Lloyd's looks for Malaysian expansion

by Maryvonne Gray | 03 Aug 2015

Lloyd’s of London is applying for a Malaysia onshore licence as part of a broader push into Asia.
Group chairman John Nelson said a licence would enable Lloyd’s to write more cover than the $137 million of business it does via Singapore, London and Labuan, Malaysia’s offshore jurisdiction.
“If you have people on the ground you get better access and a much better understanding of the risks,” he told The Financial Times.
“If we look at our performance around the world where we go onshore, our performance improves.”
Asia accounts for about 12% of the group’s business, with Nelson saying he expected that to grow at a faster rate than the region’s economic growth as governments and companies looked to close an insurance penetration gap.
Insurance penetration in the 10-member Association of Southeast Asian Nations is equivalent to about 3% of GDP, compared with a global average of 6%.
However, the region is more vulnerable to natural catastrophes than any other part of the world, The Financial Times reported.
Over the past 20 years Asia has borne almost half of the global economic cost of natural catastrophes – about $53 billion each year, according to the Asian Development Bank.

Malaysia and AirAsia plane crashes hit insurer profits

Crashes, airports turning into warzones and lost planes hit the profits of 327-year-old insurer Lloyd's of London after the worst year for airlines since 2001.

Claims from the two Malaysian Airline crashes, fighting at Tripoli airport and other tragedies including an AirAsia plane crashing off the coast of Indonesia in December left Lloyd’s with £310 million of aviation claims - the most it has faced in 14 years.

These disasters came in an otherwise benign year for catastrophe losses at Lloyd’s, whose underwriting syndicates protect against risks including earthquakes and windstorms. It said it was too early to estimate the cost of potential claims from this week’s Germanwings disaster that crashed into the French Alps, although German insurance giant Allianz has already confirmed it is the lead insurer.

Lloyd’s of London can trace its roots back to 1688, when it was founded in Edward Lloyd’s Coffee House in the City of London. It is now the world’s largest insurance market with gross written premiums of £25.3 billion.

Its pre-tax profits dipped from £3.2 billion in 2013 to £3.16 billion last year in what its boss Inga Beale described as “challenging market conditions”.

As well as claims from aviation disasters, insurers’ profits have been hit by low interest rates and new investors like hedge funds, looking for better returns than conventional investments. The abundance of capital in the Lloyd’s market has held down the prices insurers can charge, creating “soft market” conditions.

“The robust performance of the market in 2014 reflects a collective achievement, of which we should be proud,” Beale added.

Lloyd’s first female chief executive said she welcomed the latest wave of takeover activity in the market because it was attracting overseas capital. Recent deals include Fairfax Financial of Canada buying Brit Insurance. She also highlighted the growing threat of and called for new investor into Lloyd’s to support this “new risk exposure”, rather than the data-driven property and casualty market.

Mark Grice, head of insurance at accountancy Mazars, said: “This is a good result given the low interest rate and premium rate environment. Also for Lloyd’s it has been a year of development as it sets operations in emerging markets such as Beijing. The Lloyd’s platform remains attractive as can be seen by M&A activity and its intent to modernise.”

Lloyd's of London

From Wikipedia, the free encyclopedia

Lloyd's of London, generally known simply as Lloyd's, is an insurance market located in London's primary financial district, theCity of London. Unlike most of its competitors in the industry, it is not a company but instead a corporate body governed by the Lloyd's Act of 1871 and subsequent Acts of Parliament. Lloyd's serves as a partially mutualised marketplace within which multiple financial backers come together to pool and spread risk. These underwriters or "members" are both corporations and individuals (the latter being traditionally known as Lloyd's "Names").

The insurance business underwritten at Lloyd's is predominantly general insurance and reinsurance, although in 2013 there were five syndicates writing term life assurance. The market has its roots in marine insurance and was founded by Edward Lloyd at his coffee house on Tower Street in the 17th century. Today, it is based at the Lloyd's building on Lime Street. Its motto is Fidentia, Latinfor "confidence".^[1]

In 2011, over £23.44 billion of gross premiums were transacted in the Lloyd's market and in the aggregate it made a pre-tax loss of £516 million, driven by a number of significant natural disasters which gave rise to its highest-ever annual level of claims.^[2] In 2012, Lloyd's made a pre-tax profit of £2.77 billion on a record £25.50 billion of gross written premiums.^[3]