Lloyd’s CEO John Neal told attendees at the Marine Insurance London conference on Friday March 22nd that the aggregated results that Lloyd’s would be presenting this Wednesday March 27th would not be a pretty story. “But I think we have the beginnings of an understanding of how that can improve”.
Five or six years ago the best in class had begun to respond to the macro headwinds they perceived. At the same time, Lloyd’s had decided to expand into new territories. Costs were going up. Business was diversifying and growing, but was becoming less profitable.
“I think that there was a bit too much hope that a market cycle turn would resolve the challenging times”, said Neal, noting that, despite the high losses from catastrophe events in 2017 and in 2018, the change in price comparatively speaking had been “negligible”.
“In five months in my role as CEO of Lloyd’s I have attended more than 300 meetings with external parties, and those meetings have furnished at least 300 views as to what we should do, so I am certainly not lacking opinions as to how I should go about my job or what we should see as our priorities”, said Neal, continuing: “I think that the low interest rates that we are probably looking at for an indefinite period of time and the flood of capital seeking non-correlated returns has made a significant difference to the way in which all financial products need to be structured and the way in which they operate.”
Neal said that this had coincided in a rapid development of our use and expectations of technology. He said that, from an insurance point of view, that “it has given us an opportunity to redesign our models. I would say that we are ‘thinking’ about it, but that we still have a lot of work to do as to what that actually means, particularly as to what constitutes good customer service.”
He revealed that he had been told on Thursday March 21st that “we are getting good price increases in Japan” on the back of events there, with rates up 30%. However, as Neal observed, “the rate is 3%. Thirty per cent of 3% is not a lot.”
Neal said that it was not price that was going to redirect a change in business models at Lloyd’s.
“I think that many of us have realized that the traditional and old-fashioned pricing cycle is at best on hold, and probably more likely to be over.”
“For Lloyd’s, certainly our results have not been good enough. It’s been a tough market for everyone, but we perhaps have got more work to do than some. We know that.”