SIRC 2019

The Lloyd’s blueprint presents a picture of a market transformed.

It sketches a future for Lloyd’s in which the value proposition for all stakeholders is enhanced, with more efficient distribution, lower operating costs for underwriting entities, greater ease of access for capital providers and an improved culture for staff.

The highly impressive document runs for 146 pages, with chapters on everything from risk syndication and data to the role of the Corporation and the eccentrically named syndicate in a box.

But there is no mention whatsoever of Lloyd’s Asia.

The drive towards building out an international footprint that characterised Lord Levene’s period as Lloyd’s chairman and the push to embrace the emerging markets associated with successor John Nelson are conspicuous by their absence.

Instead, the emphasis is on improved market access for brokers via two technology platforms, with the centre of gravity very firmly in London.

And although the messaging is not present in the document itself, it has been clear from CEO John Neal’s statements that increasing Lloyd’s market share in its US heartland is more pressing than driving Asian volumes.

In preparation for the work to transform the market, Neal and performance management director Jon Hancock have overseen an underwriting remediation process at Lloyd’s that has also taken its toll on the market’s Singapore platform – which already represented less than 2 percent of total volumes written by the market.

A succession of managing agents have ended their participation on the platform, and at least some seem to have done so as a by-product of withdrawals from whole classes of business, which may have had more to do with the performance of the London portfolio than the one in Singapore.

The list of syndicates to drop from the platform over the past two years has grown. Most recently, Argo shuttered its Lloyd’s Asia arm in September, but it followed a succession of other names including CV Starr and CNA Hardy. The Standard Club also went after its syndicate was closed.

In this environment, questions are being asked about the long-term role of Lloyd’s Asia. With collective premiums of only $650mn, a number of syndicates operating on the platform have cost issues, and there is a challenge for them to achieve the scale and diversification required to operate in a region where margins are thinner than in Anglo-Saxon markets.

Other managing agents look likely to call time on their involvement over the next 12-18 months, and look to migrate their books back to London.

But there is clearly a future for the platform, it will just have to retool itself like the rest of the market in line with the principles of the blueprint, and find ways to exploit the opportunities created.

Reduced cost from the use of the two new placement platforms will help it to address its cost issue, and the flight of syndicates could be reversed somewhat by two syndicate in a box start-ups understood to be in train.

And then there is a definite capital opportunity under the new regime, which could be considerable given the size of the Asian capital markets.

But what is clear is that Lloyd’s Asia will need to adapt to become fit for purpose in the post-Blueprint One world.

To view the SIRC 2019 special issue, please click here.

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