Keese says Lloyd’s has 12 billion pound net loss buffer; targets E&S opportunity

By Ryan Hewlett

March 10 -

• Lloyd's GWP up 6.5% to 55.5 billion pounds in 2024

• Lloyd's targets growth in E&S market after California wildfires

• Lloyd's can absorb 12 billion pounds net loss, Keese says

(The Insurer) - Lloyd’s top-line growth in 2024 has validated the corporation’s strategy of attracting new entrants at a time when rates have begun to moderate, chief financial officer Burkhard Keese told The Insurer.

“We grew in the lines of business where we wanted to grow in and it also shows that our commercial strategy works. I'm very pleased,” Keese said following a trading update which showed Lloyd's GWP was up 6.5% year on year to 55.5 billion pounds.

This reflected overall volume growth of 8.5%, 0.9 points of which was driven by new market entrants, with the rest from organic growth of the existing syndicates.

Kesse, who will be succeeded by Alexandra Cliff as chief financial officer from May 1, pointed to the Corporation’s strategy to encourage large global carriers to consider establishing a Lloyd’s presence.

Last year, both Aviva and Fidelis entered the market while AIG in January launched Syndicate 2478 with backing from funds managed by Blackstone. More recently, London-Bermuda specialty carrier Convex unveiled plans to launch Names-backed Lloyd’s Syndicate 1984 in April.

“This commercial strategy has delivered, once again, what we promised,” he said, while highlighting the positive impact of modifications last year to the freehold agreements at Lloyd's which are increasing syndicate appetite for third-party capital.

E&S market opportunity

Looking into 2025, Keese pointed to the potential for Lloyd’s to grow GWP in the E&S market, particularly in the wake of the devastating January 2025 California wildfires.

“I believe a lot of the admitted underwriting will go into the E&S market, because I think the admitted players are not very happy with the losses they had to take. The US E&S market is a smaller one for Lloyd’s but it's growing and growing, and when I talk to syndicates, they all want to participate in that market,” he said.

Lloyd’s disclosed an estimated net loss to the market for the California wildfires of around $2.3 billion. Keese noted that Lloyd’s was “indirectly impacted” by the event with the majority of its exposure coming through reinsurance.

Elsewhere, Lloyd’s delivered a combined ratio of 87.1 percent for 2024, a deterioration of 2.9 points on the prior year, while the underlying combined ratio, which strips out large losses, improved 1.4 points to 79.1%.

Lloyd’s can absorb 12 billion pounds a net loss

Kesse doubled down on the importance of the improvement to the underlying combined ratio in 2024. He said Lloyd’s can now absorb 12 billion pounds of net losses before it makes an overall net loss and 8 billion pounds of large losses before its combined ratio turns above 100%.

“This gives us a very strong underwriting margin to absorb really large losses in our current results. The underwriting margin of 20% that we currently enjoy is equivalent to an 8 billion pounds net loss, which is huge,” he said.

Keese noted that the additional circa 5 billion pound investment result adds a further buffer for Lloyd’s to absorb large losses before the “whole result turns negative”.

“We can basically absorb 12 billion pounds before we make a net loss in the current conditions,” he said. “We have underlying profitability and this is resilient. It means that we are now in. a position where even if we have a large event, we still should make money and earn costs of capital.”