Lloyd’s goes big-game hunting…

Five years ago, Lloyd’s was strong-arming syndicates to shed business like an overladen cargo plane struggling to stay airborne.

How times have changed! Now, CEO John Neal has confidently presented a growth strategy with the target of reaching $100bn in GWP by 2026. To put that figure in context, Lloyd’s GWP in 2021 was $51bn; the 2026 target thus entails an effective doubling of size in five years.

Such an audacious strategy will involve big-game hunting – in other words, attracting alphabet houses that are not currently in Lloyd’s to enter the market to benefit from its access to business, global licences, strong ratings (both AM Best and S&P have upgraded in past 12 months) and capital advantages. The quid pro quo – in theory, at least – is that they will also bring attractive business into Lime Street.

2024 has already seen some success in that regard. Fidelis has launched a start-up syndicate with an accelerated growth plan; the first Lloyd's captive syndicate in over 20 years has been launched by an unnamed major global client (widely understood to be Google, as first predicted by this publication); while Aviva has returned to the market with the £242mn ($318mn) acquisition of Probitas.

But there are a number of global insurers still outside the tent, such as Sompo International, the only one of the Japanese big three without a Lloyd’s platform after its former international boss John Charman shuttered the former Endurance at Lloyd’s operation; Convex, which teasingly sits opposite Lloyd’s headquarters and writes $4bn+ of London market business; and Allianz, a global powerhouse and one of Europe’s largest P&C insurers.

Other names one might add to that list include Korean insurer Samsung Fire & Marine, a minority shareholder in Lloyd’s insurer Canopius; Italy’s Generali; Spain’s Mapfre; South Africa’s Sanlam; and a number of North American carriers, including Intact Corp (owner of RSA), as well as E&S/specialty carriers such as Old Republic, Skyward and RLI. In the latter two cases, many peers – including Cincinnati Financial, Markel and WR Berkley – already have established Lime Street presences.

In today’s Monte Carlo edition of The Insurer we examine Allianz, which continues to mull an entrance after a bid to launch a syndicate with a former Ascot team failed last year. The article on page 18 has all the details. Fundamentally, the dilemma for any new entrants is whether to build or to buy. Both have advantages and pose challenges. In Fidelis’ case, the firm has chosen to build, and in return Lloyd’s has agreed a rapid growth plan to $450mn GWP in its first full year.

However, for those insurers looking to enter Lloyd’s in order to increase their share of London market specialty, reinsurance or US E&S business, acquisition is the more obvious path. The good news for potential predators is that there are a number of private equity-owned businesses which are available at the right price. The trio of listed carriers – Beazley, Hiscox and Lancashire– also continue to trade at a lower value than their US/Bermuda peers; a reflection, in part at least, of the wider doldrums affecting the London Stock Exchange. This even prompted analysts at Berenberg to warn that these companies could be“sitting ducks” to potential overseas acquirers. The relative strength of the US dollar versus sterling may also act as an encouragement.

Of course, acquisition has its risks both in terms of balance sheet and culture. Not all recent entrants have proven successful, as the likes of AFG, ProAssurance, Standard Club and Coverys would testify. Aviva’s on-off deal to acquire Probitas was almost certainly compounded by the acquirer’s determination to gain confidence on the latter’s back-year exposures, for example. Other acquirers will naturally have their own concerns.

Nonetheless, the overall mood at Lloyd’s is much improved, as demonstrated by the news last week that its H1 2024 result was a highly credible pre-tax profit of £4.9bn with a combined ratio of 87.3 percent. The market’s senior management wants to attract more big names. We expect more positive news on that front before the year is out…