Big loss will push many combined ratios over 100%

The Lloyd’s market is facing difficult times and a big loss would push a number of players, many of which already have combined ratios close to 100 percent, into loss-making territory, according to Darren Doherty, chief executive officer of Pioneer.

“The market’s a pretty tough place at the moment,” he told Monte Carlo Today. “There are still pockets of opportunity and profitability, but those are being heavily hunted this year, which is more challenging—the Lloyd’s results overall bear that out.”

Doherty said that for the market to harden a combination of things would have to happen, but a loss would cause problems for many players.

“A catastrophe would obviously push a number of players to the wrong side of the line—a number of people are just nudging the 100 percent combined ratio and any other non-planned activity would obviously have a fairly devastating effect on certain players,” he said.

One effect of the prolonged soft market is that it has forced companies to look more closely at the costs associated with their business models, including the distribution model.

“People are looking at distribution heavily,” he said. “The cost of getting the business from the client to the carrier accounts for around 40-odd percent of the capital. There are a lot of people scratching their heads about that level of costs and ways it can be improved.

“As a market, we’ve got to look at being more efficient. We have to get capital closer to the client, the ultimate buyer, because if this is the new normal for the market there isn’t enough profit in it to satisfy the capital requirements.”

Doherty said that Pioneer is comfortable operating at the smaller end of the market, which he believes is also more profitable. “The bigger players are in every class and our positioning has always been that we want to stay at the other end of the spectrum, which tends to give historically better results.

“Our intention is to stay in that end of the field. We want underwriting integrity in the business, to manage the portfolio correctly and go through the cycles. We won’t grow just for the sake of growth, with diminished returns.”

Founded in 2011, Pioneer now has 19 teams that cover different product offerings, of which seven are in the US, one in Zurich and the remaining 11 in London.