Lloyd’s chair Roxburgh eyes growth in Europe and US, but discipline and talent come first

Lloyd’s has a unique opportunity to expand its global footprint further: by solidifying and growing its role in the US, enhancing its presence in the Persian Gulf and in Asia – and by helping close a growing protection gap in Europe. But it must first get its house in order in underwriting discipline and talent.

Key points:
Europe protection gap an opportunity
US key market; further growth possible
Talent and discipline key for Lloyd’s

That is the view of Sir Charles Roxburgh, the chair of Lloyd’s since May. One of Roxburgh’s first jobs was overseeing the selection of a new chief executive, a process that culminated in Patrick Tiernan, previously chief of markets, talking the reins. In some ways, that drove a focus on talent from the start of his tenure. And it is something he wants to define it.

“I’d like my legacy to be that I strengthened and extended Lloyd’s position as a pre-eminent marketplace for risk,” he told Monte Carlo Today. “I use the word pre-eminent because it captures the essence of expertise, quality, distinctiveness. It’s not about size; it’s about being the real leader.”

But to truly lead, he said, wherever it is growing, the market must have the right talent. “We must attract the right people to the market and use the power of the whole market, through things like the Lloyd’s Academy, to train people: both in the traditional skills of underwriting, and the new skills of underwriting in an AI-enabled world.

“We think there’s opportunities to develop more of a wholesale market in Europe.”

“That is where much of the innovation may come from. I’m excited by how AI is already being used in the market; it is going to be an incredible driver of innovation, both in terms of what we insure and how we insure things. But the talent comes first.”

Europe’s protection gap

On geographical expansion, Roxburgh said he eyes opportunity in Europe. He cites European Commission research that identifies a growing protection gap in Europe, due to factors including climate change. He believes Lloyd’s can help close this.

“Europe is underinsured; it has a big protection gap,” he said. “We think there’s opportunities to develop more of a wholesale market in Europe. That’ll be for policymakers to consider. Our European platform in Brussels is doing well. But we see more opportunities; other ways of helping close the protection gap in Europe.”

The US has higher penetration rates, and it tops his list of target markets for growth. He stresses the importance of the US to Lloyd’s – and the rich history of the relationship. The first time a Lloyd’s chairman visited, was in 1840. “He stayed there for five months,” Roxburgh claims. “We’ve got a long history; I am proud of our position in the US, which is an important part of our business.”

Some 47% of Lloyd’s premiums income comes from the US. It also represents some 25% of the surplus lines market. But he still sees plenty of opportunity to further deepen the relationship.

“I am very positive about the economic potential of America. It’s an extraordinary economy with incredible resources: intellectual capital and natural resources. It is an important part of our business – and we make an important contribution to the US economy. Lloyd’s is critical in protecting American businesses and communities. We pay billions of claims when people need it most, supporting the US economy, covering the big, difficult, complex risks. And our role in backing innovation is important.”

Let underwriters underwrite

Roxburgh, a former director general of Financial Services at the Treasury and Second Permanent Secretary of the Treasury, is attending his first Monte Carlo Rendez-Vous this year. He noted that Lloyd’s has strong relationships with the top brokers and major carriers in the US – many of whom he will meet this week. But he is keen to stress Lloyd’s will never take a direct view on business. “We’re not going to tell a business to write more of line X or line Y. That’s for them to determine,” he said.

“But there are good growth opportunities. It’s a complicated picture on rates, but there is rate adequacy in many lines; we’ll leave the underwriters decide exactly where. But we're very optimistic about continuing to build on a very strong on position in the US, by exploiting our strength around innovation, in property and through our distribution relationships.”

He also believes there is growth potential in the Persian Gulf, an area Lloyd’s serves through its platform in Dubai, as well as parts of Asia.

“The Gulf is an exciting region, both in terms of infrastructure build and economic development, and on the capital side. Some of the world’s most sophisticated sources of capital are in the Gulf. Equally, Southeast Asia, is a vibrant area, as is India, which is going to be a hugely important market economy in the next 20 years.”

The challenge in some regions, he admitted, is participating in a way that is profitable – which means good underwriting. “We must be clear that top-line growth is not the objective; we want to build sustainable profits over the long term, by having a relevant and meaningful presence in these economies, providing a good level of protection.”

Alignment of vision

Tasked with driving this vision at an executive level is CEO Tiernan. Roxburgh describes him as the “outstanding candidate” for the top job after a comprehensive search. He also values the way that selection process meant they got to know each other. “Patrick was able to learn about me, and I was able to learn about Patrick. We are extremely well-aligned on our vision for Lloyd’s: on what Lloyd’s is and can be, and what Lloyd’s is not.”

At the heart of that alignment is a focus on its core strengths. He said their first priority must be “protecting and preserving” Lloyd’s biggest assets: its licences, brand, balance sheet, solvency ratio, even its building. “Some of these have been hard-won,” he pointed out.

And to do that long term, requires underwriting discipline. “We really need to maintain that discipline in challenging market conditions,” he said, referencing a softening market.

Only with such basics in place, can the market then strengthen and accelerate. Part of that is innovation: both around underwriting, helping emerging classes such as cyber and renewable energy develop, and through structural changes Lloyd’s has made, such as London Bridge 2, which allows capital to operate more efficiently and flexibly in the market.

He also has an even longer-term vision: one he calls “rethink and transform”. That examines what Lloyd’s might look like in 2030. “Lloyd’s can’t rest on its laurels; we must face what we need to do differently to be successful into the 2030s and beyond. I’ve been posing that question to Patrick, to the Council and then to the wider market.

“How do we sharpen our proposition to make sure we are attractive to the world’s leading carriers, brokers and investors long term? How we can we innovate and deliver more competitive solutions? What do we need to do on technology and data? There’s huge potential but we must ask those questions and find solutions.”

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