Lloyds Remediation and Decile 10: Taking Advantage of the New Status Quo

By Mark Phillips - October 29, 2018

Four months ago, ripples (and a certain amount of scepticism) reverberated through the London Insurance market when Lloyd’s announced they would be taking a much tougher stance on loss-making syndicates. Since then, syndicates have been forced to work quickly to pull together business plans to show Lloyd’s how they will return to profitability.

This week, we are beginning to see Lloyd’s (and new CEO John Neal) stand by its word.

On the 18th of October, we had the announcement that Standard Syndicate was being sent into runoff after withdrawing from the Lloyd's planning process for 2019, whilst some of Lloyd's heavyweight syndicates secure approvals with premium reductions. According to Adam McNestrie in Insurance Insider earlier this week, there are three things we now know about the Lloyd’s Market in 2019:

  • The market will be smaller in 2019 than in 2018

  • Syndicates will be asked to hold more capital against risk than in past years

  • Lloyd’s will be less active in marine hull, cargo, property direct and facultative and professional indemnity insurance

Challenges and opportunities

We know that shipping and marine is a vital industry and the need to insure this industry will not be going away any time soon. For this reason, we firmly believe that those syndicates and companies able to weather this storm will continue to have access to a sizeable opportunity. Indeed, some underwriters are already reporting a slight hardening of rates and the exit of underperforming books can only spell good news for technical underwriters.

But to get there, syndicates need to very quickly:

  1. Detect and minimise loss-making business

  2. Identify and increase profitable business

  3. Develop new revenue streams

  4. Reduce operating expenses

This, however, is easier said than done, especially in marine where approaches to measuring, selecting, managing, and distributing risk have remained constant for many years. Against this backdrop, it is easy to assume that syndicates are faced with only two choices 1) run-off or 2) move into the company markets.

What we are seeing in our work with the market is that there is a third - change and innovate.

New ways of doing business using technology

Across the value chain, we are seeing companies of all types using technology to look at marine risk differently and drive stronger technical pricing, portfolio-led selection and digital distribution. Not only this but, as the market has so many times when faced with a crisis, participants are banding together to embrace the new opportunities derived from this technology.

Reduced Loss Ratios

Machine learning and behavioural analytics technology can analyse billions of existing data points to create hundreds of new factors for assessing marine risk that are far more closely aligned to loss experience than traditional approaches. When combined with predictive modelling, companies can analyse thousands and thousands of scenarios over and over again to drastically improve technical pricing, reduce loss ratios and release valuable reserves.

Read our recent blog about machine learning for marine insurance for more on how this works.

Profitable Growth

A natural consequence for companies taking advantage of these new factors is a sudden differentiated view of marine risk to standard market practice. This will allow the identification of new opportunities that may have been deemed high risk in the past based on traditional and historical factors, but no longer are. Indeed, we are actually seeing some companies who have run off large portions of their marine book in recent years, look to this technology as a way to re-enter the market.

As companies gain a deeper understanding of loss behaviour, they will start to spot new opportunities for composite marine programs. In a break from the global, annual policies that are prevalent in the market today, these companies will be able to assess the risk profile of the customer and recommend unique composite coverages that reflect their needs. Not only will these new products generate additional revenue streams, but they’ll also serve to change market dynamics and put the power of selection and pricing back in the hands of the underwriter.

And, with only 10% of the world’s risks currently insured, we believe that those insurers that commit to marine and adopt technology will have no shortage of opportunities in the future.


***A previous version of this article incorrectly suggested that Canopius’s Syndicate 4444 was likely to go into run off. This was not true and we are happy to correct this error. ***

About Concirrus and Quest Marine

Concirrus’ software, Quest Marine, uses the most advanced artificial intelligence (AI) to interpret wide-ranging datasets in real-time. Through integrating with an insurer, reinsurer or broker’s existing system, it then combines this data with historical claims information and uses AI to reveal new behavioural risk factors that can be used to identify previously hidden sources of risk and opportunity. With Quest Marine, insurers, reinsurers and brokers can accurately quantify risk; uncovering new opportunities in their portfolios, reducing losses and boosting profits.


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