I was recently in a meeting with a broker and some actuaries. The discussion was about a particularly difficult risk and how to handle the placement of the excess insurance. Someone in the room made the suggestion, “Take it to Lloyd’s!” A wise person in the room asked, “Exactly what do you mean by, ‘Take it to Lloyd’s!’?”
Like many of you, I “stumbled” into this industry and have had a unique set of experiences. When I was an engineer, it seemed like most engineers had similar education and knowledge. When I worked in the finance industry, all of us “MBA types” were speaking from the same background. But, in our industry, let’s call it the “insurance/brokerage/risk management/actuarial industry”; everyone seems to have a unique set of experiences and background. This means there is always something to learn. Also, frequently, I find myself in conversations where topics or phrases are used that are familiar but not completely understood. So, when I hear one of these industry phrases that I think needs some clarification, I am going to tackle it here in the blog for the benefit of readers and myself!
In order to define what “Take it to Lloyd’s!” means, I thought I would interview a good friend to SIGMA and a Lloyd’s broker, James Calder of Price Forbes. One of our analysts, Katie Molitor, met James when she was working for a regional insurance broker on large trucking accounts. Since joining SIGMA in 2007, Katie has introduced the rest of us to James and his wealth of knowledge. We also share a mutual client. Here are some bullet points from a recent conversation with James when I asked him to define Lloyd’s of London or “Lloyd’s”.
- Lloyd’s is a market for risks where capacity and expertise is needed.
- Edward Lloyd set up his first coffee house in 1687.
- Lloyd’s is made up of 87 syndicates. Syndicates operate in a nature similar to insurance companies.
- “Lloyd’s” used to be a “catch all” phrase to refer to the place to go when you can’t get insurance anywhere else.
- The majority of business written at Lloyd’s is placed through brokers who facilitate the process. Lloyd’s brokers offer unbiased expertise. They have a comprehensive understanding and knowledge of which syndicates deal with which types of risks and can address a broad array of risks.
- Lloyd’s is a mature operation at the center of the global insurance market place.
- The independent Lloyd’s brokers, like Price Forbes, work with the independent brokers in the states. Some of the national brokerage firms tend to use London based affiliates. James thinks this may give U.S. independent brokers an advantage because they can select from several independent Lloyd’s brokers and find the one that serves their client’s needs the best.
- The independent Lloyd’s brokers have explored the market and know where the “best” markets are for given risks.
- Hazardous risks and accounts with complex exposures are typical types of accounts for Lloyd’s.
- Most of Price Forbes’ business is from the U.S. Price Forbes dates back to 1893.
- Price Forbes is a “gateway” to Lloyd’s.
1) What is a triggering event that compels a US based broker to contact you?
- Hardening of US rates and/or non-renewal of existing policy(ies)
- Inability of existing underwriters to adequately respond to clients’ specific needs
- Need for additional capacity in an existing program
- Need for greater flexibility in underwriting approach
2) What information are you looking for in a first conversation with a US broker?
- Operations of applicant
- Key exposures
- Limits required
- Coverage requested
3) After the first conversation, how do things typically proceed?
- Discuss internally to gauge market interest
- Collect pertinent data to create an underwriting submission
- Initial conversations with market leaders
- Relay results to US broker
- Client comes to visit underwriters
4) Other than price, what other factors might the US broker consider, on behalf of their client, when investigating insurance options?
- Coverage(s) available
- Financial stability of London market
- Knowledge and experience of brokers and underwriters
5) Can you share a recent success story with our blog readers?
- A major U.S. university was unable to obtain cyber liability due to the complexity of completing an application form. Their Chief Risk Officer came to London with their broker and, together, we arranged a series of exploratory underwriter meetings to discuss their challenges. Subsequently, we negotiated and bound coverage for the university on a unique ‘no application form’ basis.
In preparing this blog, I discovered that taking a risk to the Lloyd’s market is a more straightforward process than I expected. A Lloyd’s broker, like James Calder, is accustomed to working with US brokers and clients and is frequently in the US. James has visited our SIGMA office here in Brentwood and I have had several conversations with him. His knowledge itself is an asset to any broker and his connections and experience have been instrumental in solving some of our client’s challenges.
So, next time you are faced with a challenging risk, “Take it to Lloyd’s” and contact a Lloyd’s broker. If you are interested in contacting James Calder, he can be reached at +44 (0) 207 204 8484 or by email at JamesCalder@priceforbes.com
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