“At the heart of the Lloyd’s brand story is the phrase “constant originality”. Based on your research describe where this is supporting the organisation to remain the leading insurance market”. Good afternoon ladies and gentleman. Welcome to the presentation. Today, I am going to discuss the following question: ”How being constantly original supports Lloyd’s to remain the leading insurance market? Before I start describing and analyzing the true effect of this unique brand idea on maintaining the status of Lloyd’s as the world’s leading specialist insurance market, we need to understand what it really stands for. Being constant is about tradition, good faith, security and worldwide reputation for honoring its word Originality refers to the Lloyd’s creativity in coming up with innovative solutions for risks; its willingness to be different; and the adaptability that has enabled Lloyd’s to survive and prosper for over 300 years.
These two words summarize all the best qualities that make Lloyd’s market really different. This brand idea is by far the strongest in the global insurance market, and it has remained so for many years only because Lloyd’s has done everything possible to be consistent with this brand idea in everything it did and at every opportunity, which was the most important factor that helped Lloyd’s remain its leading position in the insurance market. In other words, it is the most simplified expression of what Lloyd’s really stands for.
Let’s now see how Lloyd’s is being constantly original and how it is contributing to its reputation: Firstly, throughout the history, Lloyd’s has often been the first to insure world’s largest, new, unusual, most individual and complex risks, when many others were unwilling to do so. Lloyd’s specializes in risks that hard to price, large or otherwise difficult to quantify and understand. From oil rigs and bridges to celebrity body parts, from airlines and sporting events to global banks, millions of people at home and at work are covered at Lloyd’s.
It insured the first ever F1 night race. Lloyd’s first covered four 4 Boeing 707’s belonging to Chinese airlines. It handles international project such as transport networks, satellites, Wimbledon and the Oscars. In 1904 Lloyd’s was the first one to write motor car policy and 1911 it was the first to write aviation policy. insured the first commercial space flight in 2004 (largest market for space insurance); Things they insure: smile, legs, American footballers legs, European soccer players kneecaps Beckham, Ronaldo; bodyparts, chesthair; Coffee tasters tongue for 5mln $; wine tasters nose for 10mln $; Reputation has been built on insuring risks that others couldn’t, such as terrorism, natural disasters, and even cyber crime. The Lloyd’s name was built on foundations of integrity, trust and high ethical standards. How many other organisations could say that they’ve been involved with naval battles, sports tournaments and space shuttle launches? Or that they helped rebuild a city devastated by earthquakes? No insurer has gone so far before. Give some examples.
The main question is how Lloyd’s has achieved that? It is about the unique structure of the market, which is also called as subscription market (the world’s largest subscription market), where many underwriters collectively insure only part of the risk. In other words, the risk is shared among many underwriters, and a lot of most complex and unusual risks would have never been insured if only one company had to insure the entire risk. Also, this subscription market means that large and complex risks can be placed quickly and efficiently.
Another important factor that allows many underwriters accept complex risks is the existence of chain of security which includes central assets of more than ?2bln. This provides security and confidence for both capital providers and policyholders. Without this strong financial backup, many brokers would not be able to attract clients who need to insure their most unusual risks in the world. In fact, it never defaulted on a claim. Another factor that contributed to this success is that the market structure encourages innovation, speed and better value.
The reason is that the market is home for 50 managing agents and over 80 syndicates, which compete with each other to offer customized services at competitive prices. However, this competition is unrivalled due to the subscription nature of the market. As a result, you have an outstanding concentration of specialist underwriting expertise and talent under one roof. Underwriters excel in devising innovative and tailored solutions for complex risks. The entrepreneurial culture of Lloyd’s enables the flexibility to make innovative decisions on large and difficult risks.
The rigorous regulatory requirements and standards of Lloyd’s makes sure that only the best managing agents with the best underwriting expertise can be a part of the Lloyd’s community. In addition to that, the fast distribution channel means that answers on whether a risk can be placed are made quickly, which enables brokers to provide fast, good value solutions. All these original features make Lloyd’s market really attractive to both policyholders and participants, due to choice, flexibility and continuing innovation offered by the market. Hundreds of good ideas would never get off the ground without a way to reduce risk.
Therefore, we can say that over the last 300 years Lloyd’s has been one of the major engines of growth, because without the security that the Lloyd’s provided to the market, many wonderful ideas would never be realized, as investors would never invest in risky projects without a proper security. Lloyd’s is an opinion leader and it has an influential voice on a variety of issues to shape agenda. It is leader in the market and sets the standards for the overall market. It created its 360 Risk Insight programme to discuss on how best to manage risk in today’s risky environment.
In particular, it is concentrating on issues such as climate change, war, terrorism, political instability, pandemic risk, nanotechnology, obesity, electromagnetic fields from mobile phones, cyber crime, etc… The Lloyd’s 360 Risk Insight is focusing on catastrophe trends and what we can do to anticipate and respond to the mounting threat of catastrophe risk. Lloyd’s was a founding signatory of the Climate Wise principles for the insurance industry. The Climate Wise principles provide a framework for insurance companies worldwide to set out how they will build climate change into their business operations.
Lloyd’s plays an important role in protecting businesses from the effect of climate-related disasters and their consequences, and helping them prepare for an increasingly uncertain future. Also, it was the first one to offer a broad war, terrorism and political violence (WTPV) cover. It was the first one to offer sports event cancellation policy. We are never anxious about trying something new – whether it be exploring an emerging market or developing technology to map risk hotspots in 3D. Nor are we afraid to fly in the face of common practice if it will improve us as an organisation. Finally, we enjoy challenges.
More than that- we thrive on them. We’re not afraid of making tough decisions or tackling big issues. Nor are we shy about suggesting a new or radical way of doing things. At the heart of this story is the idea of constant originality. We create constancy through good faith, consistency, reliability and security – and by reminding people that we have been around for more than three centuries. We deliver originality through our innovative solutions to risk, having a unique market structure that matches entrepreneurialism with international scale and allowing people to deal with a genuine marketplace rather than a computer.
Above all, it’s this market structure which makes Lloyd’s unique, and gives us the dynamism, agility and decisiveness we’re famed for. Results: Market share gains, rating affirmations and continued strong investor interest prevailed, the broker says. The Lloyd’s market is experiencing a period of unprecedented profitability and growth, says Guy Carpenter. It has almost doubled in size since 2001 in terms of underwriting capacity through a combination of organic growth, new entrants and positive exchange rate movements.
The world has transformed in the last 300 years, but no matter what social, political or economic changes have taken place, Lloyd’s has always provided new types of insurance to meet new needs. Launching a satellite is a huge technical challenge. Every part of the process – launch, deployment and in-orbit operation – can fail, leading to the partial or total loss of the satellite. Once in space, there is little chance of repair or maintenance. That’s a major financial concern when the replacement value alone can be more than $300m.
Without the launch and in-orbit policies offered by insurers, many satellite operators would not be able to finance the design, manufacture and launch of their assets. Investors want confidence that their investments in space ventures will eventually deliver returns. Insurance gives them that confidence. Lloyd’s is the largest market for space insurance in terms of capacity. We offer a range of cover to the space industry – the assembly and testing of a satellite, its transport from the manufacturer to the launch site, the launch itself and operation when the satellite is in orbit. No insurer has gone so far before.
Both the science and the politics of climate change are controversial. Despite the arguments over cause and extent, businesses know they need to prepare for a range of possible outcomes. Long-term changes to our climate will have a major effect on many areas of life. We need to consider how cities and buildings are designed; how transport systems function; how we prepare for extreme weather events; the way in which production and trading systems are organised and the dangers of greater competition as key natural resources become scarcer. Climate change makes for an uncertain future, which adds cost and complexity to doing business.
It’s vital that companies and their insurers work to understand the potential effects of these changes, and acknowledge them in their planning and risk management. As the world’s leading specialist insurance market, Lloyd’s plays an important role in protecting businesses from the effect of climate-related disasters and their consequences, and helping them prepare for an increasingly uncertain future. Business is getting more complex. The internationalisation of trade in goods, services and intellectual property exposes companies to multiple jurisdictions.
Government activism and increased stakeholder expectation have placed greater scrutiny on corporate practices and behaviours. Potential liabilities for business have grown alarmingly in recent years. Insurance plays a vital role in supporting and protecting businesses from this heightened legal exposure. Lloyd’s continues to develop professional liability products in order to respond to the growing professional and personal impact of litigation, including Directors & Officers insurance for executives or general liability for product launches or construction projects.
There is an increased willingness across Europe to allow people to pursue mass grievances through the courts, leading to a further increase in corporate litigation. The complexity and uncertainty of these emerging risks play to Lloyd’s strengths. We are working ever more closely with business to ensure that the manner in which these exposures are covered and priced provides the greatest confidence for all parties. The world’s most popular game is also a multi-billion pound business. Huge television deals and global marketing opportunities continue to encourage investment in English club football.
As the cost of participation grows greater, so does the need for greater cover and protection. The players themselves create many risks for clubs, but nearly all of them are insurable. Accident and injury cover protects against players becoming incapacitated, resulting in healthcare costs and loss of earnings. Leading players will be called up for their national squads, with most clubs only releasing them when there is appropriate cover in place. Owners face many other risks to their investment.
Travel cover is critical, but home games create exposure to risk too: crowd management requires public liability cover; team and stadium employees require owners to take out employers’ liability. Some risks are less tangible, but can be equally damaging. The club’s brand is often a key asset, attracting sponsors and advertisers from around the world, but like all brands, reputational damage can sometimes lead to financial harm. Digital technology has transformed our lives. It powers credit card transactions and basic services such as transport, energy and water supply.
It is essential to the defence systems that protect us and allows hospitals to monitor and treat their patients. But just as the opportunities created by the digital world emerge and multiply rapidly, so do the risks. Businesses’ reliance on digital technology has created vulnerabilities, which can be targeted by a wide range of people with diverse aims, and the potential for huge financial or reputational damage is growing. As technologies improve, attackers are becoming more sophisticated: a company’s digital defences must remain on high alert at all times.
The social and commercial revolution inspired by digital and internet technologies will continue to present opportunities and challenges for all concerned. We are constantly analysing the risks to be found in the new digital landscape, so that companies can navigate their way with the greatest confidence. The wrld is becoming a riskier place. Claims severity is increasing for both natural and man-made events and new risks continue to emerge. This is a challenge for the industry but also allows businesses to innovate and develop new products to respond to policyholders’ changing needs.