The London market

The London market is the world's insurance and reinsurance leader. It is a transaction market for big risks and non-life insurance covers. All large insurance and reinsurance companies have recourse to it. It is estimated that approximately 15% of the reinsurance world's large industrial risks go through the London market.
© Mcginnly, CC BY-SA 3.0

It plays a major role in the placement of aviation, marine, energy and reinsurance risks. It accounts for 40% of the world's aviation written premiums and 60% of oil platforms and 15% of the world's reinsurance premiums. The London market is characterized by a strong concentration of stakeholders.

Brokers, insurance companies, the Lloyd's, International Underwriting Association (IUA) and the P&I clubs are sharing this market which, according to the statistics published by the London International Financial Services in November 2008, employs 50 000 people.

The structure of the London market

The London market is basically a brokerage and coinsurance market. The major players are therefore the clients, the brokers, the insurers pooling up within IUA, the P&I clubs and the Lloyd's syndicates.

Source: The London Insurance Market, July 1997, Sigma n° 3/2002
  • Clients: they stand for the large firms, British and foreign insurers and reinsurers. The major bulk of the market business comes from the United States. American business accounts for about 40% of the overall transactions. They are well ahead of the British ones 25% and those coming from Europe 20%.
  • Brokers: they place insurance and reinsurance risks on the market. Their role is extremely important. The Lloyd's proceed only through brokers. In order to make business with Lloyd's, brokers have to be certified by this institution. There are about 150 brokers certified by Lloyd's.
  • IUA: the International Underwriting Association of London was born in 1999 from the merger between ILU (the Institute of London Underwriters) and LIRMA (the London Insurance and Reinsurance Market Association).
    IUA's role is to defend its members' interests on the insurance market and to support due process of underwriting operations.
    By April 20, 2009, IUA has listed 65 members, 41 of which are ordinary members, 5 affiliate members and 19 associate members.
  • The P&I clubs: they stand for mutual insurance associations for ship owners and charterers. They are specialized in marine insurance.
    These clubs are organized around the “International Group of P&I Clubs”, the international organisation whose headquarter is in London and which gathers 13 major clubs.

The Lloyd's

The Lloyd's is not an insurance company but rather a market which attracts business and investments worldwide. It provides specialized corporate services for companies in more than 200 countries worldwide.

Lloyd's in 2008 is:
  • operations in 200 countries
  • 52 underwriting agencies
  • 80 syndicates
  • a turnover of 26.041 billion USD
  • net profits of 1.735 billion USD

Presentation

Lloyd's history dates back to the 17th century. As of 1688, rich traders, ship owners and captains pooled up in Edward Lloyd's tavern in order to insure their ships and carry out insurance transactions.

The establishment of Lloyd's into an underwriting institution dates back to 1811. During its establishment, Lloyd's business was wrapped around marine insurance. Henceforth, all risks may be underwritten with it.

It operates through brokers. Those brokers who are keen on taking part in Lloyd's activities must first obtain its approval and be members of the GISC (General Insurance Standards Council).

At the start of the 1990s, Lloyd's went through a crisis which considerably strained its capacity and led to the personal ruin of several of its members: the “names”.

Operating pattern

The insurance policies and reinsurance contracts are written by the “names” pooled up into syndicates.

Each syndicate is regarded as a full-fledged insurer detaining its own capital. This capital may come from its members who are either natural persons with unlimited responsibilities or corporate body whose responsibility is limited.

Syndicates are run by “managing agents” who make out business plans, define the syndicate's policy and ensure due process of underwriting, but do not take part in it on the market. They designate an underwriter who intervenes on behalf of the members.

All risks are placed by a Lloyd's broker in London; the latter stands as a link between the underwriters and the clients (insurers and reinsurers).

Lloyd's structures

The corporation

It is an association which is endowed with the corporate body that gathers Lloyd's leaders and top staff executives. Financed by members' contributions, the association provides the material and human resources required for the progress of the institution.

The corporation does not issue insurance policies, nor does it underwrite risks. It manages.
By December 31, 2008, the corporation has 851 staff members worldwide, 719 of whom in the United Kingdom.

The board

The board is entrusted with the task of governing and controlling Lloyd's. it may approve new members, agents and brokers.
The board delegates specific tasks to two bodies: the market board and the regulatory board.

Services

A unique body, CSU (Central Service Unique) centralizes all agents' administrative tasks and provides them with information on the syndicates, their financial performances as well as their exposure to risks.

Lloyd's rating

Lloyd's financial soundness is recognized by most rating agencies.

Ratings agenciesRating
Standard & Poor’s
A+
Fitch Ratings
A+
A.M. Best
A

Main technical highlights 2004-2008

in millions USD
 20042005200620072008
Gross written premiums
28 29625 78132 15732 68826 041
Net written premiums
22 60720 25425 86226 47620 585
Combined ratio
96.6%111.8%83.1%84%91.3%
Net profit
763-2 3884 1964 1921 735
Return on equity
12.5%-0.9%31.4%29.3%13.7%

Premiums and net profits'evolution 2004 - 2008

in billions USD

lloyd-premiums-profit

Gross written premiums split per class of business : 2004-2008

in millions USD

 20042005200620072008
 premiums%premiums%premiums%premiums%premiums%
Reinsurance
8 63130%9 05335%10 88734%10 89133%9 11935%
Non life
Property
6 22520%5 50521%7 12722%7 60823%5 75022%
Casualty
7 44128%5 85423%6 99822%6 71921%5 44721%
Marine*
3 91915%3 77915%5 23316%5 41117%4 29317%
Motor
1 9557%1 5406%1 8086%1 9636%1 3605%
Life
Total Life
125 - 81 - 98 - 92 - 71 -
Grand total
28 296100%25 812100%32 151100%32 684100%26 040100%
Other operations
---31-6-4-1.448-
Turnover
28 296 25 781 32 157 32 688 26 041 

* Including maritime transportation, energy and aviation

Turnover split per class of business in 2008

lloyd-turnover

2008 activities split per region and per class of business

in %

 United States & CanadaCentral & South AmericaUnited KingdomEuropeCentral & Pacific AsiaRest of the World
Reinsurance
307727354458
Property
3081916157
Casualty
21824202614
Marine
5461879
Energy
1013653
Motor
1120112
Aviation
311427
Total
100 100 100 100 100 100

2008 turnover split per region

lloyd-turnover

Combined ratio per class of business: 2004-2008

in %

 20042005200620072008
Reinsurance
94.6135.180.881.783.8
Non life
Property
95.8118.581.986.396.7
Casualty
108.893.98992.795.1
Marine
87.491.488.687.484.6
Energy
82.5146.998.873.4123.8
Motor
93.391.296.498.499.6
Aviation
72.670.665.184.586.8

Turnover split per syndicate 2007-2008

in millions USD

Underwriting agenciesSyndicates20072008
OACE Underwriting Agencies Limited
2488785633
Advent Underwriting Limited
0780274236
AEGIS Managing Agency Limited
1225479356
Amlin Underwriting Limited
20011 8001 219
Argenta Syndicate Management Limited
19651617
2121190191
6101154130
61028471
Ark Syndicate Management Limited
4020178327
6105-33
Ascot Underwriting Limited
14141 075733
Aspen Managing Agency Limited
4711-113
Atrium Underwriters Limited
0570234193
0609346281
Beaufort Underwriting Agency Limited
0318260230
Beazley Furlonge Limited
0623358285
26231 5041 212
3623--
Brit Syndicates Limited
29871 2921 034
Canopius Managing Agents Limited
4444937701
Capita Syndicate Management Ltd
55004241
Cathedral Underwriting Limited
2010423332
3010823
Catlin Underwriting Agencies Limited
20032 4271 908
Chaucer Syndicates Limited
10841 051930
11764438
1274-217
1301138113
42427693
Equity Syndicate Management Limited
02181 136804
44552417
Faraday Underwriting Limited
0435515374
Hardy (Underwriting Agencies) Limited
0382216168
38208281
HCC Underwriting Agency Ltd
404010268
4141-28
Heritage Managing Agency Limited
1200649592
Hiscox Syndicates Limited
00331 9891 281
6104-33
Jubilee Managing Agency Limited
Life 07795849
123110268
582012881
KGM Underwriting Agencies Limited
02609891
R J Kiln & Co. Limited
Life 03082822
05101 3541 096
05577055
0807290182
Liberty Syndicate Management Limited
44722 0871 377
Managing Agency Partners Limited
2791683408
61033623
Markel Syndicate Management Limited
3000393345
Marketform Managing Agency Limited
2468220177
Marlborough Underwriting Agency Ltd
1861194116
Max at Lloyd's Ltd
140012870
25258462
25266043
S. A. Meacock & Company Limited
072712698
Mitsui Sumitomo Insurance Underwriting at Lloyd's Limited
3210719511
Montpelier Underwriting Agencies Limited
51511690
Munich Re Underwriting Limited
0457617482
Navigators Underwriting Agency Limited
1221298252
Newline Underwriting Management Ltd
1218180151
Novae Syndicates Limited
2007547456
Omega Underwriting Agents Limited
0958563476
Pembroke Managing Agency Limited
400011896
QBE Underwriting Limited
0386871597
29991 9531 234
RITC Syndicate Management Limited
5678-1
Sagicor at Lloyd's Limited
Life 004041
1206112184
Shelbourne Syndicate Services Limited
2008-320
Spectrum Syndicate Management Limited
21122420
Sportscover Underwriting Limited
33342622
Starr Managing Agents Limited
1919182337
2243446
Talbot Underwriting Ltd
1183687555
Travelers Syndicate Management Limited
5000589463
Whittington Capital Management Ltd
1910-130
1955-96
XL London Market Ltd
1209419384
Other Syndicates
--264-362
Total
-32 68826 041

List as at 31 December 2008

Exchange rate
USD/GBP as at 31/12
2004
2005
2006
2007
2008
0.5191
0.58126
0.51069
0.50092
0.69096
0
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