Lloyd’s Reports Strong 2021 Half Year Results

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DATA ANALYTICS ‘THE HOLY GRAIL’ FOR INSURERS

LLOYD’S REPORTS STRONG 2021 HALF YEAR RESULTS WITH £1.4BN PROFIT AND 92.2% COMBINED RATIO

data analytics and let it be managed through a portal, and they then can use the insights delivered to differentiate themselves from the competition. But they have to start climbing that mountain from the very first percent by developing the basics, which are practically the same for every company.”

Data analytics, in that sense, will be a product for insurance companies that will need to be managed by business-minded professionals as opposed to strictly technical experts. It is the business-minded professionals, according to Raskin, who understand that “data is an asset that can be ameliorated over time” through targeted analytics.

“Analytics is the Holy Grail,” he stressed. “But to reach that Holy Grail, you’ve got to have the data, which is 70% of the effort. If you’re excelling with data, you will excel with analytics and you will gain a competitive advantage.”

Gross written premiums increased to £20.5bn (HY 2020: £20.0bn) due to an increase in premium rates, high customer retention and new growth for the first time in four years.

Premium rates increased by

9.9%, continuing the trend of 15 consecutive quarters of positive rate movement.

The combined ratio of 92.2%

(HY 2020: 110.4% and 97.0% excluding COVID-19 claims for FY 2020) is a solid improvement with a 4.8 percentage point reduction on the previous year, excluding COVID-19. These results demonstrate the substantial turnaround of Lloyd’s profitability and performance.

Lloyd’s continued to provide

significant support to its customers around the world, paying £9.4bn of claims, including to customers impacted

by COVID-19 where 80% of the claims notified to date have been paid.

Improvements to the combined

ratio have been driven by notable reductions to both the attritional loss ratio and the expense ratio. The attritional loss ratio of 50.5% (HY 2020: 52.6%), is a 2.1 percentage point reduction from the ratio reported for the first six months of 2020. The expense ratio of 35.8% (HY 2020: 37.7%) is a 1.9 percentage point improvement, and 3.7 percentage points improvement since 2017. The reduction in operating expenses remains a focus of Lloyd’s digital transformation programme.

Lloyd’s maintains strong capital

and solvency positions, with net resources increasing by £2.6bn to £36.5bn, reinforcing the exceptional strength of Lloyd’s

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DEFENDING AGAINST BILLION DOLLAR CLAIMS

• Engaging experienced lead counsel to ensure legal efforts are coordinated at the outset and to act as the central point of contact for all retained to assist in the defense of the insured. • Working with local, state and national authorities in the investigation of the incident. • Determining the best local counsel to retain and lock them in before others do. Discuss with them potential key players and issues to be addressed in the near future that may be jurisdictionspecific. • Retaining the best criminal attorneys in the local jurisdiction for consultation and coordination, if criminal charges may be involved. • Speaking with the insured and as many individuals/employees/ agents and witnesses as possible that could have relevant knowledge to help guide the investigation and determine key issues that may be raised. • Preserving critical evidence

and testimony for accuracy and establishing a solid chain of custody. • Identifying the expert specialties required and locking them in before they are retained by others. • Researching the jurisdiction where the incident occurs and the applicable law (possible multi-state application) to inform additional efforts.

STEP TWO: Engage a crisis management team so that you can control your part of the narrative. Undoubtedly, it will be a national or even an international story, and the insured’s ability to get in front of the story is critical.

Some important actions to consider here are:

• The court of public opinion is the jury, so engage an experienced crisis management or public relations team to manage events internally and externally. When potential jurors hear the matter years later, their initial impressions and memory of the incident will include your narrative, and contemporaneous public opinion can be used strategically to your advantage. • Events will move rapidly, so having a preselected stable of firms and teams is a smart strategy ‒ failing to plan is planning to fail. • Ensure that your public relations (PR) team has good relationships with key contacts in the media so that you have the pulse on the latest developments and will be given a fair opportunity to comment, if the legal team desires. It’s important that the PR team closely coordinates with the legal team and does not make any public statements without prior approval. Consult with the PR team about legal strategy and potential public perceptions to help adjust strategy and execution when it comes to court filings, hearings, and related litigation action and inaction.

STEP THREE: Define the defense strategy plan, or at least the key hypothesis of the defense strategy, and be focused and consistent in the execution of that plan. This will ensure that all teams are strategically aligned in the insured’s defense and eliminate competing approaches.

• The defense and crisis management teams must work together to create a clearly defined strategy as they play off and support one another.

Organization and coordination here is critical, from the big picture down to the details. • The strategy is the North Star of the defense and should be consistent and revisited periodically to ensure stakeholders are consistently updated and necessary tweaks are universally executed. • Engage the insurance tower from the beginning so that all levels of insurance support the strategy and are introduced to the legal and crisis management team, with key points of contact shared. • Schedule regular all-hands calls with the insured, defense team

Creator:Michael Marcovici, CC BY 3.0 <https://creativecommons.org/licenses/by/3.0>, via Wikimedia Commons

One Billion Dollars - It’s A Lot Of Money...,

and carriers so that everyone is apprised of rapidly moving developments and remains on the same page with opportunity for input by all. • Consider whether the insured has indemnity from other key parties and make demands to defend the insured as soon as practical.

Additionally, if opportunities to tender are available, explore these to help control the investigation and potential litigation. • Consider a joint defense agreement with other parties if appropriate.

STEP FOUR: Determine the insured’s exposure to better understand risk and evaluate strategy. The level of exposure or number of potential plaintiffs and defendants are key variables in adjusting the strategy. Determining exposure must be done holistically and precisely.

• Define victims, fatalities and injuries to assess damages. • Research media and social media for information on (1) victims to determine injuries and backgrounds, (2) potential witnesses that may be relevant to the investigation and likely litigation, and 3) other potential claims and claimants to incorporate into the exposure analysis. • Categorize injuries to inform damages and bifurcate plaintiffs. • Prepare a preliminary damages model, ideally automated so that it can be updated continually and optimized. • Based on these points, as best as possible determine potential exposure and note critical caveats and outstanding information that could impact the evaluation.

STEP FIVE: Create leverage for negotiations and fracturing plaintiffs. Understanding your strengths is key in improving your negotiation and settlement posture.