The Lloyd’s market announced that it expects to have the capacity to underwrite £13.7 billion ($26.5 billion) of business in 2005. The amount in pounds sterling represents a 9 percent overall decrease from last year’s capacity of £14.7 billion.
In U.S. dollars it actually represents a slight increase over last year, which at the time was around $24 billion. The steep decline in the value of the dollar against the pound, around 20 percent, creates somewhat of an anomaly, as Lloyd’s does more than 38 percent of its business in the U.S.
CEO Nick Prettejohn has frequently indicated that Lloyd’s intends to make profits on underwriting, and is prepared to lose market share in order to do so. The decrease in capacity puts teeth in that pledge.
The announcement, which is still subject to formal adoption, follows detailed discussions with each business in the market about their plans for 2005 and approval of those plans under Lloyd’s franchise arrangements. Prettejohn commented: “Under the new franchise arrangements, businesses at Lloyd’s have to take a hard look at how much business they plan to write in the coming year. Given current market conditions and the focus on delivering underwriting profit, it is a positive sign that there has been a decrease, not an increase in capacity at this point in the insurance cycle.
“Capacity is a function of planned activity. Just as important will be the amount businesses actually write during the year, taking account of market conditions as the year develops. We will be monitoring this closely.
“The fundamental financial strength and attractiveness of this market have both been underlined this year. Striking examples of this were the market’s ability to ride the worst US hurricane season for a century, and the success of our recent debt issue.”
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