NSW Claims Discussion Group

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June 2013

NSW Claims

Discussion Group

Lloyd’s

Adrian Humphreys

General Representative - Australia

> www.lloyds.com

/MARKETPRESENTATIONS

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C

onte

nt

1 Market Update

2 Lloyd’s

3 Distribution Dynamics

4 CTP

6 SWOT Analysis

5 Large claims

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1

Lloyd’s Market

• Lloyd’s structure

• Market Players

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From Coffee House……to Lloyd’s Members

1 LLOYD’S Business

> History

1689



Ships and goods insured by wealthy

individuals acting on a personal basis.



Lloyd’s Coffee House; first recorded February

1689.

1800 – 1850s



Development of syndicates

Present Day



iPhone

1712 First steam engine

1750s Beginning of the Industrial Revolution

1805 Battle of Trafalgar

1876 Telephone invented

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“Insurance is a promise to pay”, understanding the security behind your policies is

vital when securing your clients future.

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2

Lloyd’s in Australia

• Overview

• Business Class Snapshot

• Distribution Snapshot

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The previous year of

QBE and IAG global acquisitions

has changed into pressures on costs and

demands for increases in efficiencies. The battle between brokers and insurers to control distribution is well

under way with acquisitions of SME (brokers and MGA’s) business cycle in full flow….

2012 MARKET PLAYERS: TOP 7 General Insurers

**(Excluding global business; *Includes subsidiaries)**

HIGHLIGHTS (Year end Dec 2011 vs. Dec 2012)

Market Combined Ratio

: 106% in 2011 reduced

to 90% in 2012

Gross Written Premium (GWP)

: increase of

8% to US$ 40.1bn. Lloyd’s in line with market

Gross incurred claims (current and prior years)

fell 38% to US$ 24.6bn

Direct Insurers

GWP up 8.5% to US$ 37.8bn, net underwriting

Combined Ratio of 91%

Reinsurers

Outwards reinsurance spend up 36% to

US$ 837m. Cession ratio increased from 30% to

38%

New incurred claims fell by 64% from US$ 1.2bn

to US$ 463m

Market Overview

>Market Players

2

Source: APRA, (2013); Company Annual Reports, (2013); Exchange rates as per Appendix.

Lloyd’s APRA Return: may differ in 2012 (Total for all OECD classes, for both direct and reinsurance, includes last three years of account). See Appendix note.

Others*

2012 Non Life

Insurance premiums

US$ 40.1bn GWP

(US$ 29.8bn NWP)

**On a country of origin basis. May differ

from APRA statistics. Please see Appendix for further details

1.2 1.3 2.0** 3.2 4.6 6.6* 6.8* 4.6

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Property Treaty

Source: Market Intelligence calculation on Xchanging figures. Rates of exchange calculated as per Appendix

2008 – 2012 LLOYD’S PREMIUMS:

BY CLASS**

Overseas Motor

PA & Health Marine

Aviation Energy

GSP in:million US$

Lloyd’s

>Business Class Snapshot

2 Lloyd’s premiums

are dominated by

Property and Liability

classes.

Property D&F

experienced the most significant growth during 2012,

increasing by US$ 98.8m

Lloyd’s data is based on Xchanging “REG 258”, (2012); unaudited figures based on country of origin and processing by calendar year; please refer to Appendix for detailed summary of Lloyd’s Data Limitations.

!

Casualty Treaty Casualty Property (D&F) **On a country of origin basis. Please see Appendix

for further details

70.4 84.8 112.4 240.7 _183.9 449.9 500.4 627.4 774.0 798.5 62.5 49.5 50.7 65.5 _72.2 59.7 58.0 79.5 86.1 127.2 237.6 230.1 301.2 349.1 447.9 97.9 126.8 158.3 284.7 314.2 0 500 1000 1500 2000 2500 2008 2009 2010 2011 2012

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2012 LLOYD’S PREMIUM GROWTH:

BY CLASS

Gross Signed Premiums in:

million US$**

Lloyd’s

>Business Class Snapshot

Lloyd’s premiums

are dominated by

Property and Liability

classes.

Property D&F

experienced the most significant growth during 2012,

increasing by US$ 98.8m

!

**On a country of origin basis. Please see Appendix for further details

2

- 56.8 0.0 24.5 3.8 6.7 41.1 28.8 98.8 29.5 0.0 -80 -60 -40 -20 0 20 40 60 80 100 120 Accident &

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Lloyd’s

>Commercial Class Analysis

Lloyd’s

Property D&F GWP

increased

75%

from

$79m

in

2011

to

$139m

in

2012

Lloyd’s

general

PI

decreased

7%

from

$253m

in

2011

to

$236m

during the same period

Property – 2012

•

Record capital & top line pressures have returned

•

Food & beverage, power and mining are bucking

the trend due to poor claims experience

•

Rates did increase over Q1 and Q2 (7%), slowed in

Q3 and Q4 to 4% as did insured values

•

Jan / Feb storms had no affect

•

Broker insurer arrangements (Marsh / QBE)

Source: Lloyd’s Australia; APRA National Claims and Policies Database (December 2012)

2 Professional Indemnity – 2012

•

Agreement that rates need to increase, but

competition has kept rates down

•

Financial Planners & Property Valuers rise in rates,

as much as 60% if losses advised

•

Accounting & architects rate rising between 5% &

10%

•

Major engineering firms and construction companies

can expect 5% rises

•

Law firms remains stable, even reductions

•

Design and construct 10 year policies

•

Clients also looking at retaining more risk

•

AIG Aon PI deal for Australian business

• Reinsurance capital increased 10%, demand was flat

• Global return on equity of 13.4%, without Sandy

could have been at 2007 levels

• Suncorp / Berkshire Hathaway / new partners

• Increasing competition from China

• ARPC funding of flood mitigation programme

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Lloyd’s

>Commercial Class Analysis

Lloyd’s

GL GWP

increased

8%

from to

$413m, FI

increased

to

$60m

,

D&O

increased

7%

from to

$33m,

Property Treaty

increased

10% t

o

$314m

in

2012

and

Property Cat XL

increased

5%

to

$249m

.

General Liability – 2012

Financial Institutions – 2012

2

•

Claims from GFC are maturing & being paid. Need to

focus on the breadth of cover

•

CR well over 100%, not attributable to one event but a

general frequency and severity

•

Take out GFC no increasing trends in claims frequency

or amounts. But, litigation funders starting to move in.

•

Premiums starting to hold and capacity shifting from

Financial Lines & move away from large institutions

•

Increased competition reflected in rates apart from

bushfire and offshore energy

•

Older years much less favourable:

2010 Gross Loss Ratio 120%, 2011 show 100%

•

Between 2003 & 2010 claims inflation of 7% - 8% pa

•

Sharp rise in workers comp recovery actions

•

‘No win no fee’ in shopping centres

Directors and Officers – 2012

•

Two tier market, those including ‘Side C’ and those

not.

•

Most claims have been by shareholder class actions)

and reflected in rates

•

Bridgecorp & Great Southern

Trade Credit – 2012

•

US and Eurozone debt crisis, local u/w pulled out

•

Bad performers substantial rises are holding

•

Deductibles will be key to max acceptance rates

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2

Lloyd’s

New Zealand

• Overview

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2008 – 2012 LLOYD’S PREMIUMS:

BY CLASS**

GSP in:million US$

Lloyd’s

>New Zealand Snapshot

2 Lloyd’s premiums

are dominated by

Property

classes.

Property D&F

experienced the most significant growth during 2012,

increasing by US$ 72.5m

!

**On a country of origin basis. Please see Appendix

for further details

12.3 11.2 16.2 12.1 11.7 8.3 10.3 14.5 _14.9 26.6 38.4 42.9 52.2 77.2 149.7 17.5 20.6 28.1 66.2 43.0 0 50 100 150 200 250 300 2008 2009 2010 2011 2012 Property Treaty Overseas Motor PA & Health Marine Aviation Energy Casualty Treaty Casualty Property (D&F)

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3

Distribution

Dynamics

• Distribution overview

• Coverholders

• Brokers

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Source: Market intelligence based on Xchanging; Country Manager soft intelligence, (May 2013) USEFUL LINKS

Lloyd’s Licence Status: > www.lloyds.com/Crystal Coverholder Application: > www.lloyds.com/Atlas

Coverholder Directory: > www.lloydsaustralia.com.au/directory/categories.php

Binding Authorities Direct

Reinsurance

!

Lloyd’s

>Distribution Snapshot

LLOYD’S GROSS SIGNED PREMIUM TREND

(in %)**

Lloyd’s underwriters

write a mix of all classes of

direct and reinsurance

;

previous swings of business mix to

binding authorities

has been halted towards open market placements.

Service companies starting to get a foothold locally.

2009 Lloyd’s

GSP US$ 1.1bn

24% 24% 38% 38%

2011 Lloyd’s

GSP US$ 1.9bn

44% 32% 24% 24%

2010 Lloyd’s

GSP US$ 1.4bn

36% 24% 40% 24% 36%

**On a country of origin basis. May differ to APRA statistics. Please see Appendix for further details

3 2012 Lloyd’s

GSP US$ 2.0bn

30% 28% 42%

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Source: Market Intelligence based on: Lloyd’s Delegated Authority Team 2013

Lloyd’s agencies and service companies you may recognise…..

AFA

Affinity Risk Partners Brokers AIS Insurance Brokers Altiora Insurance Solutions Aon Risk Services

Arch Underwriting at Lloyd’s

Asia Mideast Insurance & Reins. ASR Underwriting Agencies ATC Insurance Solutions Ausnet Underwriting Agency Austagencies

Austbrokers RWA Austbrokers Sydney

Australian Income Protection Australian Reinsurance U/w Svs Australis Group Underwriting Austruck Insurance

Axis Underwriting Services

Beazley Underwriting

Bizcover Brit Insurance

Brooklyn Underwriting

Brooks Inglis Insurance Brokers

Catlin

CBD Underwriting

Celestial Underwriting Agency CEMAC

OMPS Australia

Online Insurance Brokers Parmia

PI Direct Insurance Brokers Professional Risk U/w QBE Placement Solutions Resource Underwriting Pacific Richard Oliver

Risk Insure

Sterling Insurance

Savannah Insurance Agency SLE Worldwide

Southern Cross Underwriting

Sportscover SRS Underwriting Agency Starr Underwriting SUA Suresave Tasman Underwriting Trafalgar Risk Management Transcorp Underwriting Travel Insurance Direct Trident Insurance Group Trinity Pacific U/w Agencies Willis

Windsor Income Protection Winsure Insurance Group Woodina Underwriting World Nomads

Cerberos Brokers Cerberus Special Risks Cheap Travel

Cinesure

CKA Risk Solutions

Columbus Direct Travel Ins. Coverforce Underwriting Dolphin Insurance Dual

East West Insurance Brokers Elkington Bishop Molineaux Epsilon Insurance Broking Services

Fenton Green & Co

Film Insurance Underwriting FP Marine

Fitton Insurance Brokers Freeman McMurrick General Security Insurance Brokers

Gow-Gates Insurance Brokers Guardian Underwriting Services High Street Underwriting Agency Hiscock Insurance Brokers Horsell International H W Wood IBL Indemnity Corporation Insurance Advisernet Insurance Facilitator Insure That International Underwriting Svs Ironshore Australia

Jardine Lloyd Thompson JMD Ross Insurance Brokers JUA Underwriting Agency Latitude

Lawsons Underwriting Australasia Logan Livestock Insurance Agency London Underwriting

Macquarie Underwriting

Magic Millions Insurance Brokers Mansions of Australia

Manufactured Homes Ins Agency Marsh

Millennium Underwriting

Miller & Associates Ins Broking Miramar Underwriting Agency Mobius Underwriting

National Underwriting Agencies Nautilus Marine Insurance Agency

Newline Insurance

Newmarket Insurance Brokers Nova Underwriting

Panoptic (Midas) Pantaenius

3 New

(Bold)

Service Company

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4

Claims Transformation

Programme (CTP)

• Claims figures

• Claims Transformation

• Claims Academy

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Considerable investment with significant outcomes…..

4 Lloyd’s

> Claims Transformation Programme

“To be the market of choice for

insurance and reinsurance

buyers and sellers to access

and trade specialist property

and casualty risks.”

“Transform the way the

market handles claims to

enhance the experience of

the customer.”

Ahead of competitors on

Complex claims handling

Competitive on Standard

claims handling

Claims Transformation

Programme

Investment

in Claims

Claims

Systems

Enhanced Customer

Experience

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Measure

Success Criterion

Current Status

Speed

25% improvement

51% improvement

Quality

No deterioration

Small improvement

Market

Perception

No deterioration

78% of brokers surveyed rated CTP system the

same or better than the alternative system

(Gracechurch Consulting Claims Performance Monitor, 2012 annual findings)

Cost

No deterioration

Costs vary depending on managing agent

_choices

Considerable investment with significant outcomes…..

4

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Considerable investment with significant outcomes…..

4 Lloyd’s

> CTP On-going workstreams



Process efficiency



Delivering claims performance information to Lloyd’s brokers

and working to reduce overall claims lifecycle



Broker Portal



Improving the web portal used by most brokers for submission

of new electronic claims, to increase ease of use and reduce

rework caused by inaccuracies



Volume Claims Service



Investigating a possible high-efficiency, customer-oriented

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Considerable investment with significant outcomes…..

4 Lloyd’s

> CTP On-going workstreams



Claims Reporting Suite



Implementing an online claims management information gateway



Claims Talent Programme



Bringing top graduates into the Lloyd’s claims arena and up-skilling

existing young claims professionals at managing agents



Legacy



Investigating whether and how to bring existing non-CTP claims into

scope



Large Loss Coordination



Enhancing the framework through which the market responds to

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5

Large Claims

• Claims trends

• New Zealand

• Lessons learnt

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LLOYD’S

> Who knows?

Nine out of 10 Nat Cat and all in the last eight years

Year

Event

US$ bn

2005

Cyclone ‘KRW’ – US & Gulf of Mexico

8.0 2001

Terrorism WTC – US

3.0 2012

Superstorm Sandy

2.5 2011

Thailand Floods

2.2 2008

Cyclone ‘Ike’ – US & Gulf of Mexico

2.1 2011

Japan Earthquake & Tsunami

1.95 2005

Cyclone ‘Rita’ – US & Gulf of Mexico

1.5 2010

Chile Earthquake

1.4 2011

New Zealand Earthquake

1.4 2005

Cyclone ‘Wilma’ – US

1.0 2010

Australian floods

0.4

Source: Lloyd’s Australia, (2013)

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Considerable investment with significant outcomes…..

5

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Considerable investment with significant outcomes…..

5 Lloyd’s

> Loss Framework in Action

Component

Status

Outcome

Corporation

Steering Group

Invoked

• Policy Holder Helpline triggered

• Communication Plan developed

• Regulatory engagement

• MCR triggered

Strategic Claims

Group

Active

• JBA study considered

• Sector Groups feedback

• No Market Level co-ordination required

PICG

Engaged and Active

• Executive Adjuster Arrangement triggered

• Sandy Sub Group formed

• 2013 Review of large loss response for PICG

LRCG

Engaged

• No separate response Group required

BACG

Engaged and Active

• Sandy Sub Group formed

• 2013 Review of large loss response for BACG

XCS

Invoked

• Cat Code issued

• Urgent arrangements in place

LIIBA

Engaged

• Attended Claims Supervisory Board on

21.11.2012

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6

SWOT Analysis

• Strengths

• Weaknesses

• Opportunities

• Threats

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Source: Lloyd’s Australia, (March, 2012)

SWOT ANALYSIS

>SWOT

6 Strengths

Weaknesses

Opportunities

Threats

• Capital, Rating & Branding

• Strong claims framework

• Market access & relationships

• Coverholder model open to attack

• Competing with ourselves

• Local service and claims

• Market consolidation & broker binders

• TORT reform worn off

• Portfolio deals

• The ‘computer says no’ esp. 26

th

_parallel

• Singapore and local subscription

• Reinsurance

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2013 increased focus on Australia….

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Appendix

• About Market Intelligence

• Data Limitations & Disclaimer

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> www.lloyds.com

/marketintelligence

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

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

Heat map of key indicators



Download Insurance Market Statistics

1 MARKET PRESENTATIONS



Local perceptions & market statistics



Key opportunities & challenges



Lloyd’s activities

3 CLASS REVIEW



Class of Business Analysis by territory



Market share analysis



Downloadable triangulations*

4 QUESTIONS

 Visit our website

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

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5

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COUNTRY PROFILES

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Summary fact sheets on 50 territories

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overview of insurance market

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Guide to Lloyd’s premiums & licence

2

* Detailed performance stats for Managing Agents only

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Disclaimer

This document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the

information Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or

liability for any loss to any person acting or refraining from action as a result of, but not limited to, any statement, fact, figure,

expression of opinion or belief obtained in this document.

Lloyd’s Data Limitations

Please note the information contained in this document is based upon data collected from Xchanging and may be incomplete

for some classes of business; for instance a substantial figure, which is missing from the REG 258 data set is comprised of UK

Motor, which is not processed by Xchanging.

Gross Premiums:

Original and additional inward premiums, plus any amount in respect of administration fees or policy

expenses remitted with a premium but before the deduction of outward reinsurance premiums.

Lloyd’s figures are based on gross written premiums based on figures processed by Xchanging by processing year and country

of origin.

Country of Origin:

denotes the country from where demand for the insurance / reinsurance emanates; i.e. the coverholder or

policyholder, irrespective of the country to which the risk is classified for regulatory reporting purposes.

Processing Year:

relates to the calendar year in which the premium, additional or return premium is processed by Xchanging,

irrespective of the actual underwriting year of account of the risks (which is determined by the inception date of each risk).

Example: A policy holder in the UK insuring a holiday home in France would be classified as a UK risk by Country Of Origin, but

French for regulatory reporting purposes. Similarly a risk incepting on 1st December 2009 would be classified at 2009

underwriting year of account but may not be processed by Xchanging until 2010 and so be allocated to the 2010 processing

year

Exchange Rate Policy

Appendix

> Data Limitations & Disclaimer

(1 AU$: 1 US$) 2006 2007 2008 2009 2010 2011 2012 Average Exchange Rates 0.7531 0.8385 0.8524 0.7919 0.9195 1.0333 1.0356

www.oanda.com (April 2013)

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