Quick Tour

Quick Tour

FOR BROKERS & MANAGING AGENTS

> www.lloyds.com/QUICKTOUR

About Lloyd’s

> [email protected]

Recent Updates: June 2010

Update of the geographic profile of insurance, growth and outlook

Lloyd’s history, market structure and core strengths

DisclaimerDisclaimer

Click HERE for Tutorial

Click HERE to launch dashboard

http://www.lloyds.com/QUICKTOUR

mailto:[email protected]

© Lloyd’sQUICK TOUR (About Lloyd's)2

Content

History Marketstructure

GeographicProfile

Global Network

Core Strengths

Clic

k B

ox t

o n

avig

ate

History Market Structure Geographic Profile Global Network Core Strengths CONTENT


Navig

ati

on

About

QUICK TOUR is designed to be used as a dashboard (in PowerPoint Show Mode).

This enables quick navigation to areas of interest using the various dashboard tools summarised below.

Click Any Box to navigate to

area of interest

© Lloyd’s

Geogr aphic spl it of Ll oyd’s – Over viewLicence Netw or k Mar ket Intel l igence Events Pr ogr amme Br oker Rel at ionship CEO Sur vey Cover hol der Init iat ivesCONTENT Offi ce Netw or kInter nat ional Mar kets

Source: Lloyd’s, Annual Report, (March 2010), www.lloyds.com/Lloyds_Market/Financial_performance/Financial_reports/2009_Annual_Report.htm

US41%

UK

20%Europe

16%

Other Americas

6%

Central Asia & Asia Pacific

9%Rest of

the World

4%

Canada

4%

Click Any Top Box to navigate to

any other section

Click Top Left Box to return to CONTENT

© Lloyd’s

Content

Inter nat ional Mar kets

2010 Pr ior it ies

Cli

ck

Bo

x t

o n

av

igate

Str ategic Review

Mar ket Devel opment

Factor s

Inter nat ional Mar kets Licence Netw or k Mar ket Intel l igence Events Pr ogr amme Br oker Rel at ionship CEO Sur vey Cover hol der Init iat ivesCONTENT Offi ce Netw or k



HistoryFrom Coffee House… to reconstruction



From Coffee house… to Lloyd’s members

1689

Ships and goods insured by wealthy individuals

acting on a personal basis.

Lloyd’s Coffee House; first recorded February

1689.

Importance of information.

1800 – 1850s

Development of the concept of “Lloyd’s member”.

Development of syndicates

1712 First steam engine

1750s Beginning of the Industrial Revolution

1805 Battle of Trafalgar

1876 Telephone invented

Historical Context



1904 1911 1960s

From marine… to every type of insurance

1906 San Francisco earthquake

1917-1990 Rise and fall of Communism

1914-1918 1939-1945 The world at war

1969 Man on the moon

Historical Context



Piper Alpha Asbestosis Hurricane Hugo

Exxon Valdez Hurricane Andrew

European storms

…to a string of lossesHistory Market Structure Geographic Profile Global Network Core Strengths CONTENT


From Reconstruction… to new structure

1996

Reconstruction & Renewal

Corporate members introduced since 1994.

Equitas reinsures liabilities from 1992

and prior years.

2001

Lloyd’s regulated by the FSA.

2002

Governance structure amended.



Market StructureThe market place and its stakeholders…



Lloyd’s is different

Lloyd’s is different

Lloyd’s is a Society of Members that operates as an insurance market.

Lloyd’s is not an insurance company.

Lloyd’s has members. It does not have shareholders.

Lloyd’s consists of a number of participants

The Society of Lloyd’s. Lloyd’s Members. Members Agents. Lloyd’s Syndicates Lloyd’s Managing Agents. Lloyd’s Brokers.


© Lloyd’sQUICK TOUR (About Lloyd's)11Source: Lloyd’s as at 31/12/09; * some risks are placed directly with managing agent-owned service companies

Lloyd’s Market Structure

Members

Policyholders

Direct

Reinsurance

52 Managing

Agents

Management

84Syndicates

Underwriting

Members Agents

Brokers

Coverholders

Service Companies*

BUSINESS FLOW CAPITAL PROVISION

Corporate

Individual

Corporation of Lloyd’s

SEE: www.lloyds.com/directories



Lloyd’s Managing Agents

Source: Lloyd’s as at 01/01/09

The syndicates underwriting at Lloyd’s form one of the world’s largest commercial insurers, and a leading reinsurer.

The Lloyd’s market is home to 52 managing agents which currently manage 84 syndicates.

MembersPolicyholders

Direct

Reinsurance

48 Managing

Agents

Management

78Syndicates

Underwriting

Members Agents


Corporate

Individual



Direct

Reinsurance

51 Managing

Agents

Management

80Syndicates

Underwriting

Members Agents

Corporate

Individual


176Lloyd’s

Brokers

Service Companies



Sources of Lloyd’s Capital



Direct

Reinsurance

48 Managing

Agents

Management

78Syndicates

Underwriting

Members Agents


Corporate

Individual



Direct

Reinsurance

51 Managing

Agents

Management

80Syndicates

Underwriting

Members Agents

Corporate

Individual


176Lloyd’s

Brokers

Service Companies


By Type15%

38%

47%

UK Listed

Individual Members

International

Financial security gives confidence to capital providers and peace of mind to policyholders.

It is the members of Lloyd’s who provide the capital to support the syndicates’ underwriting.

Members are drawn from some of the world’s major insurance groups and companies listed on

the UK stock exchange as well as individuals and limited partnerships.


Sources of Lloyd’s Capital



Direct

Reinsurance

48 Managing

Agents

Management

78Syndicates

Underwriting

Members Agents


Corporate

Individual



Direct

Reinsurance

51 Managing

Agents

Management

80Syndicates

Underwriting

Members Agents

Corporate

Individual


176Lloyd’s

Brokers

Service Companies


Bermudian Insurance Industry

UK Insurance Industry

Worldwide Insurance Industry

US Insurance Industry

Names (Limited Liability)

Names (Unlimited Liability)

40%

18%

15%

13%

9%5%

By Geography


Lloyd’s Franchise Model

Syndicate business planningUnderwriting standards Monitoring / benchmarkingClaims, reinsurance and run-off management

Syndicate capitalCentral assets

Realistic Disaster ScenariosRisk management framework

Syndicates submit plans on an annual basis and performance against plans is reviewed / benchmarked on a quarterly basis

Lloyd’s has set capital requirements centrally using its own risk based capital model since 1995 (Individual Capital Assessment (ICAs)

Undertaking disaster planning process, to identify and monitor key aggregation and catastrophe risk exposures


Direct

Reinsurance

48 Managing

Agents

Management

78Syndicates

Underwriting

Members Agents


Corporate

Individual



Direct

Reinsurance

51 Managing

Agents

Management

80Syndicates

Underwriting

Members Agents

Corporate

Individual


Source: http://www.lloyds.com/Lloyds_Market/Performance_management_framework/

Establishment of Franchise Board and model in 2002 to improve market profitability and protect Lloyd’s central assets and address divergence in syndicate performance.

176Lloyd’s

Brokers

Service Companies



Lloyd’s Brokers MembersPolicyholders

Direct

Reinsurance

48 Managing

Agents

Management

78Syndicates

Underwriting

Members Agents


Corporate

Individual



Direct

Reinsurance

51 Managing

Agents

Management

80Syndicates

Underwriting

Members Agents

Corporate

Individual


The interaction between brokers and underwriters is the source of the market's reputation for innovation and creativity. Non-Lloyd's brokers can now deal directly with managing agents subject to meeting the same commercial and regulatory standards that apply to Lloyd's brokers.

…has been approved by an appropriate regulatory body;

2. PROFESSIONAL INDEMNITY …meets our enhanced PI requirements;

3. TOBA…has entered into a terms of business agreement with each managing agent with whom it intends doing business;

…has arrangements for protecting insurance/client monies;

…is able to handle and process the business in accordance with relevant London market standards and practices.

Source: http://www.lloyds.com/Lloyds_Market/Market_participants/Managing_Agents/Managing_Agents_dealing_with_non-Lloyds_brokers.htm

176Lloyd’s

Brokers

Service Companies



Geographic ProfileFrom Geographic split to profile…


© Lloyd’sQUICK TOUR (About Lloyd's)18Based on: Hess, T., “The Opening up of International Insurance Markets: Trends and Consequences”, (2006)

Shifting Business and Insurance landscape

Business Environment increasing income / complexity & maturity of economy

Cu

lture / B

uyin

g B

ehavio

ur /

Market D

ynam

ics / Reg

ulatio

n

Rapid industrialisation

FDI/capital inflow

Focus on commercial lines

Young population

Vietnam

Motor/household insurance

Savings products

Increasing home/car ownership

Emergence of a middle-income

class

China

Reform of old (state-owned) companies

New start-ups

Brazil

Increasing role of services

Protection of start-ups

Growth of personal lines

Protection products

Turkey

Large conglomerates

Credit & Surety

Poland

FDI capital outflow

Increasing liability business

Wealth management

South Korea

Corporate (re)insurance

Ageing population

Singapore

Captives

US

XOL

Insurance Environment sophisticated products / buyers / complexity of risks



Lloyd’s Business Split – 2009



US & Canada

45%

UK

20% Europe

16%

Other Americas

6%

Central Asia & Asia Pacific

9%Rest of

the World

4%


Gross Domestic Product* – 2000

Source: *Purchasing Power Parity based on: IMF, World Economic Outlook (April 2010); http://www.imf.org/external/pubs/ft/weo/2010/


Canada 888bn US 9.9 trillion

Mexico 1.0 trillionBrazil 1.2 trillionArgentina 338bn

UK 1.5 trillionFrance 1.5trillionGermany 2.1trillionItaly 1.3 trillionTurkey 512bnRussia 1.1 trillion

India 1.5 trillionSaudi Arabia 353bnSouth Africa 295bn

China 3.0 trillion Japan 3.2 trillion

Korea 775bnIndonesia 500bnAustralia 528bn

Size of bubble proportionate to level of Purchasing Power Parity in USD; benchmarked to US (2000) (IMF ESTIMATE)


Gross Domestic Product* – 2010History Market Structure Geographic Profile Global Network Core Strengths CONTENT

Canada 1.3 trillionUS 14.7 trillion


UK 2.1 trillionFrance 2.1 trillionGermany 2.8 trillionItaly 1.7 trillionTurkey 932bnRussia 2.2 trillion



Korea 1.4 trillionIndonesia 1.0 trillionAustralia 882bn

Size of bubble proportionate to level of Purchasing Power Parity in USD; benchmarked to US (2010) (IMF FORECAST)



Gross Domestic Product* – 2015History Market Structure Geographic Profile Global Network Core Strengths CONTENT

Canada 1.6 trillionUS 18.2 trillion


UK 2.7 trillionFrance 2.6 trillionGermany 3.3 trillionItaly 2.0 trillionTurkey 1.2 trillionRussia 2.9 trillion



Korea 1.9 trillionIndonesia 1.5 trillionAustralia 1.1 trillion

Size of bubble proportionate to level of Purchasing Power Parity in USD; benchmarked to US (2015) (IMF FORECAST)



Top Sovereign Wealth Funds* – 2010 History Market Structure Geographic Profile Global Network Core Strengths CONTENT

US 52bn Norway 443bnRussia 90bnIreland 31bnFrance 28bn

UAE 662bnSaudi Arabia 432bnKuwait 203bnLibya 70bnQatar 65bn

China 787bn Singapore 370bnHong Kong 140bnAustralia 59bnKorea 27bnMalaysia 25bn

Size of coloured bubbles represent total disclosed SWF assets; benchmarked to China (2010) (SWF INSTITUTE ESTIMATE)

Source: *Estimate based on: Sovereign Wealth Fund Institute, (June 2010); figures are aggregated on funds, which were disclosed at www.swfinstitute.org/


Direct Insurance Market* – 2008History Market Structure Geographic Profile Global Network Core Strengths CONTENT

Canada 57bnUS 662bn

Mexico 11bnBrazil 25bnArgentina 6bn

UK 107bnFrance 92bnGermany 132bnItaly 58bnTurkey 8bnRussia 38bn

India 7bnSaudi Arabia 3bnSouth Africa 8bn

China 45bn Japan 106bn


Size of bubble proportionate to level of total direct market in USD; benchmarked to US (2008) (III ESTIMATE*)

Source: *Estimate based on III Fact Book; www.iii.org; for detailed statistics and clear market definitions, please refer to the local regulator & Regional Watch: www.lloyds.com/REGIONALWATCH


Direct Insurance Market* – 2000 – 2008History Market Structure Geographic Profile Global Network Core Strengths CONTENT

Canada 57bnUS 662bn

Mexico 11bnBrazil 25bnArgentina 6bn

UK 107bnFrance 92bnGermany 132bnItaly 58bnTurkey 8bnRussia 38bn

India 7bnSaudi Arabia 3bnSouth Africa 8bn

China 45bn Japan 106bn


Size of bubble proportionate to level of total direct market in USD; benchmarked to US (2008) (ESTIMATE*)

Source: *Estimate based on III Fact Book; www.iii.org; for detailed statistics and clear market definitions, please refer to the local regulator & Regional Watch: www.lloyds.com/REGIONALWATCH

> 200%

> 100% - 200%

< 100%

2000 - 2008 Premium Growth


Global NetworkFrom structures to licences and offices…



US

Excess & Surplus

Licence Network

Reinsurance onlyLloyd's is specifically registered or licensed to write reinsurance business only.*

*See: www.lloyds.com/crystal for detailed access routes + exemptions

Reinsurance from outside the territoryTerritories where Lloyd’s is not registered or licensed but can transact cross-border reinsurance business.*

Insurance + Reinsurance52 territories where Lloyd’s is licensed to underwrite insurance and reinsurance business.*



Licence Network

1990s EU legislation allows Lloyd’s to carry on insurance in other EEA

member states on an establishment & services basis

1997 Lloyd’s Japan established

2000 Lloyd’s Asia established

2002 EU establishment licence Spain

2006 Lloyd’s becomes an onshore re-insurer in China

2008 ‘Admitted reinsurer’ status in Brazil and EU establishment

licences in Poland and Austria

2009 EU establishment licence in Portugal



Office Network

1

1

1

1

2

22

2

33

3 3

3

3

3

3

1 1

1

11

4

4

4

3

3

3

3

2

4Local underwriting with co-located Syndicates(or via a Lloyd’s regulated entity); Country Manager with Market Development Role

Europe

3 Country Manager with Market Development Role

2 Country Representative for regulatory requirements

1 Country Representative for minimum regulatory requirements

Type Market Development Scope Territories

Europe

Austria, Denmark, Norway, PortugalArgentina, Belize, Chile

Namibia, Zimbabwe

Cyprus, Greece, Israel, Malta

New Zealand

South Africa

Australia, Hong Kong (SAR)Benelux, France, Germany, Ireland, Italy, Poland, Spain, Sweden, Switzerland

Brazil

ChinaJapanSingapore

North America

www.lloyds.com/AMERICA



Core strengthsFrom Performance to ratings…



Core Strengths: Lloyd’s Outperforms Lloyd’s outperforms the market during below average catastrophe years


INDUSTRY CAT LOSSES

USD BN INDEXED TO 2009

LLOYD’S MAJOR LOSSES

USD BN INDEXED TO 2009

Source: Industry - Swiss Re, Sigma No 1/2010; Lloyd’s – Net ultimate claims for major losses per syndicate QMRs, Lloyd’s pro forma financial statements, 31 Dec 2009

0

20

40

60

80

100

120

140

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Ave

rage

0

1

2

3

4

5

6

7

Industry 1994 - 2008 Lloyd'sIndustry 2009


29.3%

£3,846m

£2,007m

84.0%

£16,366m

2007

£1,899mProfit before tax

£957mInvestment return

13.7%Return on capital (pre-tax)

£17,985mGross written premiums

91.3%Combined ratio

2008

Core Strengths: Strong results

Source: Lloyd’s pro forma financial statements, 2009 Interim Results

31.4%

£3,662m

£1,661m

83.1%

£16,414m

2006

(0.9%)

(£103m)

£1,436m

111.8%

£14,982m

2005

£3,868m

£1,769m

23.9%

£21,973m

86.1%

2009



Strong Results: Currency Movements

Source: Lloyd’s pro forma financial statements, 31 Dec 2009


GWP

GBP m 8% 22% 13%

Note: Attribution to foreign exchange movements and increase in local currency stated on a compound basis

21,973

17,985

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

2008 Increase in localcurrency

Foreign exchangemovements

2009


Core strengths: Good performance 2009 annual results of a profit before tax of GBP 3,868m

Lloyd’s continues to compare well against its peers

Sources: Sources i) Insurance Information Institute (estimate-2009), ii) Reinsurance Association of America, iii) Company data (8 European companies: 17 Bermudian companies)


9792

102101

91

100

86

94

99

84

50

70

90

110

130

Lloyd's US P/C Industry (i) US Reinsurers (ii) European(Re)Insurers (iii)

Bermudian(Re)Insurers (iii)

2005 2006 2007 2008 2009

COMBINED RATIO


Core Strengths: Strength and Stability

Source: Society of Lloyd’s financial statements, Annual Report, (March 2010)

Chain of security provides excellent security and capital efficiency

1st Link

2nd

Link

3rd

Link

Syndicate Level Assets

GBP 37,400m

Members’ Funds at Lloyd’s

GBP 13,159m

Several

Assets

Mutual

Assets

Central Fund GBP 983m Corporation Assets GBP 143m

Subordinated Debt / Securities GBP 958m

Calla

ble

Layer

GB

P 683m



Core Strengths: Large Solvency surplus

Source: Lloyd’s pro forma financial statements, 31 Dec 2009


Note: * Solvency surplus net of solvency deficits

GBP m GBP m

BALANCE SHEET

19,121

10,992

13,333

14,46115,264

2,752

2,4752,297

1,368

1,801

5,000

10,000

15,000

20,000

2005 2006 2007 2008 2009

0

500

1,000

1,500

2,000

2,500

3,000

Capital, Reserves, Subordinated loan notes & securities Solvency surplus*


Core strengths: Well Positioned 3

Source: Society of Lloyd’s financial statements, (2008); based on Lloyd’s, Annual Report, (April 2009)


Our focus:

1. Performance Management

2. Solvency II

3. The Exchange

4. Claims Transformation

5. Access to business

Fitch RatingsA+ (strong), stable outlook

Standard & Poor’sA+ (strong), stable outlook A+

AA.M. BestA (excellent), stable outlook


Appendix



Data LimitationsHistory Market Structure Geographic Profile Global Network Core Strengths CONTENT

The detailed country-level Lloyd’s data used in this document is based on calendar year signed gross premiums sourced from Xchanging. This differs from the Lloyd’s data published in the Annual Report. The accounting-level Lloyd’s data published in the Annual Report is based on calendar year written gross premiums sourced directly from Syndicates. Differences are therefore explained by (1) the timing differences between written and signed gross premiums and (2) inconsistent use of rates of exchange between Syndicates and Xchanging.

Please note the information contained in this document is based upon data collected from Xchanging and may be incomplete for some classes of business; for instance a substantial figure, which is missing from the REG 258 data set is comprised of UK Motor, which is not processed by Xchanging.

Lloyd’s figures are based on gross signed premiums based on figures processed by Xchanging by processing year and country of origin.

Gross Premiums: Original and additional inward premiums, plus any amount in respect of administration fees or policy expenses remitted with a premium but before the deduction of outward reinsurance premiums.

Country of Origin: Denotes the country from where demand for the insurance / reinsurance emanates; i.e. the coverholder or policyholder, irrespective of the country to which the risk is classified for regulatory reporting purposes.

Processing Year: Relates to the calendar year in which the premium, additional or return premium is processed by Xchanging, irrespective of the actual underwriting year of account of the risks (which is determined by the inception date of each risk).

Example: A policy holder in the UK insuring a holiday home in France would be classified as a UK risk by “Country Of Origin”, but “French” for regulatory reporting purposes. Similarly a risk incepting on 1st December 2007 would be classified at 2007 “Underwriting Year of Account” but may not be processed by Xchanging until 2008 and so be allocated to the 2008 “processing year”.

Disclaimer“This document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the information Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or liability for any loss to any person acting or refraining from action as a result of, but not limited to, any statement, fact, figure, expression of opinion or belief contained in this document".

Quick Tour

Documents

Transcript of Quick Tour