By David Bull

May 22 - (The Insurer) – Lloyd’s, the largest insurer of E&S business, wants to see “all the world’s best underwriters” operating on its platform, which is well-placed to tackle some of the most challenging risks faced by insureds because of its talent, innovation, syndication, ratings and access to capital, according to Dawn Miller.

Speaking to E&S Insurer, Miller, who is chief commercial officer of Lloyd’s and CEO of its Americas operation, highlighted the growing share taken by the E&S market of the overall US commercial insurance sector, increasing from around 5% of premium written to a quarter.

For its part, Lloyd’s provided $20.3 billion in additional E&S capacity last year and covered 20% of all E&S property risks and 27% of general liability, according to data from the Corporation.

The London-based insurance market has been back on a growth trajectory in the segment in the last few years after a period of reduced participation following the Decile 10 initiative.

And Miller said she expects Lloyd’s to continue to expand in the E&S market, distributing its products through MGAs and other cover holders managing 1,200 plus binders as well as wholesale brokers placing open market business.

Growth opportunities identified include active assailant insurance, construction, cyber, healthcare, transportation and the sharing economy, along with property, which is currently the largest class of E&S business for Lloyd’s in the U.S.

“We have such a wealth of talent, innovation, expertise and an ability to come together, whether it’s consortia or otherwise, to address these large, complex risks,” said the executive, who joined Lloyd’s three years ago after leadership roles at Chubb, Axa, AIG and WTW.

Beazley’s recent move to shift a portion of its U.S. business previously written on its Lloyd’s syndicates to its own U.S. domestic E&S carrier grabbed headlines last year, amid suggestions that others could consider taking similar steps to access non-admitted business locally.

But Miller said that the trend is arguably going in the opposite direction, as more market participations, including some with “large group owners”, are instead looking to maximise and use their Lloyd’s vehicles more effectively.

“I do want all of the world’s best underwriters on the Lloyd’s platform. They don’t have to do it exclusively, or with over 50% of their business. I just want them all here, because I believe our platform is superior for being creative, for addressing tomorrow's very large, complex problems.

“The wealth of talent and innovation you have all in one little space with you here, and the here that’s represented in all of our platforms around the world, which are themselves growing,” she commented.

Miller highlighted greater institutional investor interest in the Lloyd’s market, in part because of its London Bridge 2, essentially an ILS-style investment vehicle, and the flexible range of options for capital to enter and access risk.

“There are new ways to invest in our framework here that are very clear, very transparent, very understandable,” she said.

London Bridge 2 had raised 1.9 billion pounds ($2.6 billion) of deployed and 2.6 billion pounds of committed capital by the end of last year, and has since issued two cat bonds, including the Floor Re Vision 2039.

The market has also continued to attract start-up syndicates, with 10 entering in 2024 writing combined gross written premiums of 281 million pounds.

Its capital structure and ability for investors to participate on multiple syndicates between years of account means Lloyd’s requires relatively low contributions, a more efficient level of capital requirement compared with other institutions with AA- ratings.

“We’re seeing more and more cool institutional investors be interested in the [London Bridge 2] platform. You could come in as a passive investor and simply back a business you really believe in, and there’s a very clear way to get your money in and get your money out.

“Or you can … become a full-syndicate risk-taker yourself. We’ve been spending a lot of time over the last three years really demystifying that Lloyd’s story,” Miller said.

Another recent trend has been the growing number of brokers seeking E&S capacity from Lloyd’s, including an increase in broker-led facilities seeking out guaranteed capacity across multi-class portfolios.

The executive said that around a dozen players in the Lloyd’s market have built up portfolio management teams, and are working with large distributors.

“As the market has evolved, the larger wholesalers and those holding those portfolios, those large MGAs, are saying maybe there’s a different way to participate in the Lloyd’s market; either through some sort of exclusive arrangement with a capacity provider, or possible creat(ing) their own reinsurance vehicle so they can secure some of their own capacity based on the quality of their underwriting,” she observed.

FOCUS ON PERFORMANCE

Earlier this month, Lloyd’s chief underwriting officer Rachel Turk said that large cross-class broker facilities in the market are likely to reach a “natural equilibrium” before the Corporation would be required to step in and implement constraints.

She suggested that the Corporation of Lloyd’s would not allow these facilities to “drag down the market in the same way that poor management of MGAs did in the past”.

Separately, as previously reported, there has been anecdotal evidence of greater competitive forces emerging in London and other markets, especially in relation to E&S property, where pricing is softening, in some cases significantly.

Miller said that Lloyd’s is closely monitoring pricing and any potential signs of over-competitive and ill-disciplined behaviour in the market.

“We are absolutely watching where the rates are moving. We act when we hear repeated and verifiable information about poor behaviour … but we’re not seeing that. We’re seeing at a distance in other marketplaces some really competitive behaviour in certain specialty lines.

“But what we’re seeing here is we’re holding somewhat steady, and underwriters are optioning just not to write the business,” said the Lloyd’s America CEO.

She added that Lloyd’s is “100% focused” on performance, and is driven by that focus when it engages with managing agents and underwriting businesses in the market.

“We have no desire to ever go back to a framework like Decile 10,” she said, pointing to the initiative that was brought in to address underperforming lines of business.

She said this is part of the motivation for transitioning from a rules-based oversight framework to a principles-based framework.

“We’ve got just over 1,500 cover holders across the U.S. across a variety of complex and very vital lines of business. We have a strong oversight framework for that community, and we’re continuing to work with our managing agents to make sure they are also monitoring those cover holders and making sure they’re performing,” said Miller.

BUSTING MYTHS

The executive said she and her colleagues spend a lot of time “busting myths” about Lloyd’s, around costs and the regulatory framework.

“With the principles-based framework we’re trying to peel back some of those rules that probably made sense at one time with the best of intention. In today’s framework we’re really putting that accountability back on our managing agents, and helping them to understand what would make their marketplace easier for them to operate in,” she continued.

A key part of her role is to make the Lloyd’s framework and pathway to the market clear for US cover holders and distributors.

“We want to make sure people understand how to reach Lloyd’s in an efficient way … and market sure that each of the distributors in the chain is gaining as much value as possible from having that access to Lloyd’s.

LLOYD’S LAB HAS BECOME INNOVATION DRIVER

The E&S market is widely considered a centre of innovation where the freedom of rate and form in the U.S. and creative talent allows it to bring solutions to some of the most challenging and hard-to-place risks.

For its part, Lloyd’s has been viewed throughout its history as the market to go to insure risks that are hard to find cover for, because they require innovative products.

In the last few years, Lloyd’s has supported more than 150 solutions to gain traction in the market through hits Lloyd’s Lab initiative, which started life as an insurtech accelerator but has evolved to become a much larger ecosystem, according to Miller.

Initiatives include establishing the innovation class of business (ICX) as dedicated underwriting capacity, which equated to around $2.4 billion in 2024, designed to help syndicates test and scale new products without damaging their core business performance.

“[It’s seen] an enormous amount of innovation come through, whether it’s a mapping technology, a service technology, data usage technology. The companies coming through are looking at everything from resilient solutions to cyber downtime.

“Why is that relevant? As we call for new entrants into that accelerator, we’re linking that back and looking at themes coming through the ‘own risk solvency assessments’ (ORSAs), and what’s important to our underwriters so they can learn more to inform their underwriting and so they can create the next new product,” she commented.

Recent examples of businesses coming through the Lloyd’s Lab including Faura, which helps insurers unlock more profitable business in high-risk regions by shifting the focus from probability to survivability.

Meanwhile, Novella – which just joined the Lloyd’s Lab – is the first AI-native wholesaler in the US. The firm uses the Lloyd’s Lab to help London-based underwriters more efficiently write US business, with its AI tools claimed to have helped underwriters improve their bind ratios by 3 to 10 percent.