Insurance Industry Told: Stop Writing Rubbish Business

LONDON, May 18, 2010 /PRNewswire/ -- Capacity will need to be cut and Lloyd's underwriters will have to 'stop writing rubbish business' in order for the market to maintain its profitability through the uncertain economic environment, Lloyd's chief executive officer, Richard Ward warned on the opening day of the Insurance Day Summit in London.

Describing 2010 as the 'worst and most challenging' year that Lloyd's had faced since he became chief executive officer of the market in March 2006, Ward said: " Every year I normally stand up on this platform and say it is going to be a tough year. There is a challenging investment environment and therefore we have to focus on underwriting profitability.

"Well, you might have accused me of crying wolf for the past four years but I don't think that will be the case this year."

"Don't talk to me about growing, talk to me about how you are going to shrink and make underwriting profit," he urged underwriters at the Insurance Day Summit.

Ward said that the market's large losses from the Chilean earthquake and the Transocean oil spill, combined with low rates and investment returns meant that it was faced with an uncertain outlook moving forward.

"We need to make money from underwriting profit but this has been dropping off since 2005," he continued. "It doesn't look too good moving forward.

"So what do we need to do? We need to stop writing the rubbish business. Cut it out. Focus on the good business where we can generate the profit.

"We have got to lose some weight. We need capacity to reduce so rates can go up and we need to get fit. Rest assured we have got our own Mr Motivator in the Lloyd's market in Tom Bolt [director, performance management, Lloyd's] who will make sure your businesses remain lean and mean to fit the challenging environment of 2010 and 2011. If we can do all that then the Room will remain a very profitable place to do business."

Ward concluded that the insurance industry had performed very well through the financial crisis, without the need to fall back on either government or taxpayer support.

"We've helped protect the economy during the crisis. Now it's time to protect ourselves," he concluded.

The Insurance Day Summit London continues today.

SOURCE Insurance Day