As Lloyd’s builds out its international presence with a number of local hubs, we investigate the value of the Lloyd’s model to Bermuda and to international players looking to explore emerging market opportunities.
Lloyd’s always has been a global market, but following the launch of Vision 2025 and its opening up of regional hubs in locations such as Singapore and Brazil, the increasing international capabilities of the market are helping to provide participants with a unique and trusted platform for entry and expansion in key emerging markets.
As Vincent Vandendael, director of international markets at Lloyd’s explained, Vision 2025 and the thinking behind the strategic policy document recognised that the market needed to respond to a global macroeconomic shift from West to East and from North to South. This shift necessarily requires a more local approach to emerging risks, for instance delivered through hubs such as Lloyd’s has established in Singapore. As Vandendael outlined, Lloyd’s is actively “working to expand its licence network and reach, enabling markets and managing agents to benefit from the best trading rights in new and emerging markets”.
The idea is to use the Lloyd’s blueprint in other key markets, leveraging its global licences, existing local knowledge, brand, market concentration and centralised capital to build platforms thatmirror the underwriting room on Lime Street. And this mirroring of the Lloyd’s market is also reflected in many of the syndicates’ underwriting philosophies. As James Skinner, active underwriter at Talbot Underwriting, Validus’ Lloyd’s syndicate explained, for Talbot’s international operations—be they in Singapore, Miami or Santiago— “there is the same appetite in our regional markets as in London—by line size and capabilities”.
Talbot applies a consistent, global approach to both its international and its Lloyd’s business, said Skinner. “We apply one pricing model for each class of business, and we have an open international dialogue. Underwriting consistency is almost seamless.” Video conferencing, overlap periods and team mentoring all help to create a unified culture and approach to underwriting at Talbot, he said, while the group continues to draw on and develop local talent. Such an approach has helped instil confidence in its international teams, with eight decisionmaking underwriters now operating out of Talbot’s Singapore offices—a venture that has “delivered strong results for the syndicate”.
"Business-- particularly risks with a smaller line size or that is easier to place-- is staying local, 'with underwriting more easily carried out closer to the risk'."
Darren Powell, active underwriter for Allied World’s Syndicate 2232 spoke in a similar vein, stating that players with a presence in places such as Singapore “benefit from what is effectively a branch of their London syndicate. Underwriters follow the same guidelines as they would if they were in London; there is no lightening of discipline or requirements. We have the same pricing tools and actuaries looking at the risks, the same level of peer review”. By applying a flat pricing structure and a Lloyd’smentored approach to business in these emerging regions, the market and its relevance can go increasingly global, developing business and the brand wherever Lloyd’s plants its flag.
A Lloyd’s hub offers the potential to open up considerable opportunities, while its global licensing network provides Bermudacentric players with the opportunity to develop a diverse book of business. As Powell outlined, “Allied World has gone from a fairly Bermuda-centric company to wanting to expand overseas. Lloyd’s has been a very good route to grow that global business from a traditional centre in London. The area of focus for our syndicate was emerging markets—specifically Latin America and the Asia Pacific—and through the Lloyd’s model we have been able to really develop that focus.”
Now in its third year of operations at Lloyd’s, Allied World’s Lloyd’s platform “provides balance to the business we write in Europe, the US and Bermuda”. Other markets with strong roots in Bermuda have followed a similar path, leveraging the Lloyd’s platform, its hubs and its international licences to develop an increasingly global footprint.
Helping to strengthen the Lloyd’s’ global offering is its network of international licences. As Skinner explained, “The international licences are key. While you can operate in many of these markets with your own licence and outside Lloyd’s, the credibility of the platform and its international licences are a compelling reason to participate.” In Singapore for example, Lloyd’s has negotiated a single comprehensive licence for the entire market, enabling managing agents and companiesto avoid individual licence negotiations with the Financial Authority of Singapore, streamlining their operational entry into the Asia Pacific.
Vandandael said the Singapore hub and its Lloyd’s licence allows syndicates the opportunity to “plug and play”—entering the market and begin operations with a speed and ease of doing business that could not easily be achieved alone. Lloyd’s tackles many of the regulatory hurdles associated with entry, “leaving managing agents and syndicates to concentrate on writing and acquiring regional business”. Lloyd’s is also able to bring to bear its global brand, with smaller less-well-known syndicates able to enter markets and start writing business on the back of its brand and reputation.
It is clear that the attractions of Lloyd’s have drawn many to the Singapore market. Lloyd’s Singapore has established itself as a substantial hub, with 18 syndicates now calling the market home. As Powell outlined, “Since Lloyd’s moved to Asia Square, half the market has now moved down there. The congregation of companies has helped to create a real hub and sense of market.” It is this creation of a market that in turn provides business opportunities to those present in locations such as Singapore and Rio de Janeiro (where Lloyd’s also has a presence). And those opportunities are significant.
As Vandandael outlined, there is rising demand for insurance capacity in places such as the Asia Pacific and Latin America, where sizable capital projects and rising insured risk values present considerable opportunities. Capacity and specialist underwriting expertise are often unmet locally, and as such “Lloyd’s has been warmly welcomed”. Lloyd’s approach to these new markets is to deliver complementary capacity and expertise, said Vandendael, “as a partner, not a competitor”. Such an approach has been welcomed in Singapore, but hurdles to acceptance are likely to be higher in places such as China, India and Russia.
The proximity of risk
While there is greater need for re/insurance capacity in these emerging markets, there is also an increased emphasis on placing risks locally. As Powell explained, business—particularly risks with a smaller line size or that is easier to place—is staying local, “with underwriting more easily carried out closer to the risk”. This and the fact that many local insurers like to have policies written in the local tongue, has led to the growth and success of regional hubs such as Miami for Latin America (where Lloyd’s doesn’t currently have a regional marketplace) and Singapore for the Asia Pacific.
This change in business dynamics has also shaped Lloyd’s strategic thinking. Vandendael explained: “It’s part of Vision 2025 to ensure that Lloyd’s attracts business that stays in its home region. That’s what we achieve with these local platforms.” In order for Lloyd’s to remain relevant in markets that had traditionally directed business to London, a regional presence with empowered underwriters has become a necessity, he said. Emerging hubs will help capture existing business that no longer makes the long trip to Lime Street, as well as new risks that can benefit from Lloyd’s expertise and capacity.
Local platforms also enable syndicates to be viewed as a local player. “Being in these locations—be it Miami or Singapore—you are viewed as a local market, rather than a far-flung one,” said Powell, with hubs such as Lloyd’s Singapore helping to deliver a presence, while providing the market brand and concentration necessary to attract local interest. It is evident that a boots-on-the-ground strategy is increasingly viewed as the way to enter and develop an emerging market portfolio.
Skinner agreed that “aligning ourselves with markets where the business emanates has proved a very successful model”. And this approach is only likely to deepen. As Skinner explained, “Asia Pacific and Latin America are key areas for development for us—the size of opportunities in those regions is massive.” To take advantage of these opportunities, a local presence—and potentially a Lloyd’s platform— will prove key. Skinner said around 20 percent of Talbot’s Lloyd’s business is now written by affiliated offices in Dubai, Miami, New York, Santiago and Singapore. And it seems likely that this share will only increase. Proximity has become almost a necessity, said Skinner, with clients and brokers benefiting from more local options. Choice necessarily requires players to deliver the best service, at a local level. Helping matters in Singapore are the Lloyd’s platform and the support it has received from the Monetary Authority of Singapore, he said. Sitting in Lloyd’s and waiting for the business to come to you is no longer an option. “Standing still, you are going to lose,” said Skinner.
An important element of regional development is the bringing on of local talent and the delivery of policies written in the local language. Skinner explained that in new markets Talbot seeks to “grow both culturally and locally”—building a team that draws upon local talent that speaks the local language, understands its business culture and works within that time zone. “If you want to be the market of choice, you need the cultural know-how to differentiate yourself,” he said.
This drive for greater local expertise has also been a focus for Lloyd’s, with the market having recognised the need for local talent to develop and explore emerging markets, said Powell. Through hubs such as Lloyd’s Singapore the market has been able to “realise the value of local expertise, but with a discipline that is a feature of Lloyd’s”.
International participation in these emerging hubs isn’t limited to underwriting talent. As Vandendael explained, Lloyd’s intention is to not only attract local talent, but also local risk and capital. “We are looking for local talent to join Lloyd’s, but also at increasing the total pool of risk. We are looking for partners to join us to increase the pie for all players in the market, not simply eat that which exists.” Lloyd’s capacity is likely to play a key role in opening up new opportunities.
Looking ahead, it is clear from Vision 2025 that there is appetite for the creation of further regional hubs. Vandendael said their creation would depend very much upon appetite, however, something that would necessarily need to be articulated by the market. As Vandandael outlined, new hubs are developed “to create the opportunity and the option for participating syndicates”. Such moves in turn help to strengthen the long-term efforts of the Lloyd’s marketplace as it continues to deliver global capacity. As Powell concluded, “Lloyd’s is an important weapon in your arsenal—from a marketing, licensing and footfall perspective. If you aren’t in Lloyd’s you simply don’t get the same showing and as its footprint has become increasingly global, its significance will continue to grow.”
Lloyd's, emerging markets, syndicates