LONDON INSURANCE market Lloyd’s has shrunk its Irish business because of “predatory pricing” by insurers in this market, delegates at a Dublin business event heard yesterday.
Risk was being underpriced in the Irish market, Lloyd’s chief executive Richard Ward said in a speech at a Dublin Chamber of Commerce business lunch in the Conrad Hotel.
Lloyd’s is an insurance market where underwriters form syndicates to insure risks.
“We’ve shrunk our business here because we’re not in the business of being a charity,” Mr Ward said.
Speaking afterwards to The Irish Timeshe said that, quite often, businesses in the industry use insurance "to generate cash to invest".
“If that’s your business model that’s not quite insurance,” he said. “Strong investment returns can mask poor underwriting results. What we say to our market is ‘keep the two separate . . . make sure you make profits on your underwriting and on your investments’.”
Lloyd’s had a “near-death experience” in the late 1980s, when it almost collapsed under the weight of claims on policies. This, and subsequent major losses, led it to change its business model. It now takes a very conservative approach to managing its capital, (splitting it predominantly between cash and bonds), to ensure that it has the necessary funds to support its underwriting activities.
Lloyd’s country manager Eamonn Egan said that the business model of many of the leading players in the Irish market had been to strive for market share.
On the issue of Quinn Insurance, which was put into administration by the Financial Regulator, Mr Ward said that there was clearly a failure of regulation and he was glad that it was now being dealt with. “We don’t believe it’s in anyone’s interest to have risks priced inappropriately,” he said.
Lloyd’s has been operating in the Irish marketplace for more than 70 years, and its Irish client base includes a number of household names such as Ryanair, Aer Lingus and the GAA.
It is currently trying to assess the extent of its exposure to the postponement of the US leg of U2’s 360° tour after the band’s lead singer Bono underwent back surgery.
“The Irish broking arrangement that they had, placed a lot of the business into the Lloyd’s market for their tour abandonment cover,” Mr Egan said. However U2 have since changed promoter, and it is unclear whether the policies are still underwritten by Lloyd’s and what the resulting exposure might be.
Meanwhile, Lloyd’s estimated yesterday that its net claims arising from the Deepwater Horizon oil spill in the Gulf of Mexico stand at between $300 million and $600 million.
