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CEO Statement

At the time of writing, we are shocked and saddened by events in Ukraine, which dominate both our news coverage and our discussions across the Lloyd’s market.

Though we’re yet to see and understand the full extent of the economic and human cost, it is clear the impacts will extend from Ukraine to all corners of the world.

Our thoughts, sympathy, and support are with the people of Ukraine. We salute your courage in the face of unimaginable danger, and it has reminded us what true bravery looks like. We will continue working with the Lloyd’s market, colleagues, governments, regulators and others to help bring a swift and peaceful resolution to the conflict, while providing support to those affected.

The situation has once again highlighted how connected our world is. After the global shock of the pandemic, we’re now watching a regional conflict trigger global market volatility in the short-term, and political, economic and environmental instability in the medium-term. Global challenges such as these require global responses. Governments around the world responded to COVID-19 by injecting trillions of dollars into the economy, while businesses moved to help their customers manage the disruption. On climate change, we have now built a consensus, hard-fought by activists and early adopters, that significant investment is needed by both governments and businesses to finance a transition great enough to shift the dial on global warming. Ukraine enters that fray, promising to alter the political tectonic plates and respective relationships of the world’s superpowers and alliances.

We are currently living through a period of heightened risk, not seen or experienced for 75 years. Insurance has a critical role to play. Lloyd’s is the only global marketplace for insurance and reinsurance: enabling business to flow, supporting the interconnectedness of international trade, and providing organisations with the confidence to make decisions needed to thrive in a volatile world.

Our progress in 2021 delivers on that responsibility. Every business needs a plan, but the best businesses demonstrate strong performance against that plan.

Executing Our Plans

Sustainable performance

2021 saw the Lloyd’s marketplace return to both growth and profitability. Gross written premiums grew by 11% to £39.2bn, reporting a profit before tax of £2.3bn, while our resources continued to grow by 8% and the central solvency coverage ratio was 388%. We released central resources to support this growth where it is right and appropriate to do so. We paid out almost £20bn in claims, including reported claims arising from the pandemic, and from elevated catastrophe exposures in the US and Europe.

Importantly, we delivered on our promise to return the market to sustainable underwriting profit. The combined ratio of 93.5% demonstrates significant improvement (2020: 110.3%, 97.0% excluding COVID-19 claims), and the attritional loss ratio of 48.9% has seen similar improvement (2020: 51.9%). The expense ratio has also continued to reduce from 37.2% in 2020 to 35.5% in 2021, with the Future at Lloyd’s programme central to our long-term objective of reducing total acquisition and administration costs across the market. These results evidence our continuous improvement and portfolio management approach in action and position the market for sustainable and profitable growth in the years ahead.

Digital transformation

Our plans to digitalise the Lloyd’s market moved to the ‘build’ phase in 2022, owing to the strong foundations laid in 2021. We are clear that success is defined by our ability to prove that we are better in the way we process, place and manage transactions. That we are faster, with timelines for policy issuance and technical processes reduced from weeks to minutes and claims lead times significantly reduced. We will also make it cheaper to do business, with processing costs reduced by at least 40%. The roadmap we have recently published through the Blueprint Two Interactive Guide sets out how and when we will achieve these objectives, and how the market can prepare themselves to adopt and implement the solutions.

Purpose-led leadership

We believe insurance plays a key role in unlocking economic and social progress, creating conditions in which people can lend, spend and save. This is the case on climate change, where we’re honoured to be chairing the Insurance Task Force of HRH The Prince of Wales’s Sustainable Markets Initiative, which seeks to promote a transition to net zero that works for everyone. Through Futureset, we’re leading the discussion on systemic risk and how insurers can counter and support businesses in the face of a more challenging risk landscape, whether from economic challenges, disease or the aftermath of war.

Inclusive culture

Our industry has inclusion and social wellbeing at its core: insurance is built on the premise that the cooperation of many can protect the few. We must therefore continue to convene the discussion on diversity and inclusion, knowing that a broader, more diverse social base will create a stronger organisation. That means understanding the needs and expectations of our market; creating equal opportunities for all our colleagues; and taking action to improve the experiences of women, Black, Asian and Minority Ethnic colleagues while attracting, retaining and promoting a diverse pool of talent.

Looking Ahead

We are living in challenging times, yet we believe we have the resources, expertise and platform to drive sustainable growth while helping societies and communities respond to the challenges they face. The Lloyd’s market has presented an exceptionally strong set of financial results, and arguably the strongest balance sheet Lloyd’s has seen. With this sustainable foundation, we’ll continue to provide leadership on the crucial topics of climate change and social inclusion.

We could not meet the responsibilities we do without the hard work and dedication of all our people, and I’d like to recognise their diligence and resilience in responding to a global pandemic and now a very real conflict on our doorstep.

As an industry, we stand ready and able to support businesses, communities and people in 2022 and beyond. Insurance has a critical role to play, offering the products and services so vitally needed to respond to a more complex and costly risk landscape, while holding the assets that can support society’s response to new and emerging risks.

We look forward to working with our partners to support bolder, braver decisions in the coming year.

John Neal

CEO, Lloyd's