Yesterday, Lloyd’s presented their November 2020 market messages.  Slides from the presentation can be found here.

A variety of speakers from Lloyd’s contributed, including John Neal, the CEO.  He opened by summarising the significant performance in the market since 2018 as evidenced by both the four consecutive years of rate increases and improving attritional loss ratio.  Performance is still the top priority of John Neal and his team; “profit first, then growth”.

In respect of 2020, it has, of course, been a challenge for the market – as it has for most of society.  Lloyd’s did respond well and continued to trade smoothly.  But Covid-19 is still a live catastrophe event.  Uncertainty will remain for the foreseeable future.  For 2020, the impact of Covid-19 has meant that in some lines, premium income will not reach the planned levels and this trend is likely to continue into 2021 as economies remain to a greater or lesser extent disrupted.  The fragile state of some areas of the global economy are somewhat ameliorated by the very positive rate growth in Lloyd’s which continues apace.

This economic uncertainty has led to Lloyd’s introducing a review of all 2021 business plans in the first quarter of the new year, so should material changes occur in the next few months, plans will be updated to reflect global conditions.  Lloyd’s mantra around business planning is ‘Logical, Realistic, Achievable’ (LRA) and so it makes sense to be able to review plans given the delicate state of the economy.  Another consequence of this LRA model is that Lloyd’s has imposed a differential approach to business planning based on the track record of syndicates.  Simply put, the better performing syndicates have been allowed to grow more into this improving market.  The market is planning on writing 6.5% more in 2021 than the original plan for 2020 - this will result in £41.2bn being written next year if the plan is met.  This figure is 13.2% higher than the most recent estimate for the 2020 year of account, reflecting the reduced income for 2020 as a result of the lockdowns caused by the pandemic.

On average, the Light Touch syndicates, the better performing syndicates, will grow their premium income by 18%.  Standard-rated syndicates, the majority of the market, have 12% growth and the High Touch syndicates have got only 6% growth.  It is also interesting to see what fuels this growth:

  • Light Touch – 18% growth split roughly equally between rate growth and greater levels of exposure
  • Standard – 12% growth, but limited increase in exposure
  • High Touch – 6% growth, but exposures have been reduced

Closing remarks from John Neal included the comment that the underlying performance has improved in a challenging environment, but that the work has not finished.  A ‘laser focus on performance management must remain’ and all managing agents have been charged with delivering sustainable, long-term profitability.  The market conditions will allow growth in 2021 and the ambitions of the better performing syndicates are being rewarded with appropriate plans.  Delivering on these plans is absolutely vital and will be a major determinant of success for the market in 2021.