Lloyd’s 2021 Business and Capital planning presentation

Posted 20/07/2020 – Insights

Lloyd’s has delivered its annual ‘market message’ to managing agents in advance of the submission of 2021 syndicate business plans.

In its presentation to the market, Lloyd’s CEO John Neal stated that “all plans must be logical, realistic and achievable – and they must be stress-tested for the impact of COVID-19”.

A copy of the presentation can be found here.

Alpha comment

We were encouraged to see that Lloyd’s focus on remediating the misfiring bottom two quartiles of syndicates will continue for 2021 and that those who have proven to perform well will be able to submit their business plans on a ‘file and use’ basis. Initial discussions between syndicates and Lloyd’s suggest that the market is seeking to underwrite £11bn of new business for 2021, 60% more than was agreed in 2020. Feeling this figure to be overly ambitious, Neal reported that only half of Lloyd’s syndicates have delivered ‘normalised’ net combined ratios (i.e. adjusted for average catastrophe loss experience) either 2 or 3 times during the past 3 years. Those who have failed to do so will not be permitted to grow for 2021. Lloyd’s CFO Burkhard Keese commented that COVID-19 represents a loss event without precedent and that the uncertainty must be covered by capital. As a result he went on to explain that capital requirements would be increased for 2021, citing the loss of investment earnings and the impact of negative interest rates.

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