Evolving Lloyd’s for international growth

Insurance and Reinsurance, Markets — By on February 5, 2014 at 10:51 PM
Vincent Vanderdael

Vincent Vanderdael

Lloyd’s Director of International Markets, Vincent Vandendael is responsible for helping the market to achieve ambitious growth internationally. He talks to lloyds.com about how the world’s insurance requirements will change over the coming decade and what the market must do to take advantage of these opportunities. (source: Lloyd’s of London)

You recently delivered a speech called ‘International Markets – should you care?’ Why should the market care?

Lloyd’s has always been an international market, only 18% of our business is actually from the UK. So the title was a bit of a joke – of course the market cares and they always have. However, my point is that as well as thinking about traditional markets such as the US, the market should also pay attention to markets where we write less business, and where there is less insurance altogether. Markets like China or Brazil.

The US is currently on a journey of economic recovery and is of course our most important market, but the point I want to make is that other markets are becoming more attractive, not that our traditional markets are becoming less so.

We should all ask ourselves – do we risk missing out if we don’t act? I am absolutely certain that the next phase of development in fast growing economies such as China will include insurance. In fact, China’s most recent ten year plan specifically covers the financial services industry, including insurance.

How will the world change by 2025?

Research from McKinsey which looks at how big business (i.e. those with a revenue of over $1bn) will change, reveals that by 2025 our clients will be scattered around the world, and the world’s biggest companies will be in locations different to today.

During 1980 – 2000, only 5% of large businesses were based outside developed regions. But by 2025, 45% will likely be in the developing economies. This data is supported by forecasts on the headquarters of Fortune 500 companies. In 1980 only two were in China, in 2025, 120 will be.

We need to take account of the fact that businesses will face a profound shift in the geography of their markets, and that London and New York, although important, may no longer be the only two major international financial centres.

Why is this important for the market?

Well to put it into perspective, McKinsey found that of today’s big businesses, 8,000 account for a staggering 90% of GDP. So it is fair to assume that they account for a significant portion of Lloyd’s business. We do business with big business.

Will the market have the same ease of access if businesses are headquartered in Beijing, or Sao Paolo?

We need to attract capital and people from these markets and build relationships. We also need to understand the needs in these markets and create new products for them.

It is difficult to predict the future but one thing I know for sure is that if you are not in the room when the deals are made then you are not part of the deal making.

What can Lloyd’s do to help?

We commissioned research which forecasts how changes in the world’s GDP translate into insurance business for Lloyd’s. We found that the pool of available Lloyd’s type business is likely to double by 2025. There is healthy growth in traditional markets, but at least 25% of the total available pool is coming from developing markets such as China, Brazil, Mexico, India and Russia.

What about brokers?

Brokers play a significant role in accessing/distributing insurance premiums and we don’t really expect this to change.

What’s the picture for reinsurance?

Brokers remind us every day that new competition is entering the market and that it is here to stay. But to quote Tom Bolt “We need to bake more pies!”

That means that we need to look at innovation and geographical expansion. There are opportunities out there, but it will be hard work. It is more difficult to create demand to build a book than it is to compete on price. My role in the Corporation is to remove hurdles and to help Lloyd’s access these markets.

So if the world wants local insurers, is Lloyd’s local enough?

This is an important question. Daily, I ask myself if we have the right local presence, enough market intelligence from local markets, the right licences, wordings in local languages and the relationships.

But there is good news, for those who want a share of this opportunity – Lloyd’s is starting from a great place. We can capitalise on what we already have – Lloyd’s strong reputation and brand. We have tested how we are perceived by brokers, coverholders, local insurers and risk managers and there is a huge amount of respect for the Lloyd’s market. So we are in a strong opportunity to take this opportunity .

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