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Insider in Full: Lloyd’s market has ‘unique’ opportunity to grow treaty: Neal

The Lloyd’s market has a “unique” and “genuinely exciting” opportunity to grow in treaty reinsurance at the 1 January renewal due to hard market conditions in cat business, Lloyd’s CEO John Neal has said...

Speaking at Insurance Insider’s London Market Conference this morning, Neal said Lloyd’s syndicates could be “50% larger” than at present in treaty business.

“We are substantially underweight in treaty,” said Neal, explaining that, of the 34% proportion of reinsurance for Lloyd’s, around half is facultative reinsurance, which he described as “insurance by another name”.

“Treaty is 15% of what we do, 9% property and 6% casualty,” said Neal.

“We are genuinely interested in being able to recapture the reinsurance market. We could sensibly and capably be 50% larger than we are.”

Neal said non-proportional reinsurance is more attractive than pro-rata treaty business, as, with the latter, “too much is paid away”.

He added: “If you look at non-proportional excess-of-loss property treaty, it feels like prices could be up by 40% or more, and I think they could double as we go through the June and July renewals. There is a genuinely exciting opportunity for treaty.”

Neal offered assurances that Lloyd’s will be flexible and responsive to syndicates looking to change their 2023 business plans to write more treaty business at 1 January.

“The commitment we have given is that it will take between three and five working days to respond to any changes in plan,” he said. “Our hope is the market feels ready and able to take advantage of that.”

His comments come amid increasing concernk about London’s standing as a centre for excellence for reinsurance business in the face of other maturing global markets.

Neal also praised London-listed insurer Beazley for its recent capital raise, in which it attracted £350mn ($417mn) for growth in cyber, specialty and property.

“Well done Beazley for stepping up and raising the capital,” said Neal. “That is exactly what people should be doing in the marketplace we are facing down.”

Elsewhere during his speech to the conference, Neal said Lloyd’s expects the market to achieve an underwriting profit for the full year in spite of losses from the Ukraine conflict and Hurricane Ian.

He also acknowledged that Blueprint Two, the market modernisation scheme, would likely be delayed by “one or two quarters” given the scale of its ambition.

In September, Lloyd’s delayed two open market milestones scheduled for Q3 – the provision of API specifications for a new digital gateway and the build of a proportional treaty system.

However, Neal said the programme will still be completed in 2024 before the 1 January renewal.

 

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