The waiting list for an insurer to get a spot on the underwriting floor of Lloyd’s of London is the longest in its 327-year history, indicating record demand for access to the market.
Lloyd’s has requests for about 160 so-called box seats, where underwriters and brokers negotiate policies face-to-face, from insurers seeking to join or expand as the market moves into more countries, a spokesman said. It comes even as surplus capital places pressure on reinsurance prices in one of the past decade’s quietest years for catastrophe losses.
“The Lloyd’s brand is very powerful,” Barrie Cornes, an analyst at Panmure Gordon & Co. in London, said by telephone. “Distribution is a very big attraction, along with the access to business you get whilst sitting in the Lloyd’s building.”
Gaining access to Lloyd’s has helped drive acquisitions this year and counters suggestions from some brokers that the world’s oldest insurance market should update the way it operates, largely unchanged since the 17th century. The industry is no longer a “shoe leather business,” John Cavanagh, chief executive officer of Willis Re, said last month in Monte Carlo.
Lloyd’s underwriting room is spread across four floors in the iconic Richard Rogers-designed building on London’s Lime street with 2,900 seats for insurers. Chairman John Nelson said in an interview in Monte Carlo last month that the “huge pressure” for more seats has raised questions of whether they should expand onto a fifth floor.
This comes as Lloyd’s pretax profit dropped 28 percent in the first six months of 2015 to 1.19 billion pounds ($1.8 billion). The combined ratio, a measure of underwriting profitability, also rose to 89.5 percent from 87.4 percent, indicating a deterioration.
Today, insurance brokers at Lloyd’s can still walk up to an underwriter with their client’s details recorded on a slip of paper. If the underwriter agrees to cover the risk, a premium is agreed and the slip signed. If the underwriter only insures part of that risk, the broker will then approach other firms until the rest of the risk is covered.
Lloyd’s is licensed to operate in more than 200 countries and territories with the majority of business placed through insurance brokers like Willis Re. Lloyd’s global reach as well as its access to intellectual capital has helped to spur several deals, culminating in MS&AD Insurance Group Holdings Inc.’s record $5.3 billion takeover of Amlin Plc last month.
Beazley Plc, Hiscox Ltd., Lancashire Holdings Ltd. and Novae Group Plc are among the last publicly traded Lloyd’s insurers and are considered by analysts as possible takeover targets. Catlin Group Ltd. and Brit Plc agreed to merge with overseas competitors this year.
“The brand, distribution and the licenses around the world is very powerful,” said Panmure Gordon’s Cornes. Lloyd’s has “generally restricted membership and that’s why you are seeing a number of companies looking to buy their way into the club via acquisitions.”