On the 7th December Lloyd’s presented their December market messages, highlighting a brief overview on market conditions, key outcomes of syndicate business plans and market oversight plans for 2023 with an overview given below.

Market Update

  • Property market is an area that continues to see market dislocation and Lloyd’s should be well placed to take advantage of this and will support syndicates who have a robust plan and track record of profitability in Property Treaty.
  • Hurricane Ian is a 1 in 7 net market loss and is manageable.
  • The market loss estimate for Ukraine at £1.1bn remains stable and within market tolerance.
  • Cyber market will continue to grow, with Lloyd’s writing 20% of global premium but working with best in class syndicates to better understand exposures.
  • D&O (Directors and Officers Insurance) is only class seeing negative risk adjusted rate change (RARC) and therefore Lloyd’s are not supporting growth within this class.

SBF Outcomes

  • Planned GWP for 2023 is £56bn v £48.9bn in 2022, this growth is driven predominately from inflation with exposures and RARC increases at 2022 levels.
  • Planned net combined ratio is below 95% which is in line with Lloyd’s expectations.
  • 60% of growth is being underwritten by good performing syndicates with 15% from new syndicates to market.
  • The worse performing syndicates are seeing a 10% decrease in exposure and are only allowed to grow premiums in line with rate and inflation.
  • Lloyd’s fully expect syndicates to resubmit business plans following the 1st January renewal season and have committed to review plans with speed to allow syndicates to take advantage of market conditions.

Capital update

  • Lloyd’s expect syndicates to resubmit capital models when there has been a significant change in view following 1/1, this change is usually a movement of 10%.
  • Market capital requirements have increased c.25% from £23.5bn (2022) to £29.8bn (2023). The main increases are £2.1bn for FX movement from GBP to USD, £4.4bn for exposure increases and £2.5bn for inflation offset by a decrease of £2.6bn for profitability.

Market Oversight

  • Conduct risk and culture will feature heavily in Lloyd’s oversight plan for 2023 with outcomes for falling short of standards being inability to write new business or make new hires and in extreme circumstances syndicates may be put into run-off.
  • Delegated authority oversight as well as claims handling speed and data availability are also a focus in 2023.

The full presentation can be seen here.