The View From Lloyd’s

Why international renewals and premiums are on the rise.

Following a £1bn loss in 2018, Lloyd’s is working with Syndicates and brokers to reduce exposure and increase premiums in targeted areas. What does this mean for high risk and international cover in 2020? 

Before Coronavirus or COVID-19 had ever been heard of, Lloyd’s of London was already under pressure from global disasters.

Hurricanes, typhoons, flooding and significant incidents drove steep losses at Lloyd’s of London in 2018, resulting in a call for a ‘sharper focus on performance in 2019’ from the Chief Executive. Adrian Henry, Senior Broker at Bellwood Prestbury, says that corporate clients are seeing the ramifications of this directive in two different ways. 

Premiums are being escalated… 

Firstly, after a long period of soft rates, premiums are being escalated, so that clients should prepare themselves to pay more for the same protections. Secondly, there is less appetite for particular insurance classes, making it harder to secure cover for some high-risk situations. 

Adrian explains: “Lloyd’s experienced significant losses in 2017 and although levels reduced in 2018, the message to syndicates was that business as usual would not cut it. Lloyd’s went on to analyse the performance of underwriters and brokers in every class of business, demanding reviews of pricing and risk strategies where performance was deemed to be unsustainable. 

“As we move into 2020, we’re now seeing the outcome of this new approach. 

“What has been a 'buyer’s market'… is over.” 

“What has been a ‘buyer’s market’ for the last 10 years, driving down premiums, is over. Renewals are typically experiencing a 5% to 10% uplift; in certain specialist areas, premiums can increase by as much as 90% or 100%.

“At the same time, some insurers have pulled out of certain classes of cover altogether. Others are closing their books, refusing new business – and in some cases – backing out of renewals too. With less options, prices inevitably rise.” 

What does this mean for international corporate insurance? 

"In this climate, which is unlikely to improve given the backdrop of hurricanes, floods and bushfires in 2019/20, relationships are key. 

"You have to know which insurers still have the appetite for a specific risk and where the best value is likely to be. 

“As a specialist broker with a long track record in the market, we can get access to the right people and make cases for bespoke cover that others won’t be able to manage," Adrian says. 

“How you present the risk to Lloyd’s is key. It’s important to make it easy for the underwriter to understand the client’s business and to build understanding and trust in what they intend to do. 

“We’re also being proactive with existing clients, starting the renewals process earlier to try to get best value. 

“And our aim is to advise clients on likely premiums before they bid for new business abroad, ensuring that any increasing costs of cover are included in commercial considerations, so they don’t directly impact the bottom line.”

Adrian Henry is a senior broker for Bellwood Prestbury, creating bespoke high-risk insurance cover for organisations all around the world. 
ah@bellwoodprestbury.com