hi-tech businessinsurers embrace pioneering technology 08 what lies ahead?
goodbye noughties, hello twenty tens12introducing tom bolt
lloyd’s new director of performance management 15
Lloyd’s new RiskMap redraws the boundaries of internet mapping technology
marketfor bespoke insurance specialists
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From the editor
managing editorJames Cash Consultant editorStuart CollinsSenior designerRachel Creanedesign directorOisin O’Malley Publisher Ciaran Jennings
If you want to contribute to the next issue, please contact Peter Wilson at Lloyd’s at [email protected],tel: +44 (0)20 7327 6256.
If you’d like to view Market electronically, please visitwww.lloyds.com/publications
Market is published on behalf of Lloyd’s, One Lime Street, London EC3M 7HA, by Wardour, Walmar House, 296 Regent Street, London W1B 3AW.
Care has been taken to ensure accuracy of information but neither Lloyd’s nor the publishers can accept responsibility for omissions or errors. Lloyd’s is regulated by the Financial Services Authority. © Lloyd’s 2010
03www.lloyds.com02 market Issue One 2010
contents news
WELCOME tO tHIS ISSuE OF Markettechnology is a dominant theme of this issue as we present Lloyd’s RiskMap – a groundbreaking interactive map that provides real-time information about global risks – which is coming to your desktop soon.
We look at how the RiskMap follows on from a number of applications in the insurance industry that have harnessed technology to make a real difference to client service, business efficiency and, ultimately, the bottom line.
Meanwhile, as we leave behind the noughties, we look back on a significant decade in the history of the market and look forward to the challenges of the decade ahead, and Lloyd’s strategy for dealing with them.
tom Bolt, Lloyd’s new Director, Performance Management, tells Market about the role and his priorities for 2010.
A recent 360 Risk Insight report shines a spotlight on microinsurance and examines how the insurance industry can bring security to vulnerable communities in the developing world that are facing the potential risks caused by climate change.
Finally, Market remembers the late HJ ‘Bertie’ Brasier (1917–2009), who held the record as the longest-serving underwriter at Lloyd’s, and who passed away last summer.
We hope you enjoy this issue.
Peter WilsonEditor
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From left: Lord Levene and Brandon Sweitzer,
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Board of Overseers
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Lloyd’s graduate scheme attracts record applicants
Microinsurance could offer low premiums and high hopes for the developing world Tom Bolt explains why being the new Director of Performance Management is his ideal job Lloyd’s RiskMap puts the world of risk at your fingertips
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Rocket man: meet Laurent Esquirol, Space Underwriter at Kiln
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Lloyd’s Chairman Lord Peter Levene has been honoured as the 2009 Insurance Leader of the Year by St John’s University School of Risk Management (SRM) in the US. The prestigious award, now in its 15th year, recognises the contribution of outstanding individuals whose leadership in the global insurance and financial services industry sets them apart from their peers.
This is the second time that a Lloyd’s Chairman has been honoured with the award; Sir David Rowland received the accolade in 1996.
Dr Ellen Thrower, Executive Director of SRM, said: “During his tenure as Chairman of Lloyd’s, Lord Levene has distinguished himself as an important voice and exceptional leader in the global insurance community.”
Dr Thrower added: “We set up the award in 1995 when we believed there was a real need to honour the type of global leadership within insurance that can help to inspire future leaders and talent in the industry. Our students, many of whom come from modest economic backgrounds, will be the direct beneficiaries of the high esteem in which the global insurance community holds Lord Levene.”
Previous recipients have included Gregory C Case, President and CEO of Aon Corporation, Joe Plumeri, Chairman and CEO of Willis Group Holdings, and Maurice ‘Hank’ Greenberg, now Chairman of C V Starr & Co.
The award was presented to Lord Levene at the Marriott Marquis in New York on 20 January at an event attended by more than 1,300 people from the global insurance and financial services industry. The dinner raised more than US$1.53m to support SRM scholarships and programmes.
Lord Levene said: “I’d like to thank Richard Ward, Lloyd’s CEO, and everyone in the Corporation and the market, for their grit and determination in making this happen.”
Performance management, Solvency II, the Exchange, Claims transformation and access to business are the main priorities for the Corporation in 2010, according to the new strategy.
Geographic and product diversification are also key areas of focus. the strategy states: “the market is working to improve its geographic reach and product diversification with the aim of improving its overall risk profile and thereby increasing its attractiveness.”
Access to the market remains a priority
lloyd’s news
lloyd’s strategy 2010–2012 SEtS tHE AGEnDA FOR 2010
and the Corporation has plans to promote Lloyd’s in local markets and to streamline and simplify access. this should make it as easy to transact business with Lloyd’s as it is with other specialist insurance markets. In addition, Lloyd’s has plans to further promote the coverholder channel and enhance its broker relationship management.
the modernisation agenda will continue to gather pace. Working with the market, the aim is to embed initiatives such as the Exchange, Lloyd’s Information & Reporting project and the Claims transformation
work in the market’s business practices. As Lloyd’s implements its strategy
over the next three years, the regulatory landscape, especially Solvency II, will serve as a backdrop. According to the strategy, the legislation will require significant effort on the part of the Corporation and managing agents, especially in relation to developing a compliant internal capital model, which is imperative to retaining Lloyd’s capital advantages.
industry leadership
> morewww.stJohns.edu/srm
> morewww.lloyds.com/strategy
lifetime achievement award for Lord Levene
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05www.lloyds.com04 market Issue One 2010
Changing graduates’perceptionsof insurance
When it comes to a career in financial services, graduates don’t necessarily regard insurance as a mainstream choice. But perceptions are changing and Lloyd’s efforts over the past three years are paying dividends, with the market attracting a higher calibre, and increasing volumes, of applicants every year.
Lloyd’s graduate marketing campaign includes visiting university students on campus, as well as offering them a new website where students can learn more about Lloyd’s market and the career opportunities on offer. Potential applicants can also watch video profiles of those graduates already on the programme and read graduate blogs to see what working at Lloyd’s is really like.
Last year, Lloyd’s received more than 3,000 applications and, according to Jennifer Crane, Graduate Recruitment and Development Adviser at Lloyd’s, this year the volume of applications has been higher and the “quality of applications significantly better”.
“We are more targeted in our marketing campaign and that has started to bear fruit,” she said. “We are going to top universities and spending time talking to students, including those who are in the first or second year of their degrees. the feedback we have received from applicants is that they are amazed at the information they see on Lloyd’s graduate website, as they didn’t realise the depth and breadth of the opportunities that Lloyd’s can offer.”
However, as Crane points out: “It is a long game we are playing in terms of changing perceptions. Many students think of insurance in terms of household and car insurance. But once they learn about Lloyd’s, it is easy to persuade them just how interesting the market is.”
newsinbrief
supporting women in the citySue Langley, Director of Market Operations at Lloyd’s, has won the 2009 Women in the City Insurance Award. In addition to her Lloyd’s duties, Langley is a board member of ACORD, non-Executive Director of northern Rock (Asset Co), and a Vice President at the Insurance Institute of London. Langley said: “Insurance is a fantastic market to be involved in and supporting female talent is key. Although the London market is still male dominated, it is changing rapidly and I am proud to be part of that change.” www.citywomen.co.uk
Hardy and Arig have joined forces to attract more business from the Middle East and north Africa (MEnA) into Lloyd’s market.
Hardy Arig Insurance Management (HAIM), a joint-venture company based in Bahrain, will place reinsurance opportunities on behalf of Hardy Syndicate 382 and Arig. the new company will start writing business incepting in 2010 and will focus on construction and engineering, along with onshore energy risks.
According to Andreas Weidlich, CEO of HAIM, the company will target large-scale accounts that have better risk returns compared with trade that can be absorbed by local markets.
Despite the reported slowdown in construction in certain areas, the company expects to see large demand in Saudi Arabia, Qatar and other parts of the region. “there are still projects valued in excess of uS$1.5trn in the pipeline,” said Weidlich. “A number of the MEnA and other markets in Afro-Asia are supported by governments that share the determination, and have the funds, to drive infrastructure and industrial development.”
According to tim Griffin, Head of Business Development at Hardy, the new company will be looking to develop into other reinsurance classes distinct from the core construction and onshore property
international
Extending reach in the middle east
business initially targeted. “We do not have any fixed goals for income but we will, in due course, look to develop all classes of reinsurance where we have the expertise – pricing business on a case-by-case basis.”
HAIM, which creates an access point for clients in the region, will benefit from Lloyd’s reputation in the market. “there is no doubt the industry’s perception of Lloyd’s has received a significant lift in recent years,” Weidlich explained. “I cannot think of any client who would not be delighted to have a Lloyd’s syndicate on their security panel.”
Three of the largest global insurance brokers – Aon, Marsh and Willis – have given their support to a key stage in further modernising Lloyd’s market by agreeing to pilot The Exchange for endorsements using the latest agreed version of the ACORD standard.
Dan Glaser, Marsh CEO, said that with ease of electronic access and process transparency, The Exchange provides clarity, quality and efficiency in exchanging standardised information. “Ultimately, it’s our clients who stand to benefit from a more efficient marketplace and contract certainty – and that’s a compelling value proposition,” he said.
Lloyd’s is collaborating with the London Market Group (LMG) to review issues around governance and to ensure it becomes a true market exchange. Barnabas Hurst-Bannister, LMG Chairman, said: “The Exchange can make a significant contribution to modernisation, and we will be working with the associations to drive market-wide adoption.”
The Exchange is a market utility that checks and enforces one information standard across the market, and provides a service to send messages between multiple parties through a single connection.
Graduate scheme
While the financial crisis has forced traditional credit insurers and reinsurers to re-think their strategy, with some reducing capacity in the trade credit sector, Liberty Syndicates entered the Lloyd’s market this year to offer reinsurance cover to monoline credit insurers.
“Trade credit reinsurance is a new line of business for Liberty Syndicates that fits well with our overall portfolio,” said Clotilde Spignesi, Credit Reinsurance Underwriter, Liberty Syndicates Paris. “This is exactly the sort of risk class on which Liberty Syndicates’ reputation for specialist expertise is built.”
liberty EntERS CREDIt REInSuRAnCE MARkEtnew team Spignesi admitted that starting in this
class of business in 2009 was a challenge. However, she added that, with Liberty’s strategy of reinsuring only highly qualified and recognised monoline credit insurers, combined with its expertise in handling insurance cycles, the syndicate expects to produce profitable results and become a key long-term partner for its clients.
Liberty Syndicates’ trade credit book covers mainly “short-term commercial whole-turnover trade credit”, domestic and export, as well as a small bond portfolio. “This is underwritten on quota share and excess of loss treaties as well as through facultative support with clients
brokers back the exchangemarket tools
legal appointmentLloyd’s Market Association (LMA) has appointed kees van der klugt as Head of Legal and Compliance. He will help the Lloyd’s Managing and Members’ Agency community by providing legal and technical support. Having spent nearly 20 years in the Lloyd’s market, van der klugt has worked on the legal and compliance side of both syndicates and the Lloyd’s Corporation. Specific areas of his attention will include the various proposals for reforming the structure and nature of financial services regulation, and maintaining an overview of the uk and overseas legal and regulatory environment. www.lmalloyds.com
> morewww.lloyds.com/gradspr
that we are working with,” Spignesi said. The coverage is worldwide, but it will mainly be concentrated in countries with developed economies.
Although there have been concerns about the shortage of capacity in the credit reinsurance market, Spignesi pointed out that the market has seen some new capacity emerging. “It proves that this class of business represents a good opportunity for reinsurers willing to diversify their portfolios, with a good chance of profitable results,” she added.
> morewww.libertysyndicates.com
> morewww.hardygroup.co.uk
> morewww.lloyds.com/lloyds-exchange
Students can learn more about insurance from Lloyd’s new graduate website
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Low premiums, high hopes
lloyd’s 360 risk Insight team unearthed an array of global success stories in the course of researching its recent report, Insurance in Developing Countries: Exploring Opportunities in Microinsurance.
According to the report, these successes have so far seen some 135 million people use insurance products to avoid falling back into poverty. As Trevor Maynard, Emerging Risks Manager within Lloyd’s Exposure Management team, explained: “Microfinance has already begun to play an important role in assisting developing communities. Microcredit has helped people manage their own resources more efficiently by providing capital to invest in items such as agricultural tools and equipment. Microinsurance is a logical progression of this idea, protecting the growing asset base of developing economies, helping them to mitigate and adapt to climate change and giving them the security they need to develop long-term sustainability projects.”
However, this unique insurance offering
is not without its challenges, both in terms of creating a profitable business model from what are typically very low income groups, and the fact that insurance comes
far down the list of most people’s idea of risk management when money is tight. The report highlights the fact that people with low incomes are exposed to a variety of significant risks and will resort to various strategies before a formal insurance contract would ever be considered.
Nevertheless, case studies from projects such as AIG Uganda – now Chartis – which, since 1997, has offered personal accident cover through a microfinance institution already providing credit in that market, shows that take-up can be significant. By 2003, the personal accident product had sold 1.6 million policies in three countries and was producing a US$100,000 profit, with most Ugandan microfinance institutions offering it to their clients.
“Insurance is often taken for granted in
Carefully designed insurance schemes can stabilise entire developing communities
Lloyd’s Analysis team has been busy developing an up-to-date version of the ‘Statistics Relating to Lloyd’s’ document.
this is a statistical guide to Lloyd’s insurance market and is an easy-to-use reference for key facts and figures, providing market practitioners and third parties with a useful resource for analysis and management information purposes.
the guide includes detailed statistics on Lloyd’s capacity, premium income, membership, syndicates and all major lines of business. Comparable data going back more than 50 years is also presented in some sections.
Paul Speller, Senior Analyst at Lloyd’s, said: “the intention is to add new content with each new edition and develop the guide into a key source of information for anyone wanting to find out about Lloyd’s market.”
the guide will be produced annually
market tools
receives rare silver medal
lloyd’s medal
the developed world and daily it rescues people and businesses from economic disaster,” added Maynard. “For example, the loss of a home and all its contents can be truly devastating. Many in the developing world do not benefit from this social model of pooling of risk, leaving them exposed to disaster and the poverty traps
that can result. Carefully designed insurance schemes can stabilise entire developing communities and still provide profitable, geographically diverse business opportunities to our industry.”
Neil Smith, Thought Leadership Manager at
Lloyd’s, remarked that many people in the developing world are not yet sufficiently familiar with the concept of insurance. He said: “An innovative approach to market education is needed to help raise awareness about the need for coverage of people in vulnerable communities.” m
Women and children return from working in the fields in the Lilongwe district of malawi
in PDF format and will be made freely available to all Lloyd’s market participants (members, agents and brokers) via lloyds.com. An Excel version will also be produced, containing the underlying data. third parties such as rating agencies, analysts and the financial press will also be able to obtain a copy, although a fee may be charged to non-market practitioners.
the full version of the document – including the supporting Excel spreadsheet – will become available in the spring, following the publication of Lloyd’s Annual Report 2009. However, there is an interim version available now for market practitioners.
> moreto receive a copy please contact Paul Speller +44 (0)20 7327 [email protected] Delaney +44 (0)20 7327 [email protected]
Former Lloyd’s Franchise Performance Director Rolf Tolle was awarded a Lloyd’s Silver Medal for his services to the market over the past seven years.
Lloyd’s Chairman Lord Levene presented Tolle with the Silver Medal for Services to Lloyd’s at a special dinner in December to mark his retirement. The medal is in recognition of the role that Tolle played in establishing a new commercial partnership with the market and helping to restore profitability.
Paying tribute to Tolle, Lord Levene, said: “His focus on standards and underwriting discipline has helped ensure that the market has returned to financial strength and stability.”
The Silver Medal was first awarded in 1917, and until 1969 the medal was only presented to a handful of Lloyd’s staff and members, including seven Signal Masters and one Lloyd’s Sub-Agent. Following the discontinuation of Lloyd’s Signal stations, the Committee of Lloyd’s decided to reactivate the medal using a new criterion. It is now awarded to people who – in the words of former Lloyd’s Chairman HHT Hudson – “devote themselves to the welfare of our community above and beyond any market responsibility, or any sense of obligation in connection with their own technical world”.
The award was last presented in 2005 to former Chief Executive Nick Prettejohn and former Chairman Sax Riley in recognition of their leadership following the terrorist attacks on 11 September 2001.
The Silver Medal shows Neptune and his chariot on one side, reflecting Lloyd’s links with the sea, while the reverse reads “For Services To Lloyd’s”. The recipient’s name is engraved around the rim.
the challenges and opportunities of insuring up to three billion people in the world’s developing countries have been revealed in the latest report from Lloyd’s 360 Risk Insight
more>www.lloyds.com/microinsurance
> morewww.lloyds.com/rolflloydsmedal
360 risk insight
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Lord Levene presenting Rolf Tolle with the Silver Medal at a special dinner in December
Statistically speaking
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tom Bolt explains why being Director of Performance Management is his ideal job and what the first issue he wants to tackle will be
www.lloyds.com market Issue One 2010
“there’s not another job like it on the planet.” That’s how Tom Bolt sums up his new role as Director, Performance Management, of Lloyd’s.
He began his career as a banker and, within a few years, was recruited to work at Berkshire Hathaway. During 17 years spent working for Warren Buffett, he did everything from trading insurance derivatives to underwriting life reinsurance, from buying firms in run-off to selling a Lloyd’s managing agency.
Apart from his wealth of experience in just about every part of the business, Bolt has also set up a number of new insurers, including at Lloyd’s. He spent nine years as Managing Director of the Marlborough Underwriting Agency, which gave him valuable insight into how Lloyd’s works.
“One of the advantages is that I’ve been a franchisee,” he says. “I know the positives as well as the frustrations of dealing with Lloyd’s, and I can bring that experience to this job. Hopefully I’ll make a few things better for the businesses in the market.”
the key issuesBolt regards his first task as improving the business planning process. It was a message he heard loud and clear in meetings he held with senior executives from every syndicate and managing agency, before he took over from Rolf Tolle at the start of this year.
He uses an analogy given by the head of a managing agency to explain the issue.
performance management
help the market respond to those pressures in any way we can.”
Bolt’s job entails two roles. One is as underwriter for the Central Fund. “My other role is to give managing agencies even better tools with which to manage their businesses,” he says. “We’re not looking to do it for them. We want to give them the tools to do it better themselves, so that they can navigate through what looks set to become an increasingly challenging market.”
“Lloyd’s has great data, but it hasn’t tended to be collected in a way that would maximise its use,” he says. “For example, it looks as if we’re heading into a flat or softening market. Without good data, you’re going to have to take some fairly blunt decisions in terms of rate reductions. But if you have better data that you can slice and dice, then you can say: ‘This part of the class of business is performing much better than the others, so I can afford to give a little more there.’ It enables you to compete longer into the soft market, because it allows you to pick the sweet spots better.”
One of Bolt’s aims is to make having access to this data as much a benefit of Lloyd’s membership as its host of operating licences. “Over time it should be one of the key virtues of being a member of this club, because there is no better library of risk- taking information available in the world.” m
“He said to me: ‘You’re trying to manage us through two snapshots when what we’re trying to produce is a movie’,” says Bolt.
“The people in the Directorate do meet the
market very regularly, but I think it needs to feel a bit more like a movie on our side too. If we work more with the agents through the year, we can understand their thought processes better and get many of the decisions made during that time, rather than waiting until the crunch in September and October, when all the business plans need to be approved.
“This would reduce aggravation on both sides. It should also improve the experience. The process would be more considered, less rushed and messages would be delivered more consistently across syndicates. At the end of the day, the business planning process isn’t just about regulation. It is meant to help syndicates think about their own businesses.”
Bolt wants the Business Plan Steering Group to ensure that there is joined-up thinking from Lloyd’s when approving syndicates’ business plans and setting their capital.
One of the most effective ways that the Performance Management Directorate can help syndicates is by improving even further the quality of the data on market pricing and trends that it provides to them. This will help Lloyd’s face what he regards as its biggest challenge: the likelihood of a softening market.
“While I’m cautiously optimistic that the underwriters at Lloyd’s will hold the line on prices, there’s going to be an awful lot of commercial pressure,” he says. “We aim to
• 1979–1985 texas Commerce Bank• 1985 Joins Berkshire Hathaway• 1985–1988 Managing Director, Cyprus Insurance• 1988–1991 Helped Ajit Jain develop
the reinsurance unit• 1992–1996 Managing Director of
Bankers trust’s Insurance Derivatives Business and set up and ran its various insurance subsidiaries
• 1996 Rejoined Berkshire Hathaway as Head of the European Division of its reinsurance operation
• 2008 Managing Director of Marlborough underwriting Agency Ltd when Flagstone Re bought it
tOM BOLt’S CV
The business planning process isn’t just about regulation. It is meant to help syndicates think about their own businesses
business planning
is the top priority
RiskMap will also include detailed reports and analysis from Lloyd’s 360 Risk Insight research, reports and events.
Lloyd’s digital comunications team has been working with content providers such as Dow Jones to filter information, making sure that only the most relevant news and analysis is displayed.
But the opportunities for insurers and brokers in Lloyd’s market to contribute and link their content to this new tool are very exciting, according to Jo Scott, Digital Communications Manager at Lloyd’s.
The RiskMap will be available to a limited number of users early this year, with a wider launch later on. Lloyd’s is interested in feedback from users, and invites those in the market and third parties to consider content that could be added.
“Lloyd’s RiskMap provides risk managers and the market with a comprehensive, authoritative source of risk event news and related information in real time,” says Scott. “We have built a robust and flexible platform that is visually engaging and very easy to use. We are likely to add more content over time, and we would be excited to hear feedback from the market about what they would like to see.”
original conceptThe idea to develop the RiskMap was born out of Lloyd’s 360 Risk Insight thought leadership programme, which provides businesses with the latest information and analysis on emerging risk. Research commissioned by Lloyd’s highlighted a need among
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Redrawing
the mapIn response to risk manager feedback, Lloyd’s has developed a trailblazing online risk tool that puts real-time risk information across regions and time zones at your fingertips
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category viewRisks covered by RiskMap are many and varied. They include natural catastrophes such as hurricanes and floods, as well as cyber risks, financial crime, pandemics and political risks, to name just a few.
For ease of use, the risks are grouped into five categories: geopolitical, crime and security; natural hazard; economic, regulatory and market; environmental and health; and business and strategic risk.
These five risk areas can be displayed in a ‘Risk Category’ view, which provides an all-new visualisation style. Risk areas are displayed in an interactive pie chart, which is supplemented by articles contained within that category. Risk categories will grow or shrink depending on the activity within them – again, responding to the desire for users to see what is relevant. Users can then delve deeper into the groups to view the sub-categories contained within. This allows users to refine their query in a guided way.
filtered content News content will initially be provided by FACTIVA, giving access to an unrivalled collection of more than 25,000 authoritative sources. At launch, the
lloyd’s has created RiskMap, an innovative web-based tool to help risk managers and the market keep up to date on the latest risk-related news and trends.
The RiskMap, which is due to be released later this year, uses advanced web mapping technology to track the changing risk landscape in real time. Up-to-the-minute news and analysis will be available 24 hours a day, 365 days a year.
Accessible through lloyds.com, RiskMap will initially be free to market participants and selected users. Based on familiar and versatile Google Map technology, it uses a global map view to help visualise risk information.
alternative view of global riskLloyds.com users are avid news consumers and the RiskMap will provide them with a complementary, real-time source of news content, available through a number of views. The global map view offers an intuitive and effective way of digesting information, although more traditional display options are available.
Global map users will have a ‘one-stop shop’ snapshot of the world’s most important current and emerging risks. They will also be able to zoom in, getting risk information at a regional, country or city level. Users are able to customise display settings and content in the map to suit their regional and risk-specific requirements.
Lloyd’s RiskMap provides risk managers with an authoritative source of risk event news and information in real time
risk managers for real-time risk information presented in bite-size pieces across their global
operations and portfolios.“By providing specific interfaces for each
view, and linking between them, we’ve allowed users to explore RiskMap
content in any way they like,” adds Scott. “For example, if a user
is in Map view and sees an article in a location they care about that refers to piracy, they can immediately switch into category mode and explore the entire piracy risk category. Alternatively, they can explore other events for that location.”Maps are a natural way in
which to display information, especially with a geographical
relevance, while the use of maps has been changing with developments in
satellite mapping technology. Google has pioneered the use of maps to convey information
through Google Earth and Google Street View, while GPS systems are in common usage with satellite navigation devices and mobile phones.
Scott asserts that RiskMap uses this innovative technology to go much further than existing risk maps currently do. m
map category newsfeed
www.lloyds.com12 13market Issue One 2010
Executive of Market Processes at the Lloyd’s Market Association. “These advancements are now also improving the effectiveness of organisations, allowing them to make decisions faster and on the basis of better information.
“Technology is increasingly being used in the market, presenting new opportunities and ways of doing business,” he adds.
For example, the market is working towards settling all new claims electronically, while plans to settle accounts the same way are progressing. There have also been developments in placing insurance and reinsurance business electronically, with electronic trading platforms such as RI3K and Aon’s FAConnect.
FAConnect was launched in September 2009 in a bid to open up the market for smaller facultative reinsurance purchases, which has been limited by frictional costs. Using the portal, cedents can submit, get quotes and bind facultative reinsurance online.
“Insurers and brokers in the Lloyd’s and London market have been adopting standard data messaging,” says Peter Griggs, Head of IT at the LMA. “And the electronic accounting implementation in 2010, using ACORD Standards, will significantly enhance premium processing.”
The Exchange was piloted in 2009 (see page 5); it’s an electronic platform that will allow participants to exchange risk information electronically using the common ACORD data standards. The Exchange provides a messaging hub and market directory that will allow brokers and underwriters to place messages electronically.
Standards for data messaging will also enable information on risks placed in Lloyd’s market to be analysed and presented in ways that are easier to understand. “Using imaging technology like Google Maps, insurers will be able to better visualise their exposure data, and that of the market,” adds Griggs.
Faster processing, converging mediums and greater precision forecasting are transforming the way insurers and the financial services industry do business.
But given the recent pace of technology, it is fair to assume that the industry can look forward to even greater benefits in the future. m
of devices such as catastrophe risk models. “These models – made faster and more detailed with increased computing power and developments in software – can run tens of thousands of scenarios to simulate potential disaster losses,” says Vinay Mistry, Manager within Lloyd’s Exposure Management Team. “And there are moves to develop models for a growing number of non-property classes, such as aviation, marine, and liability.
“These models produce reams of complex data, but Lloyd’s has pioneered the use of mapping technologies, such as Google Earth, to better present risk exposure information,” Mistry adds. The development of RiskMap (see page 10) is just one example of how Lloyd’s has harnessed pioneering technology.
improved dataSpecialist catastrophe modelling companies, such as RMS and AIR Worldwide, have been building bigger and better models to help companies estimate potential losses and manage their portfolios. These firms began by modelling natural peril scenarios, but they now also model the threat from emerging risks, such as terrorism and pandemics.
In recent years, these models have become more detailed: they can now show the effect of perils such as flooding right down to street level for an individual property. Catastrophe modelling companies have also developed products that give underwriters an indication of data quality. And, like Lloyd’s, they recently began using mapping technology to help underwriters interpret risk information.
“It is difficult to imagine how the industry would get along now without such technologies,” says Bryon Ehrhart, CEO of Aon Benfield Analytics, based in Chicago. Aon Benfield’s financial modelling tool, ReMetrica, is used by hundreds of clients to manage their risk exposure. And among the firm’s latest developments is ImpactOnDemand, an online catastrophe modelling tool that allows users to track their exposures alongside actual events – such as hurricanes – in real time.
“Technological developments have also improved the efficiency of the London market, reducing time spent on paper-based administration and speeding up processes,” says Peter Holdstock, Senior
‘cloud computing’ soon set to give even greater availability to applications via the internet.
More than 360 million people regularly use the web – equivalent to about 25% of the world’s total population. Internet usage is even higher in the United States and Europe, where penetration is 74% and 52% respectively.
And usage by business continues to grow. According to the US Census Bureau, some $3,333bn of e-commerce was recorded in 2007, up 12% on 2006 levels. Some 93%, or $3,082bn, was from business to business e-commerce.
In addition to the wider business benefits offered by technology, the insurance industry has also adopted and developed specific technologies. Lloyd’s, for example, has for many years now been developing tools to help underwriters better understand their exposure to certain risks, including hurricanes and flood.
Technology has enabled further improvement
As the online revolution gains pace, Lloyd’s and the wider insurance industry are embracing pioneering technology
advances in computing and telecommunications have revolutionised the way we communicate and access information.
For business, the computing and communications revolution has created huge efficiencies, opened up new markets and helped fuel globalisation. Consumers, too, have benefited, with increased competition and 24-hour access to information, goods and services.
And, while many of these technologies have been around for a number of years, they continue to develop. The internet, for example, evolved rapidly, broadening out from what was largely information sharing to social networking websites and multimedia. Furthermore, access to web services continues to grow, with mobile phone technology and moves towards
Faster processing, converging mediums and greater precision forecasting are transforming the way insurers do business
www.lloyds.com/lloyds-exchange
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technology
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a new
Laurent Esquirol, Space Underwriter at Kiln, talks about the insurer’s recent move into the satellite insurance market
www.lloyds.com market Issue Four 2009
space
Q. Why has Kiln entered the space insurance market?Space lines are a good way to diversify business because they are uncorrelated to property risks such as US hurricane or European flood risks. The space insurance market has also shown good profits over the past few years and has matured since the losses of 1999, 2000 and 2001. We chose Paris to base Kiln’s space underwriting in because France has the biggest space market in Europe and is home to two of the largest satellite manufacturers and the commercial launch company Arianespace. London is well known for insurance, so with Kiln in London and our space underwriting in Paris, we get the best of both worlds.
Q. is technical experience of the space sector important?This is a very specialised sector, and underwriters cannot rely on statistics alone. Each satellite is different, and an underwriter will need to know each risk in detail and understand the technology. For example, I trained in engineering and specialised in aerospace before working at Thales Alenia Space as a System Engineer.
Q. is Lloyd’s an important market for space risk?Lloyd’s is the largest market for space insurance in terms of capacity and is a centre for underwriting expertise. It offers a range of coverages, from the assembly and testing of a satellite, its transport from the manufacturer through to the launch site, its launch and when the satellite is in orbit.
Q. What will Kiln be offering?Kiln – via its Lloyd’s syndicates 510 and 1880 – is offering £9.2m of capacity for launch and in-orbit satellite risk. The financial crisis has
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made customers more aware of their counterparties, and they want to have their coverage with strong insurers that offer excellent security.
Q. is the space industry growing? Space is a growing sector and, much like the telecommunications sector in general, the satellite business has not been damaged by the financial crisis. The demand for communications persists because people still want mobile phone technologies, digital television and broadband internet. New services that rely on satellite technology continue to be launched and demand is also growing from
emerging markets such as Asia. The space sector is relatively small – there are only about 25 to 35 satellites launched and insured each year – but it may become more significant.
Q. What are the challenges?The main challenge for insurers will be keeping pace with the technological changes in the space sector. Pricing risk and maintaining good profits in an environment where technology is always changing is a real challenge.
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15market Issue One 2010
As Lloyd’s takes stock of one of the most significant decades in its history, we look ahead to the challenges and opportunities likely to dominate the insurance landscape in the coming years
new opportunities
DecaDetHe neXt
DefininG
during the past 10 years, the market has faced some of the largest losses the insurance industry has ever seen and witnessed one of the deepest financial crises since the 1930s.
In 2001, the Chairman’s Strategy Group was established to propel the market into the 21st century. Shortly thereafter, following the 9/11 terrorist attacks, Lloyd’s played a leading role in helping the rebuilding efforts following the tragedy, paying out about £2bn (US$3bn) in claims. Just before the end of the year, in November 2001, the UK’s Financial Services Authority took over the supervision of Lloyd’s, bringing its era of self-regulation to an end.
The Franchise Board came into existence in 2003 and has been instrumental in driving Lloyd’s performance. It brought in minimum underwriting standards and a number of risk management procedures, helping promote sustainable profitability and enhancing the financial strength of the market.
In the second half of the decade, Lloyd’s extended its global reach, setting up new offices in emerging economies such as China and Brazil. Lord Levene said: “We opened in Shanghai two years ago and it’s the market of the future. If China is going to be the biggest economy in the world, we have to be there.” He goes on to illustrate the opportunities: “We have six syndicates in China now, and it’s building up. Singapore also started from a small base and we now have 17 syndicates and 157 people.”
Most importantly, despite the challenges of the past decade, Lloyd’s has posted consistently good results and maintained its reputation as the leading insurance market in the world.
www.lloyds.com/solvencyiiwww.lloyds.com/lloyds-exchange
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looking aheadAs the next decade begins, Lloyd’s is looking to the future. The newly launched Lloyd’s Strategy shows that, as the global economy starts to show signs of recovery, the market is getting ready to take on the challenges ahead and to seize new opportunities.
Among the key challenges facing the market are the need for continued underwriting discipline; maintaining London’s position as the pre-eminent centre for specialist (re)insurance business; responding to possible changes in the distribution landscape; and protecting the market’s capital, licences and ratings from an increasingly demanding regulatory environment.
However, the Lloyd’s market is currently in a position of relative strength. This is mainly due to a strong balance sheet, underwriting expertise that focuses on profit ahead of market share, limited participation in those insurance lines most exposed to the impact of the economic downturn and an absence of major catastrophe events in 2009. That said, underwriting discipline and performance management will remain crucial to future success.
corporation and market prioritiesIn addition to performance management, the Corporation has identified four other areas of focus for 2010. Implementing Solvency II in the market in a way that protects and, where possible, enhances Lloyd’s capital structure and efficiency will be key. On the business process side, the Corporation aims to increase adoption of The Exchange while also driving a transformation in the way that the Lloyd’s market handles claims to improve the experience of the customer. Finally, there will be a push to improve access to the market through streamlining Lloyd’s coverholder management.
The market also has its own strategic priorities for the period. These will be to maintain and develop the
attractiveness of the Lloyd’s market by working to promote the competitiveness of London as a financial services centre, while continuing to improve the efficiency of business flows and placement. At the same time, the market will seek to influence the evolving regulatory landscape to maintain Lloyd’s capital and licensing advantages. The market will also continue to apply minimum standards and guidelines to drive ongoing performance improvements and ensure that high-quality and robust risk management practices are developed at both individual market participant and aggregate market levels as part of Solvency II implementation.
navigating demanding regulatory watersThe global financial crisis has prompted an international review of regulatory structures and supervision around the world. Even though non-life insurers fared significantly better than their counterparts in the banking sector, supervisors and regulators are likely to be much more cautious in their approach to the financial services industry in general.
“The focus of all international regulators has been to learn lessons from the financial crisis, with most of them signalling their intention to increase oversight and supervision,” Rosemary Beaver, Head of International Market Access and Regulatory Affairs, explains.
Regulatory oversight could become more intrusive and there is a possibility that regulators will want to hold more assets in their country from foreign reinsurers and insurers to protect their consumers. However, Beaver emphasises that Lloyd’s has been “arguing around the world that it makes sense for regulators to co-operate and supervise on a global basis, in particular recognising the strength of domestic regulation to avoid duplicating efforts unnecessarily”.
Geopolitical changes are also likely to have a significant impact on the market during the next few years. Since 9/11, the G20 nations have become more concerned with terrorism and other related activities. This means that significant sanctions and criminal penalties are in place against those who, innocently or otherwise, support international terrorists and other criminal activities. “We expect this to escalate, with more anti-money laundering and proceeds of crime legislation,” says Beaver.
In the US, new legislation expected in the
first half of 2010 is set to create a Federal Insurance Office. This would provide a consistent US voice on international insurance issues and could also provide a mechanism with which to prevent the discriminatory application of collateral requirements for Lloyd’s and other non-US reinsurers.
In Europe, the regulatory landscape is changing in the next three years, with the main focus being Solvency II and the establishment of the European Systemic Risk Board and the European Insurance and Occupational Pensions Authority to monitor macro-prudential regulation.
Solvency II has been a regulatory priority for Lloyd’s for some time and, with the current deadline for compliance set for October 2012, preparations for the new legislation are gathering pace.
James Walmsley, Senior Manager, Government Policy & Affairs at Lloyd’s, explains that, although the Corporation is supportive of the legislation, there are some concerns about the details. “It is crucial that Solvency II’s new supervisory environment facilitates the efficient conduct of insurance business, as well as ensuring that insurance undertakings meet rigorous financial and governance standards,” he says. “We will continue to lobby the European Commission to ensure the best possible outcome for the market.”
Lloyd’s has put in place an intense Solvency II implementation programme and Walmsley points out that the next few months will be critical. “There are a number of developments taking place in the near future, such as the fifth quantitative impact study [QIS5] and the FSA’s internal model dry-run process,” he says. “They will require Lloyd’s and managing agents to test run Solvency II processes in the course of the year.”
Despite the challenges, Lloyd’s expects to see a more efficient and favourable regulatory environment. Beaver says: “Lloyd’s will remain vigilant, proactive and robust at defending the market and its trading rights. We need to
ensure that the compliance burden and conditions to access business overseas do not deteriorate.”
exploring new emerging marketsIncreasing flows of business into Lloyd’s from international markets is a key part of Lloyd’s Strategy.
In the past two years, the Corporation has gained licences in several European countries, including Poland, Austria and Portugal. It also opened offices in Ireland and Scandinavia, and strengthened Lloyd’s operations in Germany and France.
The BRIC countries are also high on the agenda. After opening an office in Brazil last year and a reinsurance operation in China in 2007, Lloyd’s is now turning its attention to Russia and India, as well as considering increasing its presence in China.
“There is a window of opportunity in China to enhance our trading rights, which at the moment are only for reinsurance,” Jose Ribeiro, Director of International Markets at Lloyd’s, explains. “We are looking at the regulation to see if it would be possible for the market to trade on a direct basis.”
Looking to the future, Ribeiro is bullish about the economic recovery, saying: “There are a lot of opportunities and potential for business in 2010. The only concern is that there are signs that the market may soften further this year. But, even with a reduction in rates, there will be greater opportunities in terms of economic growth and new business.”
Judging by the level of success, resilience and modernisation seen in Lloyd’s in the past decade, the challenges ahead are likely to continue to serve as catalysts for a stronger and more accomplished market.
www.lloyds.com16 17market Issue One 2010
new opportunities
there are a lot of opportunities and potential for business in 2010
DefininG momentsAnti-clockwise from top right: Brazil’s football legend Pelé celebrates Brazil’s successful bid to host the 2016 Summer Olympics; a fireman looks on at the base of the destroyed World Trade Center on 11 September 2001; US soldiers on patrol in Afghanistan; CERN’s Large Hadron Collider offers a glimpse into the origins of the universe; Lloyd’s underwriters insured the smile of America Ferrara from Ugly Betty for US$10m in 2007.Previous page, from top to bottom: A builder carries a window at one of many construction projects symbolising the rapid growth of China’s cities; traders in a flurry of activity as the financial crisis dawns on global markets; US President Barack Obama and his family celebrate his inauguration in January 2009.
community people
19www.lloyds.com18 market Issue One 2010
Lloyd’s Community Programme (LCP) aims to continue its successes of 2009, when it exceeded its target of recruiting 1,000 volunteers.
LCP, which delivers a huge number of community projects every year, has always been concerned with improving the prospects of young people on Lloyd’s doorstep, according to Vicky Mirfin, Community Affairs Manager at Lloyd’s.
She explained: “One of the issues that has risen up the agenda during this recession in the UK is that unemployment for young people, particularly those in the 16–18 age group, has increased dramatically. A Chartered Institute of Personnel and Development report found that only a quarter of employers saw this group as a viable source of labour.”
As it approached the end of its 20th anniversary year, Lloyd’s Community Programme (LCP) celebrated placing 20 local students in the market on traineeships by hosting the City Business traineeship Awards in november 2009. the awards were attended by the Lord Mayor of London, Lloyd’s Chairman Lord Levene, and nick Furlonge, Chairman of LCP.
the programme places A-Level leavers from surrounding inner-London boroughs in paid summer work placements of between six and thirteen weeks.
the market welcomed 21 students into 15 companies, and they got to work across a number of different business functions.
Ilya karpenko, who was placed at Antares underwriting, won the Highly Commended trainee of the Year award and his placement has been extended for a further six months.
karpenko is 19 years old and recently completed A levels in Business Studies, History and Russian at Dunraven School in Lambeth. He said: “the work
celebrated at lloyd’s
From left: Ilya Karpenko and the then Lord Mayor of London, Ian Luder
EVEntS
Helping the London
Lloyd’s Charities Trust presented £50,000 to the Whitechapel Homeless Mission
the market paid its respects to HJ ‘Bertie’ Brasier at a memorial service at St Mary’s Church, Bishopsgate, on 20 november 2009.
Brasier, who was born in 1917 and died last summer, was a respected and colourful figure at Lloyd’s. Having notched up almost 60 years as an underwriter, he held the record of longest-serving underwriter in the history of Lloyd’s. He retired in 1982, before looking after names’ interests
well into the 1990s.Brasier joined Lloyd’s in 1932
at the age of 15, in the depth of the Depression. Aware that money at home was tight,
he saw an advertisement for a job at Lloyd’s, bunked off school and walked much of the way from his home in north London to save money – he never looked back.
As a keen amateur cricketer, Brasier organised Lloyd’s cricket tours, and in 1974 decided to form an official Lloyd’s Cricket Club (LCC), for which he served
lloyd’s community programme offers further traineeships
first as Chairman and then latterly as President until the end of his life.
About 150 people, including former Lloyd’s Chairman Sir David Rowland and numerous Lloyd’s underwriters past and
present, attended the service.At the reception, hosted by Lloyd’s in the Old Library,
the family presented the Bertie Brasier Challenge Cup to LCC President Roger Alwen. the trophy will be contested between Lloyd’s underwriters and
brokers in a new annual fixture in his memory.
Lloyd’s extended a helping hand to two homeless charities in London at the end of last year.
In November, Graham White, Chairman of Lloyd’s Charities Trust, presented its annual Special Award of £50,000 to the Whitechapel Homeless Mission in east London.
The Whitechapel Mission, which was founded in 1876, provides respite and care for homeless people every day of the year from a site just one mile from the Lloyd’s building. It has an existing association with the market, with volunteers from Lloyd’s Community Programme regularly helping out at its day and life skills centre.
At this time of heightened military activity, it is notable that more than a quarter of the people supported by the Mission have served in the armed forces.
Vicky Mirfin, Community Affairs Manager at Lloyd’s, says this fact prompted Lloyd’s Patriotic Fund Christmas
> moreTo provide an internship for a local student in 2010, contact Lloyd’s Community Affairs on +44 (0)20 7327 5925 or email [email protected]
Gift Appeal. “During the Appeal, people in the market donated practical items for homeless veterans: gloves, hats, scarves, food items and so on,” she said. More than 600 items were collected for the homeless ex-servicemen staying at a Veterans Aid Hostel in east London.
Lloyd’s Patriotic Fund initiated this collection and has provided support for serving and ex-service men and women for more than 200 years.
Mirfin added: “On any given night, there are an estimated 1,100 former service men and women on the streets of London, so the help we provide is extremely important.”
Homeless
placement at Antares left me with no doubt as to my future career – I know I definitely want to become an underwriter. therefore, I am thrilled to be offered a further six months and can’t wait to get started.”
Feedback from the market about the students’ calibre was glowing. neil Smith, CEO of Hampden Agencies Limited an LCP member company, said: “this was the first time that Hampden Agencies had offered a paid internship and our experience of the City of London Business traineeship programme was very positive. the recruitment process was smooth and we were sent good candidates for interview, one of whom stood out immediately as intelligent, mature and confident.”
City traineeship award
With this in mind, Mirfin said that the work of Lloyd’s Community Programme, which targets the market’s neighbouring districts in east London, takes on an even greater significance.
“We will be continuing our successful project offering A-level students paid internships. We’ve had really positive feedback from all sides and we want to do more to help local young people find ways to enhance their career prospects and improve their basic skills,” said Mirfin.
> moreTo find out more about Lloyd’s charities visitwww.lloyds.com/charity
> morewww.lloyds.com/lcptraineeships
1–2 march 2010Lloyd’s tokyo office openingtokyo, JapanLloyd’s Japan will hold two events to mark the opening of its new office in central tokyo. On 1 March, Lord Levene will officially open the new office with a ribbon-cutting ceremony. On 2 March, a more formal event will be held in the Ambassador’s Residence at the British Embassy, tokyo, at which Lord Levene and the Ambassador, David Warren, will make speeches.For more information on these events, please contact Iain Ferguson, President & COO, Lloyd’s Japan. [email protected]
3 march 2010Spanish insurance Weekthe 17th Annual Spanish Insurance Week provides an opportunity for brokers, insurers and other insurance professionals to discuss developments in the local market.
25–29 april 2010risk and insurance management Society (rimS)Boston, USMore than 5,000 risk managers are expected to attend this four-day conference. It is anticipated that over 100 Lloyd’s market practitioners will attend, with many available on the Lloyd’s stand to meet delegates.
20 may 2010Lloyd’s rugby Club 7’s Competition, London, tW9 2SSLloyd’s Rugby Club 7’s tournament, held annually at Richmond Athletic Ground, kew Foot Road, Richmond, gets underway at 12pm, with the final to be played at 7.30pm. For more information, contact Debbie Ball at [email protected]
lloyd’s clubsIf you’re a keen clay-pigeon shooter, sailor, motor enthusiast, cricketer, footballer or rugby player, or have simply always wanted to try a new activity, you’ll find a Lloyd’s club or society to satisfy your interests. For more information, contact Liz Lotz at [email protected]
remembering ‘bertie’ brasier
www.lloyds.com20
ward roomfrom theview
Lloyd’s is entering 2010 in good shape, but our strategic review shows that we cannot afford to be complacent
extensive consultation with managing agents and brokers – to look at the external perspective. How is the wider insurance world evolving, and what do we need to do to stay in pole position?
A key finding is the need to work closely with Lloyd’s brokers and coverholders to ensure that our distribution model works into the future. Other priorities include a resolute focus on underwriting discipline through the performance management framework; increasing the adoption and use of The Exchange; driving a transformation in the way the market handles claims; and, of course, Solvency II.
The success of the strategy depends heavily on our broking and underwriting communities. But the Corporation will also play an important role. Keeping the brand sharp and relevant, improving our operating efficiency, maintaining high ratings and a secure capital base are as important as ever. Above all, the performance oversight of the Franchise Board will remain central to the health of the market as we enter this new decade. m
We must react to changing conditions in the outside world. The immediate challenge remains the uncertain economic climate. The fact that our market has done well, despite the testing conditions of the past two years, is a tribute to your hard work and sound judgement. But we are not out of the woods yet. One of my major preoccupations in 2010 is the regulatory climate. The key priorities are to continue to make progress in preparing ourselves for the Solvency II regime and to ensure that the legislative detail of the regime is both proportionate and reasonable. We also need to keep a close eye on national and international governments as they work to find a ‘magic formula’ that can prevent another financial collapse. One of our 2009 mantras – that general insurance is not banking – will echo through this year.
The new strategy doesn’t stop at 2010; it covers the next three years. After several years of concentrating on our internal procedures, with a leading role for the Corporation, we have used this strategic review – with its
viewpoint
richard wardLloyd’s Chief Executive
How is the wider insurance world evolving, and what do we need to do to stay in pole position?
more>www.lloyds.com/lloyds-exchange
