Lloyd’s of London: Transformative growth in a market underpinned by investor confidence and robust management
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Howden Re’s market update on Lloyd’s of London investigates the marketplace’s transformation from a period of significant losses to one of robust profitability from 2021-2023. With a strong foundation, high investor confidence, positive market outlook, and commitment to innovation, Lloyd’s is poised for continued success in the years ahead.
Howden Re has a seasoned team of experts in the Lloyd’s Market, supporting the ambitions of clients across reinsurance, M&A, capital raising and legacy.
Core takeaways from the report:
Unprecedented growth and profitability, enhanced by Lloyd’s unique structure
In 2023, Lloyd’s posted its strongest underwriting performance since 2006 and the highest profit in the marketplace’s history:
- Net combined ratio: 84%
- Total return on capital: 25%
- Profit before tax: £10.7bn
These results were due to excellent underwriting performance, coupled with strong investment returns.
From 2021-2023, Lloyd’s GWP CAGR has been approximately 15%, with two-thirds of this growth driven by underlying rate strengthening. This rate-driven growth has enabled Lloyd’s to maintain a sub-50% attritional loss ratio for three consecutive years, enhancing its ability to absorb outsized natural catastrophe losses while still delivering industry-leading results.
Bill Cooper, Managing Director at Howden Capital Markets & Advisory, commented, “Over the last 2 years there has been a notable increase in interest in Lloyd’s from the wider insurance industry and the investor community and we expect this to continue given the underlying strengths of the market and its prospects for the future.”
Lloyd’s unique structure, which includes the benefits of mutuality and the ability to leverage and structure capital deployment to boost returns, contributed to a market-wide return on capital of approximately 25% in 2023, the highest since the years following Hurricane Katrina.
Investor confidence returns
Lloyd’s has attracted a high calibre of entrants in recent years, including some of the most seasoned sector investors and participants such as Aviva, Bain Capital, Blackstone, CVC, Fidelis, JC Flowers and Stone Point. This vote of confidence in Lloyd’s future prospects has been reinforced by credit rating agencies upgrading their view of Lloyd’s.
Howden Re has played a key role in in a significant number of recent market transactions, including CVC’s acquisition of a majority stake in Dale Underwriting Partners , and the establishment of 3 new Lloyd’s platforms for the 2024 YOA.
A marketplace driven by aspiration and commerciality
Robust oversight by Lloyd’s senior management has been coupled with a commercial and ambitious outlook, positioning Lloyd’s as not only the global hub for underwriting excellence but also at the forefront of innovation and advancement within the sector.
Looking ahead
Lloyd’s is extremely well positioned for the next phase of the P&C insurance cycle, with strong risk management oversight in place, but also encouraging signs that sustainable growth can be achieved given the number and quality of new businesses and investors now involved in the Market.
Bradley Maltese, CEO of UK & Global Specialties at Howden Re, said: “Lloyd’s has dealt with the past, managed down costs and expenses, and positioned itself once more as a centre of innovation and excellence. There have been vast improvements in the performance of individual syndicates, with new entrants offering diversity in class of business and innovation which is appealing to investors. The market delivered excellent returns in 2023 and is positioned extremely well for future profitability.”