September 5th, 2012

Lloyd’s: What Will Success Look Like?

Posted at 1:00 AM ET

Matthew Day, Senior Vice President
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If Lloyd’s is successful in achieving the growth and diversification outlined in its near-term and long-term strategic plans, it can expect to capitalize on business opportunities in emerging market economies such as the BRIC countries (Brazil, Russia, India and China). Growth, however, will not necessarily be limited to these markets. Other countries in Southeast Asia, Eastern Europe and Latin America are experiencing strong growth and increasing insurance penetration, and these territories also present attractive opportunities for Lloyd’s.

To illustrate the potential of the emerging market economies, Table 1 illustrates PricewaterhouseCoopers’ (PwC) estimated ranking of the top ten countries’ projected GDP at purchasing power parity (PPP) in 2050 compared to 2009 levels. The shift towards emerging economies by 2050 is very evident, and it is interesting to note that the number of emerging economies in the rankings jumps from four in 2009 to six in 2050, with China and India expected to occupy the top two places. This reinforces the expectation that emerging markets will grow rapidly over the next few decades and stresses the importance of penetrating these markets and pursuing business growth opportunities. That said, these regions also potentially bring increased economic, regulatory and business risk, and Lloyd’s ability to manage this risk will be a test of the market’s developing enterprise risk management controls.

Table 1

lloyds-report-t1

Ultimately, the measure of Lloyd’s success in implementing its Vision 2025 strategy and its progress toward becoming a “United Nations of Insurance” will be illustrated by its penetration of emerging markets. Another key measure of progress will be how its diversity of income, capital and talent mirrors the global economy’s future state. Success is not a foregone conclusion since a number of peer companies have already redirected their focus to these emerging regions. Moreover, success will be not only measured in terms of premium growth, but also by Lloyd’s ability to attract a more diverse range of capital providers and further develop its talent pool. Arguably, Lloyd’s has less direct control over these two aspects.

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