“With any hard market, there tends to be a variety of factors. To point the finger at COVID-19 would be a mistake,” according to Dominick Hoare, group chief underwriting officer and active underwriter of Munich Re Syndicate.
Hoare, who also serves as an elected member of the Council of Lloyd’s, was speaking on Intelligent Insurer’s Re/insurance Lounge, an online platform where interviews and panel discussions are held live on a weekly basis and content is available on demand at any time to members.
“In the last five years, rates have come down year on year, coverage has broadened, and acquisition costs have gone up, to the point where, by 2019, we were losing money as a specialty market here in London,” Hoare explained.
The legacy issue in London and the under-reserving of the US casualty market both set the groundwork for hard market conditions. Then, COVID-19 arrived.
“You have these issues coming together, which has contracted capital, and capital is prepared to continue demanding much better returns, which is driving those rates upwards,” he added.
Hoare is convinced that the start of the traditional renewals will bring more of the same he expects that, over the next 18 to 24 months, the hardening market trends will continue, with hardening across nearly every single line of business.
Coping with COVID-19
“As an overall position, through the perspective of the London Market and the Lloyd’s market in particular, we’ve fared very well over the last five or six months,” said Hoare.
“We’ve been trading very efficiently, we’ve been very responsive to our clients, and we’ve seen high volumes come into London.”
However, he admitted, it has been tough at times and the market is losing some of its soft decision-making such as that 10-second conversation on the way to a lift.
“On the face of it, we delivered. But in the long term, I’m doubtful we can continue to deliver at this pace, unless to some extent we can return to the face-to-face and relationship-based environment of London,” he added.
In March, there was what Hoare dubbed a “tank of relationship goodwill”, but this is running out and he’s concerned that if the market has to stay virtual going forward, there may be difficult times ahead.
While he believes that the industry has done well in terms of supporting clients through the pandemic, Hoare doesn’t think it’s getting the PR right.
“We forget that a lot of claims are being paid very successfully and quickly.” Dominick Hoare
“We tend to hear the bad news stories of claims not being paid, whether or not they’re valid.
“We forget that a lot of claims are being paid very successfully and quickly. The industry is doing a very good job, but not getting the PR message correct,” he explained.
Hoare explained that there are two key drivers behind the restructuring of Lloyd’s.
The first is performance. Lloyd’s had been underperforming against its peers. Hoare said: “The work that’s been done, particularly when Jon Hancock was onboard, was phenomenal and we’ve turned a corner.”
Costs are the second issue, and ultimately a “tougher nut to crack”, according to Hoare.
“Another change we’re talking about is to bring in greater efficiency, through the use of technology, so we can drive costs down to a level where we’re as good, if not better, than our peer group,” he added.
It seems that the pandemic has been a catalyst for changing things more quickly. “If you look prior to COVID-19, the market was transacting about 70 percent of business on electronic platforms, now it’s in the mid-90s. It’s demonstrated to practitioners that it can be done, and it shows what technology can deliver,” he said.
Hoare fought back against criticisms that the increasing restrictions at Lloyd’s are forcing the entrepreneurial spirit out of the market.
“The shakeout underway for the last two to three years has shaken out the garbage, but the entrepreneurs are still there,” he stated, adding that Lloyd’s is actively encouraging the so-called light-touch cohort to “develop, grow, and be entrepreneurial”.
Hoare admitted that Lloyd’s is a bifurcated market to some extent, but he added that it has supported and championed the people who know how to deliver.
In the long term, Hoare knows, Lloyd’s is very much the global home for special insurance and is a marvellous magnet for attracting that type of talent. The market has never failed to pay a valid claim in 325 years, he concluded.
Overall, Hoare is confident that Lloyd’s has a “fantastic story going forward”, as long as it gets the mechanics behind it in place.
To watch the full video interview on which this write-up is based, click here and visit Intelligent Insurer’s Re/insurance Lounge.
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