A close look at Lloyd’s reinsurance, leverages opportunities: Tiernan – Artemis.bm

This morning, participants in the Lloyd’s insurance and reinsurance market were warned to be aware of the challenges of the insurance market and future reforms, but were also told that the market will help those who can benefit from the internal side.

Speaking to the market, Patrick Tiernan, Chief of Markets at Lloyd’s, explained that the reinsurance market is closely monitored and encouraged participants to alert Lloyd’s of any changes to their reinsurance programs in the near future.

Tiernan said: “We want to take this opportunity to highlight reinsurance, a sector that we feel has changed a lot since we’ve been here together, and that needs attention,” Tiernan said.

He explained that Lloyd’s sees reinsurance “from the cedants and reinsurance perspective,” with a quarter of the premiums written in the market being allocated to third party reinsurance investors.

He went on to say, “We are looking closely at the availability, design, pricing and positioning of the upcoming insurance, especially in specific segments and classes.”

Adding that, “We can’t walk around with our heads in the sand,” and ignoring the changes in the reinsurance market is extremely difficult.

He warned the Lloyd’s market of the need to act on any problems that may arise, or changes to their recycling arrangements.

“It is a natural expectation that managers see the potential of their reinsurance strategy, and review risk appetites, underwriting strategies and costs, if the environment varies according to the plan.

“Therefore as part of the process this year, all organizations have been asked to provide their views on their insurance premiums, limits, retention and availability of cover, to help evaluate the writing policies,” Tiernan explained.

Adding, “We need you to stay on top of what’s going on and make sure your business plans for 2023 have good ideas and smart contingency plans.”

He added that it was already necessary for syndicates to inform Lloyd’s of the changes to the recycling programs, encouraging the market to be realistic about not offering plans in Q1.

Tiernan then went on to discuss the opportunities that will present themselves, as the insurance markets strengthen and said Lloyd’s will support those who can grow.

“This could represent an opportunity for those who underwrite in-contract reinsurance at Lloyds,” he said.

Adding, “We will be actively looking to help those in the right position to take advantage of any opportunities you may wish to pursue.

“Hopefully this is reflected in the evolution of the risk appetite we have provided to organizations that meet the requirements.

“This will increase LCM’s exposure to five, while remaining within our overall ambition.”

But, on the other hand, Tiernan warned, “We can’t show the same flexibility, in terms of economy or growth, where plans are based on expectations rather than what can be seen.”

The best-performing syndicates are set up to have little flexibility in terms of growth in risky environments, it seems, while the least-performing ones have little chance of growth, based on the cat’s exposure.

He said Mr. Lloyd wanted to be quick to respond quickly to requests for change, in order to allow the market to remain smart even if there are problems or opportunities.

Tiernan said: “We’re going to try to be smart and efficient in terms of reinsurance and investment,” Tiernan said.

It is interesting to note that Tiernan did not mention Lloyd’s linked insurance (ILS) initiatives, its recent launch of the London Bridge 2 ILS, or how this could work in favor of market participants at this point in the reinsurance cycle.

Lloyd’s groups and members may be interested in risk exposure, using the London Bridge 2 ILS, either to obtain reinsurance funds that are more cost-effective, or in a way that will reduce associated costs.