Operational risks such as pricing are top concerns for Lloyd’s CROs, finds LMA survey

Pricing, cost reduction and other “bread and butter” issues are the top concerns for chief risk officers (CROs) within Lloyd’s managing agencies.

That’s according to a survey by the London Market Association (LMA) CRO committee, with PwC, entitled The changing face of risk: breaking the vicious circle.

Pricing, cost reduction, change management, market modernisation, and competition are the top five risks, said the survey. These internal factors rank ahead of exogenous factors such as cyber risk and climate change.

The majority of respondents were concerned about delegation of underwriting authority, with 85 percent saying that the relatively high level of delegated business in the market is unsustainable unless the risks from these channels are managed more effectively.

Almost half of respondents said the preponderance of corporate capital at Lloyd’s means that future product innovation will take place outside the market, initiated by individual companies. The other half were undecided. Asked about talent, respondents said underwriting faces the greatest challenge relative to other industries, closely followed by data analytics.

Phillippa Smith, chair of the LMA CRO Committee and group head of risk management at Barbican Insurance, said: “In effect, these findings take us back to Risk 101: whereas we have focussed on macro-risk issues in recent years, we are now considering the bread and butter of risk management as the greatest threats."

She added: “More widely, due to potential market fatigue on big topics like cyber, Lloyd’s CROs are focussed more on the operational implications. That vein of operational risks has flowed through to the risks identified in the survey.”

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