Energy Insurance Newsletter - October 2006 - JLT

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14Lloyd’s2007 CAPACITYEarly indications from 2007 business planssubmitted to the Lloyd’s Franchise Directorateare said to point towards a record Lloyd’s totalcapacity* for 2007 in excess of £16 bn.Of the business plans submitted by the end ofJuly it was reported that capacity is on average(subject to approval) up 9%. If this trend wereto be reflected in all syndicates business plansultimately submitted, the total capacity for 2007would breach the £16 bn (USD 29 bn) mark forthe first time in Lloyd’s history.* Lloyd’s capacity is defined as the maximum amount ofpremium (net of commissions) that may be written by the marketin accordance with Lloyd’s risk based capital requirements.Possible changes in capacity that are noteworthyare as follows:• Kiln has announced they are planningto expand 2007 capacity to over £1 bnrepresenting a 25 percent increase on thisyear’s capacity of £803m. This would makeit one of the largest Lloyd’s insurers by stamp(premium income) capacity.• Cathedral Capital plc, is looking to raiseup to £100m from a fund raising exerciseand expects to grow to a record £300m incapacity on Syndicate 2010 next year, a 22%increase on its current £250m capacity.• Chaucer has announced a proposal for a£40m increase in capacity for next year,which represents about an 8.5% increase.• Beazley has said it expects Syndicates 2623and 623 to increase their level of capacity for2007 by just over 3.5% to £860m.• Hardy has announced that it will form a newnon-marine syndicate for 2007, Syndicate1301. It is expected that the new syndicatewill have a capacity of up to £75m andwill write across a range of non-marineclasses with a focus on international directproperty and reinsurance.• Heritage is setting up a new syndicatemidyear 2006 that will be rolled into theirexisting syndicate for the 2007 year ofaccount. The new syndicate will have £35mof premium income capacity (a 15% increaseon their current syndicates’ capacity).2006 HALF YEAR RESULTSLloyd’s has just announced a mid-year,pre-tax profit of £1.35 billion, with the market’sunderwriting profit increasing by 20% sincethe same time last year. The market’s combinedratio has also improved to 86%. This is thesyndicates’ outgoings as a percentage of theirincome, so anything below 100% is a profit. Thiscompares with 88% for Bermuda, and over 90%for insurers and reinsurers in the US and Europe.Lloyd’s Chairman, Lord Levene said:“These are an excellent set of results. Today’snumbers clearly show the underlying strengthof the market. Lloyd’s, in the first half of 2006,outperformed its major international peer groupsdue to a combination of good market conditionsand the strong underwriting discipline withinthe market.”CENTRAL FUND CONTRIBUTIONSLloyd’s Syndicates contributions to the market’scentral fund – which rose from 0.5% in 2005 to1% of underwriting capacity in 2006 – will remainunchanged in 2007, but is planned to be cut forthe 2008 underwriting year, one year earlier thanpreviously anticipated.
15NEW STANDARDSLloyd’s Franchise Board has recently publisheda set of minimum standards for Underwritingand Risk Management to help managing agentsassess their overall performance and to makethe market even more competitive and profitable.Lloyd’s said this reflects the need to ensurehigher levels of performance in the marketbecause of their reliance on mutual performance.The standards are an important part of theirwork to protect Lloyd’s central assets, as well asits reputation and brand, and to further enhancemarket performance. While most franchiseeswill already meet the standards, Lloyd’s said theinformation published will raise the performanceof those firms that face more challenges, reducingany negative impact they may have on overallperformance. Lloyd’s added they have nointention of micro-managing firms but are makingperformance expectations clearer, and acting as abusiness partner, providing support and help whenneeded. The underwriting and risk managementstandards will be effective from 1 January 2007.CHINASince last November’s announcement byPresident Hu Jintao that Lloyd’s had been invitedto develop an onshore reinsurance operation,the corporation has been working hard withmanaging agents to design the right platformfor underwriters.Lloyd’s is currently working towards submittingits formal operational submission to the ChineseInsurance Regulatory Commission (CIRC). Onlywhen this submission has been accepted andLloyd’s China has been deemed “operationallyready” by the CIRC, will the vehicle be allowed towrite onshore reinsurance business in China.NO U.S. ‘ADMITTED’ PRESENCE FOR THETIME BEINGFollowing a review of Lloyd’s US trading status,they have has decided “for the time being” not topursue US admitted status (an idea that was putforward as part of their three-year strategic plan)In an update to the market Lloyd’s said themain reasons were the “associated regulatoryburden, limited franchisee interest, and Lloyd’sdistribution profile within the US”, adding “Wewill be reviewing measures to improve marketaccess to the US Excess & Surplus Lines marketfor Lloyd’s and our findings will be presented atthe September Franchise Board meeting.”
Page 1: Energy Insurance NewsletterOctober
Page 4 and 5: 4Energy Market OverviewOur last new
Page 6 and 7: 6PowerThe rating environment for op
Page 8 and 9: 8News in BriefACE USA has announced
Page 10 and 11: 10not change until the Coast Guard
Page 12 and 13: 12Losses2006 Energy losses of USD 1
Page 16 and 17: 16Political Developmentsin the Ener
Page 18 and 19: 18FOCUS ON:Capital Markets - theCha
Page 20 and 21: 20FOCUS ON:The Impact of Losseson t
Page 22: 22About JLT Risk SolutionsJLT Risk

Energy Insurance Newsletter - October 2006 - JLT

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