A new facility has been launched at Lloyd’s to specifically provide meaningful capacity for emerging and developing exposures that do not readily fit risk profiles that can be insured by established classes of business and policies. A reputation for innovation has long been a trademark of Lloyd’s and this initiative is aimed at reinforcing that position.
Involving more than 20 syndicates the facility can provide up to USD125m in limit. Each of the participants is in a position to bring potential business to the facility as a “sponsoring” underwriter. There are no parameters set for what might be considered but descriptor classes by way of example include supply chain, reputation and parametric. In each case a sound business case must be made demonstrating the viability and sustainability of the exposures to be underwritten.
Tim Allen of Renaissance Re is heavily involved and gives us his thoughts on the initiative.
Growing up in London you would hear stories about the odd things that Lloyd’s could insure; a piano session player’s hands, a footballer’s legs etc. When I started working in the market in 2004 I still found that entrepreneurial spirit to be present, seeing the relatively nascent public D&O market and the hard to place US lawyers E&O market being led from London.
Over the intervening 15 years however I feel that innovative spirit has dwindled somewhat. In places, we have become nothing more than a US surplus lines market with higher acquisition costs than the domestic markets we are competing against.
In an environment where margins on the established lines are being pressurised, every percentage point counts. Within some sectors there is also a natural de-selection in the business that reaches us. It is likely that by virtue of it being in London, some business has been unable to get placed in its home market, which can make achieving margin more challenging.
Addressing un-met needs
We can’t be complacent and wait for the business to come to us. We as a marketplace need to recapture the entrepreneurial spirit that made Lloyd’s the centre of the global insurance market in the first place.
We need to start producing products that address currently un-met needs that can only be purchased in London. The Lloyd’s market has survived and thrived for nearly 400 years on the basis of being able to re-invent itself and to constantly address the evolving needs of clients.
An example of the London market’s ability to meet changing client demand and exposures is the large scale response to cyber risks. London pushed the boundaries of coverage and dramatically increased available capacity. Results have been reasonably encouraging to date and now we are experiencing a strong domestic push for that business to be repatriated.
RenaissanceRe was in many ways the first Insurtech out there in 1993 and we have retained that desire to take on pioneering risk. That was why the Lloyd’s Product Innovation Facility (PIF) was of massive appeal to us.
New product focus
The Facility, “led” by Tokio Marine Kiln and supported by more than twenty other Lloyd’s markets, is our collective response to the need for new product creation in the market. The Facility covers any class within Lloyd’s and is focused on “new” products, i.e. those that attempt to cover something where there is no established existing solution.
The Facility is not there to address hard to place deals nor to execute existing products in more efficient ways (e.g. a streamlined distribution solution). The products can be volunteered by the members of the facility or submitted by producing brokers. The Facility had a very low-key launch a few months ago and we are working on a number of solutions currently.
A panel approach
This is early days in the development of the Facility and at this stage it is not a consortium or standard lineslip where the lead underwriter and/or nominated lead underwriters can bind following markets. Instead it is more of a panel approach with the participating underwriters strongly indicating their intent to support. They will have the ability to agree or disagree participation for their own capacity and line size.
The bigger picture message is that Lloyd’s definitely has appetite to continue in the long tradition of being able to listen, adapt and design its underwriting capacity for new and evolving risks. The best way to approach this is with a subscription market with more than one set of eyes reviewing and contributing to a superior offering for the policyholders’ requirements.
