Securing capacity is increasingly challenging for Australian underwriting agencies as Lloyd’s continues to reduce its exposure to the local market.
Lloyd’s has made no secret of the fact it will retreat from “bad business” after making a £2 billion ($3.73 billion) loss in 2017.
In a speech earlier this year CEO John Neal described the performance as “totally unacceptable”.
“It’s not acceptable that between 2015 and 2017 unprofitable syndicates have eroded 87% of the market’s profit,” he said. “The view that it will ‘all come out in the wash’ has been harmful for the collective.
“The old adage that every business has a price is wrong: bad business is simply bad business, and it shouldn’t be happening in this marketplace.”
Mr Neal also flagged a “new geographical focus”, prioritising developed markets with the greatest potential for further growth, “such as the US and new opportunities in Europe through Lloyd’s Brussels”.
The change in approach is being felt in the Australian market, but Underwriting Agencies Council CEO William Legge says most agencies had time to prepare.
“[Lloyd’s] has had some horrendous results and it doesn’t take much nous to realise things were going to have to change,” he told insuranceNEWS.com.au.
“After many years of saying, ‘Just go to Lloyd’s and get it done,’ it isn’t that simple and they are asking a lot more questions.
“Finding capacity is a bit of a challenge, but that is what we do in this business. Local markets are seeing much more business being offered to them.”
Mr Legge says the impact is being felt across all lines of business.
“They are going through the syndicates’ books and asking, ‘Are you making money, and if not can you turn it around?’ If the answer is no, then they are being told, ‘Just don’t do it any more.’ It has created a challenge, but it was foreseeable.”
Mr Legge says today’s Underwriting Agencies Council expo in Sydney broke records, with 105 exhibitors at the new venue of the Hyatt Regency.
“There was a great attendance and good vibes from both exhibitors and brokers,” he said.