Despite Growth, Challenges Mount For Lloyd’s Of London Market
Despite the growth trajectory of Lloyd’s of London market, Reinsurance broker Gallagher Re has raised concerns about internal and external challenges for the insurance central market in the United Kingdom.
In the maiden Lloyd’s of London Market Report, Gallagher Re which tracked the market’s capital, profitability and positive trajectory in terms of performance, reforms and profitability, raised concerns about the broader inflationary environment, natural catastrophe losses, and Russia’s invasion of Ukraine as well as their potential impact as key priorities and factors that could frustrate the positive trajectory of the market.
On the internal side, the report highlighted challenges around the formulation and implementation of ESG strategies and other Lloyd’s initiatives including digitisation and modernisation.
Tom Wakefield, UK CEO of Gallagher Re said, “Lloyd’s made great progress in 2021, particularly given the natural catastrophe burden that hit the market,”
According to the report, reinsurance broker Gallagher Re noted that a number of both internal and external challenges remain “critical concerns” for the Lloyd’s of London market, despite measurable progress last year.
“A relentless effort to improve syndicates’ performance has led to satisfactory results, which bolster the market’s sustainability and its credibility. Lloyd’s steadily decreasing attritional loss ratio points to the positive performance impact of portfolio remediation and rate increases,” he said.
“Challenges remain, though. Maintaining or even stabilising the positive trajectory in 2022 will be frustrated especially by intensifying inflationary pressures and their impacts.”
“That said, we see a level of momentum not just in underwriting performance, but also in market reform measures, which have taken a big step forward through the agreement this year of a data standard for electronic trading. Lloyd’s remains a market which we will promote to our clients as resilient, innovative, and strong.”
Analysis of various multi-year metrics by Gallagher Re demonstrates that efforts to improve the sustainability and credibility of Lloyd’s market are already having a positive impact, with most Lloyd’s syndicates achieving a sub 100 per cent combined ratio in 2021, and most trending towards more profitable results.
In the same vein, by viewing the breakdown of Lloyd’s profit and loss since 2011, the analysis highlighted a period of recent volatility and increased risk, but most notably the marked turnaround in underwriting performance despite reduced investment returns.
Positive trajectories in attritional loss ratios are also evident, as they continued on a five-year decline reflecting continuing rate momentum across Lloyd’s following 16 consecutive quarters of positive movement as well as the impact of remedial work undertaken.
“We found a moderate correlation between the mean and standard deviation of each syndicate’s combined ratio over the period 2012 to 2021,” explained Shireen Gammoh, Gallagher Re’s Head of Strategic and Financial Analytics.
“While that suggests more volatile syndicates have tended to outperform, it demonstrated that consistent profitability was also achieved with lower volatility. Our analysis further shows that the general spread of performance across the market has significantly narrowed, and shifted the market towards a profitable result in 2021 versus previous years.”
Comments are closed.