Lloyd’s aims to identify underwriting & exposure challenges earlier in the syndicate business planning process

Lloyd’s, the world’s oldest insurance and reinsurance marketplace, has released a market bulletin detailing the 2024 business plan and capital approval process and timeline for syndicates, stating that it intends to identify underwriting and exposure challenges earlier in the syndicate business planning process.

The May 16th bulletin from Peter Montanaro, Director of Market Oversight, informs the market of both the 2023 process and timelines for agreeing 2024 business plans and capital requirements.

It underlines that performance remains Lloyd’s number one priority, highlighting the importance of syndicates providing evidence that they have considered and factored in the risks linked to macro thematic challenges in their plans.

“This will provide us with the confidence to contextualize any immediate underwriting and exposure challenges,” reads the bulletin. “This year we will endeavor to define those areas of focus and levels of materiality for challenges, earlier and with more specificity by setting clear direction during the Syndicate Business Discussions (SBDs) and maintaining consistency throughout the planning process.”

Lloyd’s adopts a principle based oversight model that says it enables it to ensure “a fair but differentiated” approach to both the capital and planning process for the 2024 year of account.

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However, the level of flexibility that Lloyd’s is able to afford syndicates depends entirely on a syndicate’s categorization.

Nevertheless, the market “will seek to enhance the attractiveness of the Lloyd’s platform by capitalizing on the opportunities that a principles-based framework allows for differentiation.”

Lloyd’s syndicates come under three main categories: Outperforming syndicates; Good and moderate syndicates; and Underperforming and Unacceptable syndicates.

For the first group, which are the strongest performers at Lloyd’s, the approach will be “to understand what they intend to do, check that all material strategic or thematic issues have been resolved and evidenced through SDB engagement, and trust them to have planned accordingly .”

For the syndicates who are not outperforming, Lloyd’s notes that its “principle-based approach means we will focus our review on the area(s) that is driving the overall categorization rating and the potential impact of such on underwriting and capital.”

Syndicates who fall under the good category will see their review of plans focusing on “only material issues as part of a portfolio based approach,” while moderate syndicates’ plans will be reviewed in more detail.

Regarding those that fall under the underperforming and unacceptable category, Lloyd’s explains that they will have already had Board Level discussions and therefore “must operate strictly within pre-agreed remediation plans.”

Regardless of the category, however, Lloyd’s aims to engage earlier this year as it looks to address any immediate underwriting and exposure challenges.

The SBDs will start in June, with every managing agent meeting with Lloyd’s representatives. Discussions will focus on performance and cover syndicates’ goals and ambitions for the 2024 year of account, including exploring managing agents’ ambitions for syndicate classes of business.

While Lloyd’s intends to engage earlier than in the previous year, it will still adopt a phased approach for business plans and capital submissions for the 2024 capital and planning process.

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