Insurance is more important than ever in our unpredictable world
It is now one hundred days since I started my role as chairman of Lloyd’s, the world’s biggest insurance and reinsurance market. During that time, a series of devastating natural catastrophes has struck in the Caribbean, the US, Mexico and South Asia. As a result, governments, businesses and communities around the world are relying on Lloyd’s to help them rebuild their lives and livelihoods. From the Lloyd’s building in London, on any given day we pay out about $50m (£38m) in claims. Of course the last few weeks have been anything but normal. And these disasters remind us of our purpose at Lloyd’s and in the wider insurance market, which is to help governments, communities and people recover more quickly from disaster, by providing them with the financial resources they need.
The devastating impact of these disasters is also a reminder of the need for governments to be better prepared for the impact of climate change. Insurance cannot be a substitute for the preparations necessary to mitigate the impact of these disasters. But insurance has a very valuable role to play in the rebuilding work. What is emerging from these recent tragedies is the level of under-insurance that persists even in wealthy economies like the US. Governments must do more to promote the benefits of insurance to protect their citizens and must resist the temptation to raise taxes and build protectionist walls around the free movement of insurance capital. Lloyd’s is in the business of allowing governments to export their risks and we have already begun paying hundreds of millions to victims in the Caribbean and the US.
In fact, Lloyd’s has paid out over $90bn in claims over the last five years, and the great majority of these claims have been paid in support of disasters thousands of miles away.
So advocating loudly for the value represented by insurance, and to argue against protectionism and excessive taxation that result in under-insurance and hardship, must continue to be a priority for Lloyd’s.
Notwithstanding the continued strength of Lloyd’s, which was highlighted in last week’s interim financial results, a second priority must be to continue to address the very significant inefficiency that persists in commercial and wholesale insurance markets. All market participants must work to change that. The London market has modernisation programmes and it is imperative these are implemented quickly.
A third priority is to continue to promote and protect the distribution of our products globally: to protect the licences we have in over 200 markets; and to seek licences in new markets. That is why we welcome the Prime Minister’s words about wanting to reach agreement with the EU on issues including transitional arrangements and immigration.
A fourth priority is innovation. Technology is creating new risks and we must develop products that respond to these risks. Lloyd’s rightly has a global reputation for its leadership role in innovation in insurance. But the industry itself is not yet innovative enough. Lloyd’s is a leader in the development of cyberrisk protection policies, but other new products are needed.
If Lloyd’s did not exist today, no one would invent it, and yet it is a brilliant invention that has shown a capacity to adapt, to change and to grow for more than 300 years.
Our ability to respond effectively in times like these is what sets us apart. As I write, teams of people from the Lloyd’s market are helping communities and businesses. And I believe that by continuing to invest in improving the market’s processes; to advocate for the free movement of insurance capital; and to promote a culture of innovation, we will enable Lloyd’s to go on fulfilling our purpose of helping our clients rebuild their lives and livelihoods after tragedy has struck.