Third party capital is paramount to success at Lloyd’s
Lloyd’s must embrace third party capital if it is to remain relevant in a competitive market, according to a new strategic plan set out by the insurer.
The plan, which states that the Lloyd’s model was built around the management of third party capital, says that growth of non-traditional products and capital is now an established feature of the reinsurance industry.
Lloyd’s’ newly appointed CEO, Inga Beale said: “Diversity of capital underpins Lloyd’s current and future strength – strategically and financially. Encouraging diversity by both geography and type of capital is important, ensuring that Lloyd’s responds positively to trends in capital provision and the growth of the re/insurance sector in developing economies.”
The plan states that while ‘new’ capital supports both ‘new’ and ‘traditional’ products, the vast majority of current activity is in the property-catastrophe business.
“This has short-term implications in terms of the level of competition and hence pricing and margin adequacy,” it says.
Beale says that international growth, which is still at the heart of the 2025 vision, is also very important for the market’s development.
“The shifting balance of global economic activity over the coming decades is one of the most significant changes – and opportunities – to which the market must respond,” she said. “Relying on cross-border reinsurance business flowing into London will not by itself meet the aspirations of Vision 2025. Increasing Lloyd’s share of insurance business in developing markets is also required. The role of brokers in London and in local markets is key to accessing new business as insurance markets develop in these economies.”
However, the focus on building Lloyd’s’ presence in developing economies will not be at the expense of Lloyd’s’ position in established markets, and will build on existing distribution relationships, according to the plan.
