New capital a strategic threat: Lloyd’s
The recent influx of capital into reinsurance from the capital markets has been identified by the Lloyd’s market has one of its key strategic threats. But the market has also identified that it could benefit from this influx.
Lloyd’s made the observations in its annual report, released following its 2013 results last week. The market said that changes in the distribution landscape and the increasing competitive threat from non-traditional capital had the potential to reduce the volume and quality of business shown to the Lloyd’s market.
In response to this, the market identified the challenge of meeting this threat as being one of its strategic priorities.
“These areas fall within the ‘strategic priorities’ around which the next iteration of Lloyd’s strategic plan is being built,” the report said. “Work is under way to assess the potential impact of both the evolving strategies and actions of brokers and of the influx of additional non-traditional capital entering the market. The strategic plan will outline Lloyd’s response to these issues and identify specific actions.”
This sentiment was echoed in comments made by John Nelson, the market’s chairman. Covering a number of challenges facing the market, he named this threat fourth, following underwriting discipline, modernisation and the ability to innovate.
“Fourth, Lloyd’s, as a market, has the opportunity over the medium and longer term to harness capital, from traditional and new sources, to meet the growing demand for specialist insurance. This will require imagination and innovation in developing the right structures – blending this new capital with the right approach to underwriting discipline, risk modelling and measurement, and appropriate pricing,” Nelson said.
