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Lloyd’s: An Overview of the Market

Keith Stern: UK Regional Manager October 2014

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Agenda

• History • Market Structure • Financial Strength • Financial Results • Global Reach • Uk insurance market & Lloyd’s • Accessing the market • Coverholders • Events • questions © Lloyd’s

History

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From Coffee House…

First known reference to Edward Lloyd’s coffee house in Tower Street

(London Gazette 18-21 February 1688)

© Lloyd’s 2012

…To every type of Insurance

1877 1906 1911 1969 © Lloyd’s 2012

PIPER ALPHA 1988 EXXON VALDEZ 1989 HURRICANES 1989 ASBESTOS 1980

s

- 1990

s © Lloyd’s

…and an appetite for unusual risks requiring innovative solutions

© Lloyd’s 2012

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The Lloyd’s market is known for its specialist expertise…

© Lloyd’s 2012

Market Structure

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Lloyd’s Key Characteristics

► Lloyd’s is a

market,

not a company ► The Lloyd’s market

insures complex and specialist risks and SME business

► London based

international business (UK is our second largest market = £3.5bn)

►

Regulated

by the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) ► Products are

distributed via Lloyd’s brokers, coverholders and syndicate service companies.

© Lloyd’s 2012

Lloyd’s market structure

Policyholders



Direct



Reinsurance

Coverholders

200 Lloyd’s Brokers Service Companies BUSINESS FLOW (£26,106m) Corporation of Lloyd’s Management 56 Managing Agents 91 Syndicates Underwriting Members



Corporate



Individual CAPITAL PROVISION (£60,782m) www.lloyds.com/directories

© Lloyd’s

A DYNAMIC AND DIVERSE MARKETPLACE

At December 31 agents that manage 91 syndicates © Lloyd’s 2012 < Picture to go here >

Financial Strength

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Lloyd’s Ratings

INDEPENDENTLY ASSESSED

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In the eyes of leading ratings agencies, Lloyd’s is viewed as enjoying robust

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capital reserves: Standard and Poor’s: ‘A+’ (strong) Fitch Ratings: ‘AA-’ (very strong) A.M.

Best: ‘A’ (excellent)

` Lloyd’s Annual Report 2013 © Lloyd’s 2012

OUR CHAIN OF SECURITY

•

LINK ONE: SYNDICATE ASSETS

(£42,342m) • Before writing business, a syndicate must put up funds to cover their own share of claims • These funds are the first port of call when paying policyholder claims Figures correct as at December 2013

OUR CHAIN OF SECURITY

•

LINK TWO: MEMBERS’ FUNDS AT LLOYD’S

(£15,242m) • Every member (corporate or individual) must provide sufficient capital to support their underwriting • These funds are held in trust for the benefit of policyholders and used only if the syndicate assets have been exhausted Figures correct as at December 2013

OUR CHAIN OF SECURITY

•

LINK THREE: LLOYD’S CENTRAL FUND

(£3,198m) • The Central Fund includes members’ annual contributions and funds issued by the Corporation of Lloyd’s • If a syndicate has failed to meet its liabilities and the two previous links proved insufficient, the Central Fund can provide a final reserve to cover those outstanding liabilities Figures correct as at December 2013

Financial Results

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Strong U/W Results

Gross written premiums (mns) Combined ratio Investment return Result before tax (mns) Return on capital (pre-tax) % 2009 35,376 £21,973 86.1% 2,848 £1,769 6,227 £3,868 23.9

2010 35,469 £22,592 93.3% 1,975 £1,258 3,446 £2,195 12.1

2011 36,389 £23,477 106.8% 1,528 £955 (800) (£516) (2.8) 2012 40,545 £25,000 91.1% 2,084 £1,311 4,517 £2,771 14.8

2013 $43,698

£26,106

86.8% $1,406 £839 $5,734

£3,205

16.2

< Picture to go here > Source: Lloyd’s Annual Report 2013. All figures as at 31 December 2013 © Lloyd’s 2012

2013 major claims Significantly below long term average

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Source: Lloyd’s 2013 Annual Results (March 2014) Claims in foreign currency translated at the exchange rate prevailing at the date of loss

© Lloyd’s 2012

Lloyd’s outperforms peers

Combined ratio

Source: Lloyd’s pro forma financial statements, Dec 2013 Peer group formed of 11 companies operating in the US, European and Bermudan markets

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Global Reach

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2013 Lloyd’s Premiums by region

Europe (including UK [18%])

33%

US (including Canada)

43%

Central Asia & Asia Pacific

12%

13% 2012 12% 2011 10% 2010 9 % 2009 US & Canada 41% 2012 44% 2011 43% 2010 45% 2009 Other Americas

8%

Other Americas 8% 2012 8% 2011 7% 2010 6% 2009 Rest of the World

4%

Europe + UK 15% + 18% = 33% 2012 16% + 18% = 34% 2011 16% + 20% = 36% 2010 16% + 20% = 36% 2009

Sources: Lloyd’s Annual Reports (2008 – 2013): http://www.lloyds.com/Lloyds/Investor-Relations © Lloyd’s

2014 Lloyd’s Office Network

Europe North America www.lloyds.com/AMERICA 1 1 1 3 Europe 1 3 1 2 4 3 4 4 3 2 3 1 3 1 3 3 1 3 3 3 3 1 3 1 2 2 Type 4 3 2 1 Market Development Scope

Local underwriting with co-located syndicates (or via a Lloyd’s regulated entity); Country Manager with Market Development Role Country Manager with Market Development Role Legal Representative for regulatory requirements

Territories China Japan Singapore Benelux , France , Germany , Ireland , Italy , Poland , Australia , Hong Kong (SAR) UK Brazil South Africa

,

Spain , Sweden , Switzerland Canada, US Northeast, US Southeast, US Central & US West Cyprus , Greece , Israel , Malta, New Zealand, India

Legal Representative for minimum regulatory requirements

Austria , Denmark , Norway , Portugal, Lithuania Argentina , Belize , Chile Namibia , Zimbabwe, US Virgin Islands © Lloyd’s 2 2

Uk insurance market & Lloyd’s

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Uk insurance market

Chart: Insurance Market Leaders (2012)

(based on ABI Statistics; UK domestic business only , excluding Lloyd’s; in billion GBP)

0.0

2.0

4.0

6.0

4.9

3.2

3.1

3.4

3.4

2.5

1.4

1.7

2.0

1.7

1.7

 Almost 75% of the market is dominated by these 11 players © Lloyd’s 2012

Lloyd’s UK Premium income

Lloyd’s Premium Income 2008-2013 by Class of Business

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0

Split % Direct: RI

2008

59:41

2009

55:45

2010

54:46

2011

53:47

2012

51:49

2013

55:45

Accident & Health Aviation Casualty Casualty Treaty Energy Marine Overseas Motor Property (D&F) Property Treaty UK Motor © Lloyd’s

Swot analysis

STRENGTHS Brand - results of brand survey are encouraging.

Distribution model - network of coverholders and service companies.

Ratings and Reserves Accreditation of new Lloyd’s brokers and coverholders WEAKNESSES Accessibility for regional brokers and MGAs Competition from the companies market.

Perception issues on claims and contract certainty.

Absence of Lloyd's regional offices.

Lloyd’s in UK OPPORTUNITIES Becoming more active regionally.

Some disaffection between regional brokers and MGAs and the companies market.

Building new relationships - broker networks/cluster groups (£6.5bn premiums in their control) Extended programme of events/activities .

99% of UK businesses are SME

THREATS (Challenges) Volatility of the UK economic recovery.

Continuation of prolonged soft market conditions.

New regulatory regime in UK (FCA & PRA) Need to stay ahead of the game re: online trading.

Growth of aggregators and comparison sites in SME sector.

© Lloyd’s

Accessing the market

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Access to Lloyd’s for EU Brokers

This roadmap is for local Brokers who are seeking access to the Lloyd’s Market for a local client Risk Carrier

Via Local Service Company

Placement

Lloyd’s Managing Agent Syndicate(s) Via Local Coverholder

Local Broker / MGA with binding authority, Underwriting Agency Via Eu Service Company (crossborder)

Lloyd’s Managing Agent – direct or via a Lloyd’s Broker Lloyd’s Managing Agent Syndicate(s) Syndicate(s)

Via Eu Coverholder (crossborder) local Broker / Agent with binding authority, Underwriting Agency

Via Lloyd’s Broker Lloyd’s Managing Agent – direct or via a Lloyd’s Broker Lloyd’s Managing Agent Syndicate(s) Syndicate(s) Become a coverholder

In countries with established licence Lloyd’s Broker) – approval via Delegated Authority Approval Process (contact Managing Agent and

Become a managing agent approved broker

Become a non Lloyd’s Registered Broker - approval via individual Managing Agent registration process (direct contact)

Become a Lloyd’s registered broker

approval via Lloyd’s Broker Approval Process

Lloyd’s Managing Agent direct – via a Lloyd’s Broker or Lloyd’s Managing Agent Lloyd’s Managing Agent Syndicate(s) Syndicate(s) Syndicate(s)

How to access this channel

Contact local Country Manager >www.lloyds.com/offices Access Service Company details in the Coverholder Directory > www.lloyds.com/directories/coverholders Contact local Country Manager > www.lloyds.com/offices Access the Coverholder Directory > www.lloyds.com/directories/coverholders Contact local Country Manager > www.lloyds.com/offices Access Service Company details in the Coverholder Directory > www.lloyds.com/directories/coverholders Contact local Country Manager > www.lloyds.com/offices Access the Coverholder Directory > www.lloyds.com/directories/coverholders Contact local Country Manager > www.lloyds.com/offices Access Directory of Lloyd’s Registered Brokers www.lloyds.com/directories/brokers Contact local Country Manager > www.lloyds.com/offices Access information for prospective Coverholders > www.lloyds.com/coverholders Contact local Country Manager > www.lloyds.com/offices Access information on Managing Agents – non Lloyd’s Brokers > www.lloyds.com/nonlloydsbrokers Contact local Country Manager > www.lloyds.com/offices

© Lloyd’s

> www.lloyds.com/brokerregistration

coverholders

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Improvements to the coverholder model

Prior to July 2010

► ► ► No applicant coverholder had been visited by a Lloyd’s representative No Lloyd’s networking opportunities for coverholders Restricted access to the Lloyd’s brand ► ► Lack of best practice guidelines UK Population: 700 coverholders

Today

► ► ► Visited all applicants (ex-City of London) since 2010 - 95% have been approved Held coverholder conferences A number of enhancements have already been made - faster turnaround times, branch approvals,

broker sponsored approvals

, and more informative welcome packs ► ► ► Greater access to the brand, a coverholder toolkit and enhanced guidelines online.

Monitoring how we compare to the companies market (‘gap’ analysis) and enhancements to the rules on sub-delegation/internet trading UK Population: 1600 coverholders (‘grand-fathered’ 600 restricted coverholders this year) © Lloyd’s

Coverholders (& Service Companies): Regional Distribution www.lloyds.com/directories

Number of Coverholders August 2014: Total 1649 South East: London: East: South West: West Midlands East Midlands North West Yorkshire Wales Scotland North East Jersey Guernsey Isle of Man Northern Ireland Isle of Wight Coverholders 363 295 241 138 137 124 119 75 59 34 28 7 6 4 15 4 Number of Service Companies August 2014: Total 90 South East: London: East: South West: West Midlands East Midlands North West Yorkshire Wales Scotland North East Jersey Guernsey Isle of Man Northern Ireland Isle of Wight Service Co 7 42 10 0 8 2 0 1 0 1 8 5 0 5 1 0

© Lloyd’s Source: Market Intelligence based on: Lloyd ’s Delegated Authorities

Events

where can you meet lloyd’s underwriters & brokers?

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2015 events schedule ► Compass Broker Services (Whittlebury Hall) – 25 th /26 th February 2015 – 4 underwriters ► BIBA (Manchester) – 13 th /14 th May – 10 underwriters ► AIRMIC (Liverpool) – 15 th /16 th /17 th underwriters and brokers June – 22 ► Broker Expo West (Bristol) – 24 th underwriters Sept 2015 – 4 ► Lloyd’s Meet the Market (Birmingham) – October – 100 market practitioners ► Broker Expo North (Coventry) – 12 th underwriters November – 5 ► BIBA Scotland – November – 4 underwriters ► Contact me at [email protected]

© Lloyd’s

Questions?

© Lloyd’s

© Lloyd’s