Lloyd’s of London is a fantastic brand, not just in the UK, but globally. How underwriters and brokers transact in the famous “underwriting room” remains one of the most unique business models in financial services.
Lloyd’s is the most iconic home-grown British financial institution with a strong heritage dating back to 1686. Unlike other financial industries such as investment banking, which is dominated by foreign entities, non-life (re)insurance is one of the last financial industries in which the UK holds a pre-eminent position.
Lloyd’s has built a reputation as the ultimate risk taker and can still achieve profits from practices that emerged over three centuries ago at the heart of the City of London. Historically, Lloyd’s can only write risks through Lloyd’s licensed firms (i.e. Lloyd’s broker) – this is controversial at the moment. It’s the healthy arguments and negotiations between underwriter and brokers that keep Lloyd’s a relatively profitable institution. This regular intellectual battle is fundamentally important for Lloyd’s overall success.
However, the level of this intellectual sparring has been reduced over the past decade. There has been less “bespoke” underwriting due to the mega-facilities by the larger brokers which involve portfolio, rather than individual risk, underwriting. Excessive leverage on trading volumes and forcing underwriters to give cover under “blind agreement” is unhealthy to the market. This practice is therefore strictly monitored – particularly with the recent heavy losses that have hit the Lloyd’s market.
Lloyd’s Asia
Singapore created its own Lloyd’s market called Lloyd’s Asia back in 1999. When I arrived in Singapore in 2009, there were only a few syndicates but this number increased rapidly from 15 to 22.
At first, I was running around at Lloyd’s Asia as you do in London. However, most syndicates were demanding advance appointments as the culture of Singapore is only to agree to a meeting with a prior appointment. Nevertheless Lloyd’s Asia still exists – but there isn’t much uniqueness about it. Lloyd’s Asia is clearly not a trading floor and does not have the vibrancy of the Leadenhall Market traditions.
I wonder why Lloyd’s syndicates are all in the same building without visible synergies in Singapore? In my opinion, Lloyd’s syndicates in Singapore are working independently and are not functioning as a “market”. In fact, most brokers see a syndicate at Lloyd’s Asia as another insurance company. It is also not a truly subscription market, where a lead syndicate underwrites a risk led by other follower syndicates. In London, Lloyd’s operates more like a society and syndicates also proactively exchange views on risks and support each other.
Fundamentally, a clear issue is that most underwriters need to refer risks to London. This needs to be rectified should Lloyd’s Asia intend to operate as a standalone entity rather than a branch of Lloyd’s of London.
A more attractive trading place
Underwriting authority needs to be in Singapore and there must be daily transactions between brokers and underwriters. Otherwise, Lloyd’s Asia will not be an attractive trading place. Leaders/heads of a syndicate should stay for a short period of time ideally having been seconded from a London-based headquarters and return after completion of the secondment. There is then an opportunity to bring this knowledge back to London and to the Lloyd’s of London marketplace as a whole.
Lloyd’s syndicates ought to spend time reviewing and analysing how they established a dominant position in the world in the first place, and what is the strategic advantage of replicating the model in Singapore where demands from fast growing Asian economies are serviced. If underwriters need to refer back to London too frequently, transactions slow down and the Lloyd’s market loses its attraction and appeal.
Syndicates should only establish a presence in Asia having studied all these factors. If one doesn’t give sufficient underwriting authority to the local practitioners, it will fail to attract quality business.
This article is written by Hiroki Miyamoto, chief executive of UIB Asia Reinsurance Brokers; he is based in Singapore.
-
Claims: Same asset, different market: why regulatory fragmentation changes how insurance responds in Asia
- October 5
Asia’s insurance market comprises many countries, each operating under its own rules, practices and market norms. These differences influence not only how insurance is placed, but also how it performs when tested by a loss. Commentary on Asia’s compelling growth story can sometimes overlook the complexity and distinctiveness of the individual markets that make up […]
-
Infrastructure: Data centres are racing ahead of the rules built to insure them
- September 21
Data centres have become a defining infrastructure story of the AI era, particularly in the Asia Pacific region. A single hyperscale facility can now draw more than 100MW, and in Malaysia alone roughly 13GW of data centre capacity is either planned or already under development. Behind every one of those numbers sits a construction and […]
-
Risk management: Insurance lessons from one of China’s deadliest industrial accidents in recent years
- July 20
The explosion at a Chinese fireworks factory at the start of May is a reminder that the true value of an insurance program is tested not when a policy is purchased, but when catastrophe strikes. The fire at the Huasheng Fireworks Manufacturing and Display Company in Liuyang, Hunan province, claimed 37 lives, injured 51 people, […]
-
Insurtech: 6 AI trends reshaping the industry
- February 25
AI has become the defining technology of our time, entering the hands of everyday consumers and employees faster than any innovation in recent history. The speed of adoption has been remarkable, mirrored by an equally intense wave of hype, but real business impacts are beginning to surface. What was once the domain of specialised data […]
-
Zurich | Why resilience will define the winners of Asia’s clean energy transition
Planning for future conditions from the outset can improve operational reliability, reduce potential disruption and protect long-term asset value.
-
Sedgwick | Captives in Asia: From Niche Solution to Strategic Risk Platform
Captive insurance has evolved from niche tool to strategic risk infrastructure in Asia, with connected claims data seen as key to unlocking its full value.
-
BlackRock | Rethink the rules: how TAA and ETFs are reshaping portfolio construction
BlackRock's Daniel Caderas and MSCI's Raman Aylur Subramanian explain why tactical asset allocation (TAA) and exchange-traded funds (ETF) have become essential as global markets fragment and static allocations lose their reliability.
-
BlackRock | Infrastructure comes of age for insurers
Are insurers capturing full value from the asset class? BlackRock shares its perspective.
Hiroki Miyamoto, UIB Asia Reinsurance Brokers
How Lloyd’s Asia can improve: a broker’s perspective
Hiroki Miyamoto, UIB Asia Reinsurance Brokers