The measures were included as part of a report setting out six guiding principles explaining how Lloyd’s would respond to a MTE. The six principles are categorised into two areas: crisis management, to ensure the market responds to a crisis effectively, pays claims as quickly as possible and remains solvent; and opportunities to support the market.
Lloyd’s said it would focus on shortening the review and agreement process of business and capital plans, allowing syndicates to respond more effectively to the aftermath of a major catastrophe and enable capital to flow into the market more efficiently.
Jon Hancock, Director of Performance Management, Lloyd’s, said:
“We want to make it easier for syndicates to do business by focusing our oversight efforts on the important things. One important area where we can help is to make sure the Lloyd’s market is in a position to act swiftly and decisively to any future market-turning events. This is about stronger, smarter oversight.”
“We don’t want to impose overly burdensome requirements on syndicates or insist on any unnecessary processes or paperwork. We want to make it as straightforward as possible to raise new capital. Doing so will ensure that Lloyd’s is even better prepared for once-in-a-generation market turning events.”
The last clear market changing event was caused by the World Trade Center attacks in September 2001, after which there were rate increases of approximately 40% across all classes of business. More than half the new reinsurance capital raised globally in the immediate aftermath of 9/11 went to Bermuda.
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For more information and to arrange interviews, contact Nathan Hambrook-Skinner, Senior Manager, Marketing and Communications, Lloyd’s, at email@example.com or on +44 (0)20 7327 6125.
Notes for editors
The new plans, which are designed to help managing agents, syndicates and their policyholders, are laid out in a guidance paper published today.
In the report, Lloyd’s outlined six guiding principles.
Principle 1: Market stability and payment of claims
Lloyd’s primary focus is on the stability of the market by ensuring it is solvent and liquid to ensure prompt payment of claims to affected policyholders.
Principle 2: Management of failing syndicates/members
It is likely that some syndicates/members will fail following an MTE. Lloyd’s will ensure that the run off of those syndicates are managed in an orderly fashion to minimise any wider impact to the market.
Principle 3: Stakeholder/data collection/coordination and communication
Lloyd’s would look to take a lead with coordinating interaction and collation of data with key external stakeholders (e.g. regulators, governments, rating agencies) minimising any duplication where possible.
Principle 4: Support the market
Support the market in responding to opportunities arising from an MTE which ultimately supplies capacity to clients. Where possible, activities in support of existing businesses may be prioritised ahead of new entrants.
Principle 5: Accelerate key processes
Lloyd’s approach will be commercial and pragmatic. This may include the use of an accelerated version of syndicate business and capital plan review/approval process.
Principle 6: Lloyd’s priorities
Corporation staff will focus on supporting the market in response to the event – potentially all other non-essential central activities will be temporarily suspended.
In addition Lloyd’s has set out a clear internal structure and segregation of duties to ensure the Corporation is best placed to respond to an MTE.
Lloyd’s also recommended that Managing Agents consider in advance the possible implications of an MTE and prepare suitably proportionate, robust and well tested contingency plans. These should reflect Lloyd’s approach of reactive and proactive planning following an MTE.