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Risk Management – The view from Lloyd’s. Andrew Gurney – Manager, Risk Analysis Risk Management Division, Lloyd’s 13 October 2004 – ISDA/PRMIA Seminar, London. Managing Agents (45) Syndicates (66). The Lloyd’s Market in 2004. Corporation. Lloyd’s Brokers (168). CLIENTS. MEMBERS.

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Risk management the view from lloyd s l.jpg

Risk Management – The view from Lloyd’s

Andrew Gurney – Manager, Risk Analysis

Risk Management Division, Lloyd’s

13 October 2004 – ISDA/PRMIA Seminar, London


The lloyd s market in 2004 l.jpg

Managing Agents

(45)

Syndicates

(66)

The Lloyd’s Market in 2004

Corporation

Lloyd’s

Brokers

(168)

CLIENTS

MEMBERS

Reinsureds

Corporate Groups (649)

Commercial

Individuals

(Unlimited Liability Members)

(2,045)

Members’

Agents

(4)

Service Companies

Individuals(Limited Liability Members) (1,402)

Personal

BUSINESS FLOW

CAPITAL PROVISION

Source: Lloyd’s


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Trends in syndicates & managing agents

2004 average syndicate capacity £227m

2004

1983

Source: Lloyd’s


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7%

8%

Geographical source

Property

Casualty

36%

9%

Marine

Direct

48%

Aviation

52%

Reinsurance

Motor

11%

Energy

29%

3%

5%

8%

North America

UK

12%

45%

Europe

Asia Pacific

Latin America

Africa/Middle East

27%

Business mix: 2004 year of account

Class of business

Source: Lloyd’s, analysis of 2004 franchisee business plans


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Franchise Goal

“To create and maintain a commercial environment at Lloyd’s in which the long term return to all capital providers is maximised”

Lloyd’s Franchise Board


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Franchise Board – Strategic Aim

  • Outstanding risk management capability


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Risk Management

  • Position within the Franchise

    • Governance

    • Competency

    • Capability

    • Resource


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Key Focus areas

  • Develop a risk management framework

  • Raise risk management awareness & capability

  • Benchmark the standard of risk management

  • Improve the accuracy of market level loss estimates


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  • Actual Losses

  • Identify and measure internal and external losses & near misses

  • Classify

  • Analysis

Franchise Risk Management Framework

Risk Strategy

Objectives, Vision, Risk Policy, Appetite, Organisation & Governance Structure, Risk Glossary

Risk Groups

Business Strategy Credit Capital Liquidity

Financial MarketInsuranceRegulatory Operational

  • Risk and Control Assessment

  • Identify & assess

  • - Risks

  • - Controls

  • - Processes

  • Measure (qualitative & quantitative)

  • Appetite

  • Owners

  • Key Indicators

  • Key risk indicators

  • Key control indicators

  • Key performance indicators

  • Environmental monitoring

  • Stakeholder monitoring

Action Plans

risk environment


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Lloyd’s Risk Framework

  • Initial workshops

  • Iterative follow-up

  • Quarterly Franchise Risk & Control Assessment

  • Oversight and challenge

  • Risk Management Assessment


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Raising Risk Awareness

  • Risk conference

  • Risk forum

  • Workshops

  • Communication

  • Risk Management Assessment


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Risk Management Assessment

  • Capability Survey

  • Control self assessment


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RDS Guidance and Instruction

  • Issued in April 2004

    • Key sections

      • Definitions

      • Calculation Principles

      • Recommended Best Practice

      • “Event Subset” Submissions

      • Scenarios and Events

    • Available on Risk Management Website

      • www.lloyds.com/riskmanagement


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Scenarios and Events

DE-MINIMIS SCENARIOS

1 USA Windstorm

2 Marine Event

3 North Sea – Loss of Major Complex

4 Aviation Collision

5 Major Risk Loss

6 Satellite Risks

7 Liability Risks

8 Political Risks

9 Alternative RDS: A

10 Alternative RDS: B

SPECIFIC SCENARIOS

11 Second Event

12 Florida Windstorm

13 California Earthquake

14 New Madrid Earthquake

15 European Windstorm

16 Japanese Earthquake

17 Terrorism


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Conclusions

  • Next steps and key challenges

    • ICA reviews

    • RDS Overhaul – stage 2

    • Risk Management Assessment – feedback

    • Risk Management Capability Model

    • Competency framework

    • Continued training, education and assistance

    • Embedding risk management throughout the Franchise