Fourth consecutive year of rate rises gives Lloyd’s tail wind to deliver its plans

Lloyd’s of London has seen four consecutive years of rate rises.

This is according to its chief executive John Neal, speaking during a media briefing yesterday on its Q3 trading update.

He said: “In my 30 plus years in the market, I have never seen four consecutive years of rate rises – so this is really giving us the tail wind to insure what we can and execute against plans and determine that we can achieve a return to strong profitability in 2021.”

Lloyd’s has been on a three-year journey to improve performance; this year’s process has been about delivering “realistic, logical and achievable” plans against the backdrop of the Covid-19 pandemic.

He continued: “One thing is for certain, the pandemic has caused a huge amount of disruption and uncertainty for our people, customers, businesses and the economy.”

Lloyd’s anticipates that it will pay out £5bn in Covid-19 claims, but Neal said this is “good news” as it helps customers.

But he said: “We will maintain a focus on profit over growth,” and that post-pandemic, Lloyd’s “will support the right growth for the right risk at the right price”.

Must continue forever

Neal admitted that although the market had made progress, there is more work to do - he added that it is foolish to think otherwise.

He said: “The performance actions must continue, in fact they must continue forever. It is an every year process as far as we are concerned”.

He pointed out that market conditions are better, with double digit performance being permitted for the very best performers at Lloyd’s for the first time in a long while.

“It goes without saying that Covid-19 will continue to impact next year’s performance and, dare I say it, performance beyond and into 2022,” Neal said.

“While 2020 has been an exceptionally challenging period for our people, our customers, our industry broadly and economies around the world, Lloyd’s continues to do its bit.”

Logical, realistic, achievable

Neal went on to clarify his thought process behind being ”realistic, logical and achievable”.

In terms of being logical, Neal said Lloyd’s needs to see that the right performance actions have been identified, as well as a real commitment to portfolio management within the syndicate.

Realistic means that the assumptions made that underpin the Lloyd’s plan gives due recognition to current and future market conditions.

And lastly, achievable means that there is a genuine track record of people doing what they say.

Lloyd’s is also continuing to benefit from continued rate momentum in 2020; it has seen an adjusted rate increase and is also seeing less new business flowing.

“The mix between new business and renewal portfolio is slightly different in 2020 and likely to be slightly different in 2021,” he said.

He calls this positive for performance, as a business that has been underwritten previously is generally understood better than a new one.