Making claims a hurdle principle is a signal to pay attention,” Alex Hindson, partner and head of sustainability at audit and consulting firm Crowe, told Insurance Insider. “Failing to meet a hurdle principle has significant implications on the potential to support a business plan shared with investors and regulators and in delivering growth.”
The overall way of assessing performance has also been revised to shift to a more outcomes-based focus.
“They want, for instance, you to show that you are treating your customers fairly. So, they will want to see what suite of information, including data, you're using, in order to judge that,” one claims manager explained. “Then they will want to say, what are you doing with it? Are you feeding that back to your underwriters. Are you investigating?”
Implementation challenges
The rollout has not been without complications, however.
The claims community initially embraced Lloyd's consultative approach to changing the claims principle throughout 2024, but many felt "blindsided” by a later lack of support and the absence of finer detail on the information required by the corporation.
The 2025 implementation year has been designated as a "soft rollout”, allowing syndicates flexibility in timing their attestations rather than adhering to a fixed reporting schedule.
This approach has created a staggered response across the market, although Insurance Insider understands almost one-third of the market stuck to the previous March attestation schedule.
However, among those who have already received their feedback, there is a high level of frustration that the Corporation hasn’t been clear on requirements or offered examples of best practice.
A number have had a “torrid time” of getting their attestation approved after prior year paperwork had quickly been signed off, in some cases with multiple back and forth attempts to get wordings in line with the outcomes Lloyd’s is looking for.
Others are still awaiting feedback months later, but no initial timescale was set for feedback so it is uncertain when they might receive it.
One of the most significant challenges facing the claims community is the shift from process-focused to outcome-based evaluation.
One chief claims officer explained demonstrating an outcome can be harder in claims where success often comes from preventing worse outcomes rather than generating measurable positive results.
The challenge extends to demonstrating claims teams' contribution to underwriting performance. This inability to quantify the claims value proposition creates complications when syndicates must independently justify their claims operation’s worth and compare themselves to market peers.
An example of this is the change in language in sub-principle four on claims management.
Previously, this stated: “Claims performance, customer experience and opportunities for improvement are regularly assessed using both data and qualitative assessment.”
For the hurdle principle, this has been changed to: “Robust governance and oversight is in place, including at executive level, to monitor and manage delivery of outcomes against expectations whilst identifying and realising opportunities for improvement.”
Data is proving to be another challenge, especially around delegated authority, where Lloyd’s draws its data from DXC/Velonetic, which isn’t comparable to syndicates’ own data. As one source explained: “You could have 10,000 claims on the claims bordereaux for delegated claims, but for Lloyd’s, that just shows up as one claim. Lead claim value on their sheet might not be your reality.”
Another echoed: “Lloyd's slice and dice their data differently to how most of us do. So it's difficult for us to take their data and then apply it internally within our team. We, for example, have had to create our own data dashboard.”
On the flipside, this is likely to drive demand for better data analytics and performance measurement tools, with several sources stating that they are exploring AI applications for managing claim lifecycles.
Elevation of claims
Despite the challenges faced, the market is taking the change in its stride with no suggestions from sources that any syndicates would outright fail to meet the new claims requirements.
Most of the market is already measuring and judging the success of claims beyond the requirements set by Lloyd’s, making this an exercise in sharing information for some.
Overall, sources in the claims market believe the change of claims to a hurdle principle is more than a regulatory requirement; it embodies a fundamental recognition of claims' strategic importance.
One source labelled it a “once-in-a-generation opportunity” to raise the profile of claims and bring it out from a “back-office function” and create ripples beyond the claims function. As such – and despite teething issues – the community is onboard with the new principle threshold.
Announcing the change in the Lloyd’s Q4 2024 market message, the market oversight director at the time, Peter Montanaro, said the shift was designed to improve overall market financial performance through “tangible improvements in claims cost management and business retention. It will seek to drive choice of where new business is placed towards the Lloyd’s brand.”
One claims source emphasised the importance of highlighting good claims performance for the market, saying “you can't have a viable insurance market unless you appreciate the value of claims”. They added that while “very few people will move to an insurer or a market for their claim service, they'll certainly leave it for it”.
This strategic elevation also addresses a long-standing market dynamic where claims departments operated with limited attention from board level.
Hindson said: “Boards will expect to have more evidence and assurance before they are prepared to sign-off the self-assessments, and this is going to drive more scrutiny.
“Management will feel more pressure in terms of the business plan and capital implications of failing to meet the required maturity level and so will want to push claims teams for more reassurance.”
In addition, the change is likely to have a positive impact in attracting and retaining talent as it moves claims further up the board agenda, which is a welcome development.
Beyond this, Lloyd’s is seeking to highlight its superior claims handling as a key differentiator in the global market to attract and retain business in an increasingly competitive international marketplace.
One source said: “They are very much alive to the fact that claims is a strategic differentiator. They want to make this sustainable. Reality is, it is about paying claims quickly and fairly.”
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