2019 Mid-Year Lloyd’s Market Update

Lloyd’s of London is the world’s leading insurance market, providing services in over 200 countries and territories. It is made up of syndicates which are individual insurers who write the risks. In 2017 and 2018, Lloyd’s was heavily affected by catastrophe events, resulting in aggregated market losses of £2bn and £1bn respectively. These losses and the need to improve performance have been fundamental to creating the current market environment. As of October 2019, this environment can be categorised into 3 key outcomes for clients. 1) Rate increases

2018 was the 4th worst year on record for global catastrophe losses. This, compounded with attritional claims being higher than expected, heavily affected the market’s profitability. To improve performance and create a sustainable underwriting environment, rates have increased across all classes at an average of 4.2%. Some subclasses have seen material increase, such as Property (+5.9%), D&O (+70% for some US companies) and Professional Indemnity (+40%).

2) Reduction in capacity

In response to recent losses, in 2018 the bottom performing 10% of each syndicate’s portfolio was reviewed as part of the "Decile 10" initiative. A handful of syndicates went into run-off whilst many exited underperforming classes, reducing the capacity available in the market. Many insurers have reduced their line size to increase profitability, a trend that is also echoed in Lloyd’s competitors. This means that in some cases, your existing insurer may decline to renew your policy or increase your limit of indemnity as part of their new strategy.

3 )Tightening of terms

The current market has enabled a "risk selection" environment where underwriters are tightening terms on underperforming risks e.g. high hazard property risks. Loss-affected portfolios are seeing an increase in exclusions and additional criteria for policyholders. This risk selection has also had positive effects on rates for clients where the underlying risk has improved e.g. rate reductions where vacant properties have become occupied.

What does this mean for me?

EIG will continue to work with you to understand your insurance needs and deliver cover in this challenging environment. Using our understanding of your risk, along with our knowledge of the market and specific underwriter appetites, we will best present your risk to targeted insurers to secure the right coverage at an optimal price.