September 2012 Bermuda Re/insurance
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approach to the market. “Tom Bolt sits in the same building, so if the market has a problem with a particular measure, there’ll be a queue outside his door.” He added that Bolt is a “sensible fellow who commands immense respect”, and is not someone to impose unnecessarily burdensome regulation upon the market. “It’s not going to stop his office every now and then putting out an edict the market disagrees upon, but it does mean that being in the same building we can work through issues without disadvantaging policy holders,” said Dupplin. Graham added that “Lloyd’s will want to continue to regulate in an evidence-based way”, even if at times this might prove tough for the market. But as Graham made clear, Lloyd’s is “right to be self-interested and to manage risk in a prudent way—this is not to stifle entrepreneurship or prevent people bringing large risks to the market”, but to protect the market from the potential fallout of accumulated losses.
A touch of Forth
While the Lloyd’s market has, over an extended period of time, proven its worth, there is never time for complacency, and a number of threats to the market persist. London remains a vibrant centre for re/insurance, but continued development and innovation will be key to Lloyd’s ongoing success. As Dupplin indicated, Lloyd’s has had to develop from a “300-year-old market employing people who sat on tall stools equipped with quill pens” to one that must necessarily employ “greater use of technology to make the transacting of insurance simpler”. As Dupplin indicated, such projects are “like painting the Forth Railway Bridge—they are never over”. Unless the market continues to develop its technological capabilities and innovate, it faces the danger of being left behind, he said.
Hoshina likewise indicated that Lloyd’s needs to keep an eye on technology developments, adding that company markets in general have the edge on the market when it comes to the deployment of technology. He warned against the market falling behind. Dupplin also highlighted the dangers posed by Solvency II, with the regulatory framework having the potential to make “Lloyd’s a less attractive place to deal with”. He said that the final shape of the regulatory regime would soon be established, but added that he hoped it would “allow businesses to operate in a sensible way without being completely overburdened by regulation”.
Harris, for his part, highlighted three areas of improvement for the market. The first is the “opportunity to drive more cost out of the system. Capital efficiency at Lloyd’s is high, but from an operational efficiency standpoint, there are more costs that could come out of
“There really is no competition for Bermuda and Lloyd’s. If you want good people to look at your risk, there really are only two markets to consider.”
the market to make it more competitive”. Lloyd’s indicated in its Vision 2025 document that it intends to improve capital efficiency in the market. One would hope that this will extend to operational areas as well. Harris said that the second area of improvement for the market would be “better use of data in aggregate—what has driven underwriting results over time, what lines have been more profitable, understanding the customers more and where potential growth might come from”. He said that the market boasts a real wealth of data, but that its participants and their businesses would benefit from greater access to such information.
Finally, Harris mentioned improving responsiveness to changes in the market—echoing Dupplin’s concerns. “You are starting to see shorter cycles and certainly greater capital flexibility in the market and you have to be responsive to partner with, and access, that capital. The business planning process needs to become more dynamic in the London market, but without undermining its integrity,” he said.
A Lloyd’s presence continues to be viewed as a significant benefit by reinsurers pursuing international business. Its global licences and international ambitions suggest its influence will continue, although whether as a conduit or as the front-runner for regional markets remains to be seen. Regardless of how Lloyd’s’ market projection plays out, a London syndicate continues to be of significant benefit to Bermuda reinsurers. As Hoshina outlined “cedants distinguish their panel of reinsurers not only on an individual company basis, but also by market. They will examine what percentage of their reinsurance is placed with Lloyd’s, Bermuda, European and US reinsurers and being able to have a platform in both Lloyd’s and Bermuda enables firms to access quality business in both locations”. And as they are the two leading reinsurance markets, it makes perfect sense that the partnership should continue.
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