Lloyd’s anxious on reinsurance cover for syndicates, tightens oversight

Lloyd’s is showing concern that syndicates might not make it through the reinsurance renewals with all the coverage they had hoped for and is now demanding a closer look at reinsurance planning.

Conditions in reinsurance have “materially shifted” and syndicate reinsurance now “requires close attention,” Lloyd’s chief of markets Patrick Tiernan said during Lloyd’s Q3 market message.

Lloyd’s has demanded all syndicates present their full array of assumptions on outwards reinsurance rates, limits, retentions and availability of cover to “help evaluate underwriting plans,” Tiernan said.

“We don’t expect you to have a crystal ball at this stage, but we do need you to be cognizant of current conditions and ensure that your 2023 business plans have thoughtful assumptions and sensible contingency arrangements,” Tiernan said.

The goal: “to avoid the need to resubmit with all that involves in Q1”

Property and unspecified specialty classes will be under the microscope as Lloyd’s watches, with evident concern, “the availability, structuring and terms of upcoming reinsurance placements.”

Lloyd’s may “actively support” syndicates providing inwards reinsurance and believes its approach should be visible in flexibility in cat risk appetites and capital requirements to qualifying syndicates. Lloyd’s can get more growth in the LCM5 exposures, used to measure and manage overall cat exposure, “while still remaining within our overall appetite,” Tiernan said.

Not everyone is invited. “We cannot show the same flexibility on either capital or growth where plans are built on optimism rather than demonstrable experience.”

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