A video of the Market Message is available here as well as slides available here.

The following are a summary and extract of the words of wisdom delivered by Lloyd's Chief of Markets Patrick Tiernan and chief actuary Emma Stewart:

1. Stocktake on the state of the market,
2. Forward looking underwriting views and areas of focus,
3. Approach to 2024 Planning for underwriting and capital,
4. Claims in the Lloyd's market.

Looking at the first three areas,

Stocktake on the state of the market - well positioned for a sustainable future

2022 looks to be in decent shape.

Lloyd's demonstrated an improved combined ratio (claims + expenses /premium) in 2022 with premium growth of 19%.

Sets the foundation for a strong 2023 with 15% premium growth with further growth expected for 2024.

Expected gross written premium £56bn approx.,

Q1 2023 was catastrophe "quiet",

No drastic reversals of underwriting conditions as once expected,

Positive trends in D&F accelerating but so are negative trends in some casualty classes,

Current level of market discipline encouraging.

Changing shape of portfolio:

• long-tail business (casualty) now larger than short tail (property for example),
• Growth mainly from the US,
• Growth mainly from binding authorities and open market while reinsurance has lagged significantly behind,
• US wildfires, severe convective storms, flood are approaching catastrophe scenarios.

Six key stimuli driving strategic thinking

1. Geopolitical risk - regional conflicts, trade disputes, political violence, terrorism;

2. Macroeconomic pressures - recession, interest rates and inflation and how these affect the portfolio, require an increased buffer particularly for long tail classes; Lloyd's concentrating on D&O declines and the management of binder books which are slower to respond;

3. Catastrophe loss picks (expectations) - consistent historical miss between actual and planned catastrophe loss ratios - volatility will increase with lack of retro sideways cover and increased attachment points, exposure management still critical despite improving rates;

4. Reinsurance market volatility - average of 25% of premium ceded away and Lloyd's reviewing the managing of aggregations and systemic risk, reinsurance coverage must be back to back with inwards business;

5. Cyber - Lloyd's determined to segregate systemic risk (state backed cyber attacks) from core cover - underwriters offering broader core cover will face higher capital requirements; a failure to meet Lloyd's expectations may result in a syndicate downgrade.

Planning for 2024

Lloyd's will build on the differentiation between syndicates, ranging from syndicates that continue to outperform, enjoying de-minimis plan reviews, moderate syndicates that will have much more detailed reviews, to underperforming syndicates will have to cut back their volatility.

Performance is Lloyd's number one priority.

Emma Stewart, Lloyd’s Chief Actuary, then spoke on the intended capital requirements and reviews:

• Planned exposures must be adequately capitalised for,
• Growth in premium and net exposures will mean higher capital requirements,
• Lack of new capital coming into the market to provide extra capacity,
• Capital models will need to reflect unpredictable risk landscape with new unprecedented challenges,
• Lloyd's risk based oversight will focus more on high risk syndicates,
• Inflation, interest rates, banking disruptions all need to be taken into account,

Lloyd's will indicate and then apply capital loadings where it considers a syndicate has material under capitalisation.

Claims and summary

Claims service must be a key strength of the Lloyd's offering. There is still much work to be done. Syndicates will be differentiated by their claims service.

We are in a continuous elevated risk landscape, we are optimistic but not complacent. Further growth in the market overall and in some strategic areas. Finally, Patrick posed existential questions such as what must we do to ensure this generation leaves a sustainable legacy and, to avoid squandering this opportunity what can Lloyd's do to help syndicates with their growth plans and, what elements of the market can be built upon or rebuilt to ensure we pass on to the next generation a market that is equipped for the future.

Comment

It is reassuring to see just how rigorous and expert Lloyd's has become in the past years at monitoring and reviewing syndicates and driving out underperforming business which has positively affected the recent years' results. Lloyd's top team are clearly thinking ahead strategically and in detail and trying to take the market with them in making the market more resilient, profitable, and attractive for capital providers for now and the future.