Lloyd’s Strategy 2011-2013

January 2011

© Lloyd’s2

Lloyd’s vision

Key Characteristics

A subscription market backed by mutual security A broker market; brokers are Lloyd’s distribution arm and are critical to its

ongoing success A London-based international business Diversity across all aspects of the market

Role of the Corporation

To undertake the overall risk and performance management of the market To maintain and develop the attractiveness of the market

“ To be the market of choice for insurance and reinsurance buyers and sellers to access and trade specialist property and casualty risks.”

© Lloyd’s3

The principal challenges in Lloyd’s competitive environment remain broadly the same as last year

Maintaining market performance

Maintain the attractiveness of London as the leading centre for specialist (re)insurance

Maintain the attractiveness of Lloyd’s compared to other specialist insurance centres

Maintain access to changing business flows and distribution

A changing supervisory and regulatory environment

© Lloyd’s4

Given the stable competitive environment, the market's strategic priorities for the plan period remain the same Maintain and develop the attractiveness of the Lloyd’s market

Maintain and promote the competitiveness of London as a financial services centre

Continue to improve the efficiency of business flows and placement, accounting and claims handling

Protect Lloyd’s capital and licensing advantages against an evolving regulatory landscape

Resolute focus on underwriting discipline and risk management

Continued application of performance management framework

Ensure high quality risk management developed and embedded at individual and aggregate levels

© Lloyd’s5

Corporation priorities for 2011

Market Oversight

Solvency II The Exchange

Claims Transformation

Access to Business

© Lloyd’s6

Lloyd’s strengths need to be maintained, and in some cases, further developed

Market Oversight

Given the current state of the insurance cycle and need to avoid syndicate failures wherever possible, the Corporation will emphasise its challenging business partner role

Brand & Reputation

Maintain the strong position of the Lloyd’s brand, protecting against any risks arising from negative perceptions of the wider financial services industry or the actions of managing agents as they grow and develop their own brands

Access to business

Ensure Lloyd’s international licence network and London location continue to provide access to significant flows of specialist (re)insurance business

© Lloyd’s7

Lloyd’s strengths (cont.)

Capital Efficiency and the Chain of Security

Lloyd’s capital structure provides financial security to policyholders and capital efficiency to members

Mutuality and market cohesion

The layer of mutuality represented by the central fund underpins Lloyd’s capital strength, licences, ratings and the market’s reputation for claims payment. It also provides market participants with a common interest, helping to make the market more influential than the sum of its parts

Subscription market

The subscription market remains a key characteristic of the Lloyd’s market and operates to the benefit of market participants

Solvency II remains a major priority over the plan period and underpins many of Lloyd’s strengths

© Lloyd’s8

Lloyd’s strengths (cont.)

Diversity in market composition

Diversity is an important characteristic across all aspects of the market and is desirable from a risk management perspective and in Lloyd’s offer to its clients and stakeholders

Underwriting expertise and innovation

Lloyd’s has a reputation for underwriting expertise and product innovation

Ratings

Lloyd’s ratings – independent opinions of Lloyd’s financial strength and ability to meet ongoing insurance policy and contract obligations – remain at the market’s target level

© Lloyd’s9

Areas of focus: Market Portfolio DiversificationThe Lloyd’s market portfolio has some notable areas of concentration

Product – a gradual shift towards catastrophe business over the past decade

Geography – heavily focused on North America and the UK

Response

The response to these trends is unchanged. It is for managing agents to decide on their business mix

The Corporation will support that activity through its market development activity;

o Promoting Lloyd’s in established and emerging markets

o Pursuing distribution initiatives

o Securing regulatory access to new markets in response to market demand

© Lloyd’s10

Areas of focus: Distribution Model

Lloyd’s is a broker market

This model continues to serve the market well

The consolidation of brokers continues, both in Lloyd’s and the wider industry. This concentrates much of the flow of business to Lloyd’s with a small number of brokers

Response

Broker relationships – the importance of brokers and the need for mutually beneficial relationships between brokers, managing agents and the Corporation is unchanged

Coverholders – delegated authority arrangements continue to be an important part of Lloyd’s distribution model, subject to appropriate controls

Routes to Market – the development of deeper relationships with local producing brokers and continue efforts to improve processing and operational efficiency remain important

© Lloyd’s11

Areas of focus: Market modernisation

Market modernisation is about changing the way business is processed. The guiding principles are:

To improve market efficiency and give more choice around how to operate

To reduce cost and risk

Response

A number initiatives will deliver key aspects of Lloyd’s future operating environment:

Enabling Initiatives Lloyd’s Information and Reporting Project Information Use and Management The Exchange

Future Processing Model (including Claims Business Systems Options)

© Lloyd’s12

Lloyd’s faces challenges in the medium to long term in ensuring it continues to meet its need for talent

Response

Continue to work with the Lloyd’s market bodies and other industry groups to promote the industry, and specifically Lloyd’s, to potential employees

Where appropriate, to lead initiatives to attract and develop talent for the benefit of the market as a whole

To attract and develop the appropriate skills and expertise to allow the Corporation to deliver its role efficiently

Areas of focus: Market talent

© Lloyd’s13

Visit lloyds.com/strategy for more information

© Lloyd’s14