NSW Claims Discussion Group Lloyd s Adrian Humphreys General Representative - Australia June 2013 > www.lloyds.com/marketpresentations > www.lloyds.com/countryprofiles
Market Update 1 Content Lloyd s Distribution Dynamics CTP Large claims 2 3 4 5 SWOT Analysis 6
1 Lloyd s Market Lloyd s structure Market Players Domestic Market Focus
LLOYD S Business > History 1 From Coffee House to Lloyd s Members 1689 Ships and goods insured by wealthy individuals acting on a personal basis. Lloyd s Coffee House; first recorded February 1689. 1800 1850s Development of syndicates Present Day iphone Historical Context 1712 First steam engine 1750s Beginning of the Industrial Revolution 1805 Battle of Trafalgar 1876 Telephone invented
LLOYD S > Chain of security 1 Insurance is a promise to pay, understanding the security behind your policies is vital when securing your clients future.
2 Lloyd s in Australia Overview Business Class Snapshot Distribution Snapshot Coverholder Overview
Market Overview >Market Players 2 The previous year of QBE and IAG global acquisitions has changed into pressures on costs and demands for increases in efficiencies. The battle between brokers and insurers to control distribution is well under way with acquisitions of SME (brokers and MGA s) business cycle in full flow. 2012 MARKET PLAYERS: TOP 7 General Insurers (Excluding global business; *Includes subsidiaries) 6.6* 6.8* 2012 Non Life Insurance premiums US$ 40.1bn GWP (US$ 29.8bn NWP) 4.6 4.6 Others* 3.2 1.2 1.3 2.0** **On a country of origin basis. May differ from APRA statistics. Please see Appendix for further details HIGHLIGHTS (Year end Dec 2011 vs. Dec 2012) Market Combined Ratio: 106% in 2011 reduced to 90% in 2012 Gross Written Premium (GWP): increase of 8% to US$ 40.1bn. Lloyd s in line with market Gross incurred claims (current and prior years) fell 38% to US$ 24.6bn Direct Insurers GWP up 8.5% to US$ 37.8bn, net underwriting Combined Ratio of 91% Reinsurers Outwards reinsurance spend up 36% to US$ 837m. Cession ratio increased from 30% to 38% New incurred claims fell by 64% from US$ 1.2bn to US$ 463m Source: APRA, (2013); Company Annual Reports, (2013); Exchange rates as per Appendix. Lloyd s APRA Return: may differ in 2012 (Total for all OECD classes, for both direct and reinsurance, includes last three years of account). See Appendix note.
Lloyd s >Business Class Snapshot 2 Lloyd s premiums are dominated by Property and Liability classes. Property D&F experienced the most significant growth during 2012, increasing by US$ 98.8m GSP in: million US$ 2500 2008 2012 LLOYD S PREMIUMS: BY CLASS** **On a country of origin basis. Please see Appendix for further details 2000 314.2 284.7 Property Treaty 1500 447.9 349.1 158.3 86.1 127.2 301.2 65.5 126.8 72.2 1000 97.9 230.1 79.5 237.6 50.7 58.0 59.7 49.5 774.0 62.5 798.5 500 627.4 500.4 449.9 240.7 70.4 84.8 112.4 183.9 0 2008 2009 2010 2011 2012 Source: Market Intelligence calculation on Xchanging figures. Rates of exchange calculated as per Appendix Property (D&F) Overseas Motor Marine Energy Casualty Treaty Casualty Aviation PA & Health! Lloyd s data is based on Xchanging REG 258, (2012); unaudited figures based on country of origin and processing by calendar year; please refer to Appendix for detailed summary of Lloyd s Data Limitations.
Lloyd s >Business Class Snapshot 2 Lloyd s premiums are dominated by Property and Liability classes. Property D&F experienced the most significant growth during 2012, increasing by US$ 98.8m 2012 LLOYD S PREMIUM GROWTH: BY CLASS Gross Signed Premiums in: million US$** 120 100 Accident & Health Aviation Casualty Casualty Treaty Energy Marine Overseas Motor Property (D&F) 98.8 Property Treaty UK Motor 80 60 40 20 0 0.0 24.5 3.8 6.7 41.1 28.8 29.5 0.0-20 -40-60 -80-56.8 **On a country of origin basis. Please see Appendix for further details Source: Market Intelligence calculation on Xchanging figures. Rates of exchange calculated as per Appendix! Lloyd s data is based on Xchanging REG 258, (2011); unaudited figures based on country of origin and processing by calendar year; please refer to Appendix for detailed summary of Lloyd s Data Limitations.
Lloyd s >Commercial Class Analysis 2 Lloyd s Property D&F GWP increased 75% from $79m in 2011 to $139m in 2012 Lloyd s general PI decreased 7% from $253m in 2011 to $236m during the same period Property 2012 Record capital & top line pressures have returned Food & beverage, power and mining are bucking the trend due to poor claims experience Rates did increase over Q1 and Q2 (7%), slowed in Q3 and Q4 to 4% as did insured values Jan / Feb storms had no affect Broker insurer arrangements (Marsh / QBE) Reinsurance Market Reinsurance capital increased 10%, demand was flat Global return on equity of 13.4%, without Sandy could have been at 2007 levels Professional Indemnity 2012 Agreement that rates need to increase, but competition has kept rates down Financial Planners & Property Valuers rise in rates, as much as 60% if losses advised Accounting & architects rate rising between 5% & 10% Major engineering firms and construction companies can expect 5% rises Law firms remains stable, even reductions Design and construct 10 year policies Clients also looking at retaining more risk AIG Aon PI deal for Australian business Suncorp / Berkshire Hathaway / new partners Increasing competition from China ARPC funding of flood mitigation programme Source: Lloyd s Australia; APRA National Claims and Policies Database (December 2012)
Lloyd s >Commercial Class Analysis 2 Lloyd s GL GWP increased 8% from to $413m, FI increased to $60m, D&O increased 7% from to $33m, Property Treaty increased 10% to $314m in 2012 and Property Cat XL increased 5% to $249m. General Liability 2012 Financial Institutions 2012 Increased competition reflected in rates apart from bushfire and offshore energy Older years much less favourable: 2010 Gross Loss Ratio 120%, 2011 show 100% Between 2003 & 2010 claims inflation of 7% - 8% pa Sharp rise in workers comp recovery actions No win no fee in shopping centres Claims from GFC are maturing & being paid. Need to focus on the breadth of cover CR well over 100%, not attributable to one event but a general frequency and severity Take out GFC no increasing trends in claims frequency or amounts. But, litigation funders starting to move in. Premiums starting to hold and capacity shifting from Financial Lines & move away from large institutions Directors and Officers 2012 Trade Credit 2012 Two tier market, those including Side C and those not. Most claims have been by shareholder class actions) and reflected in rates US and Eurozone debt crisis, local u/w pulled out Bad performers substantial rises are holding Deductibles will be key to max acceptance rates Bridgecorp & Great Southern Source: Lloyd s Australia; APRA National Claims and Policies Database (December 2012)
2 Lloyd s New Zealand Overview
Lloyd s >New Zealand Snapshot 2 Lloyd s premiums are dominated by Property classes. Property D&F experienced the most significant growth during 2012, increasing by US$ 72.5m GSP in: million US$ 300 2008 2012 LLOYD S PREMIUMS: BY CLASS** **On a country of origin basis. Please see Appendix for further details 250 43.0 200 Property Treaty Property (D&F) 150 66.2 149.7 Overseas Motor Marine 28.1 100 17.5 20.6 77.2 52.2 38.4 42.9 50 26.6 14.5 14.9 8.3 10.3 11.7 12.3 16.2 11.2 12.1 0 2008 2009 2010 2011 2012 Source: Market Intelligence calculation on Xchanging figures. Rates of exchange calculated as per Appendix Energy Casualty Treaty Casualty Aviation PA & Health! Lloyd s data is based on Xchanging REG 258, (2012); unaudited figures based on country of origin and processing by calendar year; please refer to Appendix for detailed summary of Lloyd s Data Limitations.
3 Distribution Dynamics Distribution overview Coverholders Brokers
Lloyd s >Distribution Snapshot 3 Lloyd s underwriters write a mix of all classes of direct and reinsurance; previous swings of business mix to binding authorities has been halted towards open market placements. Service companies starting to get a foothold locally. LLOYD S GROSS SIGNED PREMIUM TREND (in %)** **On a country of origin basis. May differ to APRA statistics. Please see Appendix for further details 24% 24% 24% 2009 Lloyd s GSP US$ 1.1bn 38% 2011 Lloyd s GSP US$ 1.9bn 44% Direct 38% 24% 24% 24% 2010 Lloyd s GSP US$ 1.4bn 40% 32% 28% 2012 Lloyd s GSP US$ 2.0bn 42% Reinsurance Binding Authorities USEFUL LINKS Lloyd s Licence Status: Coverholder Application: Coverholder Directory: 36% > www.lloyds.com/crystal > www.lloyds.com/atlas > www.lloydsaustralia.com.au/directory/categories.php 30% Source: Market intelligence based on Xchanging; Country Manager soft intelligence, (May 2013)! Lloyd s data is based on Xchanging REG 258, (2011); unaudited figures based on country of origin and processing by calendar year; please refer to Appendix for detailed summary of Lloyd s Data Limitations.
Lloyd s >Australian Coverholders 3 Lloyd s agencies and service companies you may recognise.. AFA Affinity Risk Partners Brokers AIS Insurance Brokers Altiora Insurance Solutions Aon Risk Services Arch Underwriting at Lloyd s Asia Mideast Insurance & Reins. ASR Underwriting Agencies ATC Insurance Solutions Ausnet Underwriting Agency Austagencies Austbrokers RWA Austbrokers Sydney Australian Income Protection Australian Reinsurance U/w Svs Australis Group Underwriting Austruck Insurance Axis Underwriting Services Beazley Underwriting Bizcover Brit Insurance Brooklyn Underwriting Brooks Inglis Insurance Brokers Catlin CBD Underwriting Celestial Underwriting Agency CEMAC (Bold) Service Company Cerberos Brokers Cerberus Special Risks Cheap Travel Cinesure CKA Risk Solutions Columbus Direct Travel Ins. Coverforce Underwriting Dolphin Insurance Dual East West Insurance Brokers Elkington Bishop Molineaux Epsilon Insurance Broking Services Fenton Green & Co Film Insurance Underwriting FP Marine Fitton Insurance Brokers Freeman McMurrick General Security Insurance Brokers Gow-Gates Insurance Brokers Guardian Underwriting Services High Street Underwriting Agency Hiscock Insurance Brokers Horsell International H W Wood IBL Indemnity Corporation Source: Market Intelligence based on: Lloyd s Delegated Authority Team 2013 New Insurance Advisernet Insurance Facilitator Insure That International Underwriting Svs Ironshore Australia Jardine Lloyd Thompson JMD Ross Insurance Brokers JUA Underwriting Agency Latitude Lawsons Underwriting Australasia Logan Livestock Insurance Agency London Underwriting Macquarie Underwriting Magic Millions Insurance Brokers Mansions of Australia Manufactured Homes Ins Agency Marsh Millennium Underwriting Miller & Associates Ins Broking Miramar Underwriting Agency Mobius Underwriting National Underwriting Agencies Nautilus Marine Insurance Agency Newline Insurance Newmarket Insurance Brokers Nova Underwriting Panoptic (Midas) Pantaenius OMPS Australia Online Insurance Brokers Parmia PI Direct Insurance Brokers Professional Risk U/w QBE Placement Solutions Resource Underwriting Pacific Richard Oliver Risk Insure Sterling Insurance Savannah Insurance Agency SLE Worldwide Southern Cross Underwriting Sportscover SRS Underwriting Agency Starr Underwriting SUA Suresave Tasman Underwriting Trafalgar Risk Management Transcorp Underwriting Travel Insurance Direct Trident Insurance Group Trinity Pacific U/w Agencies Willis Windsor Income Protection Winsure Insurance Group Woodina Underwriting World Nomads
4 Claims Transformation Programme (CTP) Claims figures Claims Transformation Claims Academy
Lloyd s > Claims Transformation Programme 4 Considerable investment with significant outcomes.. Transform the way the market handles claims to enhance the experience of the customer. To be the market of choice for insurance and reinsurance buyers and sellers to access and trade specialist property and casualty risks. Investment in Claims Claims Systems Claims Transformation Programme Enhanced Customer Experience Ahead of competitors on Complex claims handling Competitive on Standard claims handling Source: Market Intelligence based on: Lloyd s Delegated Authority Team 2013
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Lloyd s >Claims Strategy 4 Considerable investment with significant outcomes.. Measure Success Criterion Current Status Speed 25% improvement 51% improvement Quality No deterioration Small improvement Market Perception No deterioration 78% of brokers surveyed rated CTP system the same or better than the alternative system (Gracechurch Consulting Claims Performance Monitor, 2012 annual findings) Cost No deterioration Costs vary depending on managing agent choices Source: Market Intelligence based on: Lloyd s Delegated Authority Team 2013
Lloyd s > CTP On-going workstreams 4 Considerable investment with significant outcomes.. Process efficiency Delivering claims performance information to Lloyd s brokers and working to reduce overall claims lifecycle Broker Portal Improving the web portal used by most brokers for submission of new electronic claims, to increase ease of use and reduce rework caused by inaccuracies Volume Claims Service Investigating a possible high-efficiency, customer-oriented central service handling high volume, low complexity claims Source: Market Intelligence based on: Lloyd s Delegated Authority Team 2013
Lloyd s > CTP On-going workstreams 4 Considerable investment with significant outcomes.. Claims Reporting Suite Implementing an online claims management information gateway Claims Talent Programme Bringing top graduates into the Lloyd s claims arena and up-skilling existing young claims professionals at managing agents Legacy Investigating whether and how to bring existing non-ctp claims into scope Large Loss Coordination Enhancing the framework through which the market responds to large and catastrophe losses in a coordinated manner Source: Market Intelligence based on: Lloyd s Delegated Authority Team 2013
5 Large Claims Claims trends New Zealand Lessons learnt
LLOYD S > Who knows? 5 Nine out of 10 Nat Cat and all in the last eight years Year Event US$ bn 2005 Cyclone KRW US & Gulf of Mexico 8.0 2001 Terrorism WTC US 3.0 2012 Superstorm Sandy 2.5 2011 Thailand Floods 2.2 2008 Cyclone Ike US & Gulf of Mexico 2.1 2011 Japan Earthquake & Tsunami 1.95 2005 Cyclone Rita US & Gulf of Mexico 1.5 2010 Chile Earthquake 1.4 2011 New Zealand Earthquake 1.4 2005 Cyclone Wilma US 1.0 2010 Australian floods 0.4 Source: Lloyd s Australia, (2013)
Lloyd s > Global Claims 5 Considerable investment with significant outcomes.. Source: Market Intelligence based on: Lloyd s Delegated Authority Team 2013
Lloyd s > Loss Framework in Action 5 Considerable investment with significant outcomes.. Component Status Outcome Corporation Steering Group Strategic Claims Group Invoked Policy Holder Helpline triggered Communication Plan developed Regulatory engagement MCR triggered Active JBA study considered Sector Groups feedback No Market Level co-ordination required PICG Engaged and Active Executive Adjuster Arrangement triggered Sandy Sub Group formed 2013 Review of large loss response for PICG LRCG Engaged No separate response Group required BACG Engaged and Active Sandy Sub Group formed 2013 Review of large loss response for BACG XCS Invoked Cat Code issued Urgent arrangements in place LIIBA Engaged Attended Claims Supervisory Board on 21.11.2012 Source: Market Intelligence based on: Lloyd s Delegated Authority Team 2013
6 SWOT Analysis Strengths Weaknesses Opportunities Threats
SWOT ANALYSIS >SWOT 6 Strengths, Weaknesses, Opportunities, Threats Strengths Weaknesses Capital, Rating & Branding Strong claims framework Market access & relationships Coverholder model open to attack Competing with ourselves Local service and claims Opportunities The computer says no esp. 26 th parallel Singapore and local subscription Reinsurance Threats Market consolidation & broker binders TORT reform worn off Portfolio deals Source: Lloyd s Australia, (March, 2012)
2013 increased focus on Australia.
A Appendix About Market Intelligence Data Limitations & Disclaimer
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Appendix > Data Limitations & Disclaimer Lloyd s Data Limitations Please note the information contained in this document is based upon data collected from Xchanging and may be incomplete for some classes of business; for instance a substantial figure, which is missing from the REG 258 data set is comprised of UK Motor, which is not processed by Xchanging. Gross Premiums: Original and additional inward premiums, plus any amount in respect of administration fees or policy expenses remitted with a premium but before the deduction of outward reinsurance premiums. Lloyd s figures are based on gross written premiums based on figures processed by Xchanging by processing year and country of origin. Country of Origin: denotes the country from where demand for the insurance / reinsurance emanates; i.e. the coverholder or policyholder, irrespective of the country to which the risk is classified for regulatory reporting purposes. Processing Year: relates to the calendar year in which the premium, additional or return premium is processed by Xchanging, irrespective of the actual underwriting year of account of the risks (which is determined by the inception date of each risk). Example: A policy holder in the UK insuring a holiday home in France would be classified as a UK risk by Country Of Origin, but French for regulatory reporting purposes. Similarly a risk incepting on 1st December 2009 would be classified at 2009 underwriting year of account but may not be processed by Xchanging until 2010 and so be allocated to the 2010 processing year a Exchange Rate Policy (1 AU$: 1 US$) 2006 2007 2008 2009 2010 2011 2012 Average Exchange Rates 0.7531 0.8385 0.8524 0.7919 0.9195 1.0333 1.0356 www.oanda.com (April 2013) Disclaimer This document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the information Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or liability for any loss to any person acting or refraining from action as a result of, but not limited to, any statement, fact, figure, expression of opinion or belief obtained in this document. 35