11 September 2017 Insurance

Parts of the Lloyd’s Vision 2025 ‘should be reconsidered’

Despite its long history and its distribution prowess, Lloyd’s and the London Market are at a point of a central transformation, said Nick Frankland, CEO of the UK business at Aon Benfield, speaking at a press conference the reinsurance broker held at the Monte Carlo Rendez-Vous yesterday (Sunday September 9).

“Lloyd’s needs to deliver on its targeted operating model: it needs the Aon-led PPL electronic placement platform to be put in place, it needs digitisation of its back office, and it needs these much more quickly than I believe they are currently planned,” said Frankland.

He believes this will help to reduce the market’s high expense ratio of 41 percent, a figure 8 percent higher than the industry average.

Lloyd’s will also need to address its implicit distribution costs, he noted, to ensure that a greater share of net premiums goes towards paying claims and improving profitability.

Currently that amount is between 40 and 45 percent; Frankland said it should be nearer 60 to 65 percent.

He suggested it may also be time to reconsider parts of Lloyd’s Vision 2025, to focus more on Lloyd’s core franchise, rather than chasing business in overseas markets.

“Now is the time to focus on the hurricane losses and the damage they’ve done, and ensure claims payments are processed as quickly and efficiently as possible, which Lloyd’s has a fantastic history of doing.

“But it also needs to be focused on transformational change and it can’t be distracted by losses, however extreme,” Frankland said.

“It needs to transform to remain relevant and fit for purpose. With departure from the EU still to come, Brexit cannot be allowed to distract from the attraction of trading in London,” he said.

Over the last three years, eight new syndicates have been approved at Lloyd’s, bringing £750 million ($990 million) of new capacity. Frankland suggested this trend will continue into 2018 with more new entities formed.

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