Chief Executive Officer's statement

As we approach the second quarter of the 21st century, the headline threats are familiar: extreme weather events, large-scale disasters, economic shocks and geopolitical instability. What's changing is the tempo – driven by new dynamics including climate change risk, the advent of AI, increasing social unrest and outsized liability awards, or 'nuclear verdicts'.

Add to that a web of interconnected risks – cyber, supply chains, capital flows – and crises no longer ripple; they ricochet. Losses don’t sting; they hurt. Insurers must prepare for chain reactions, not just isolated events.

But risk and opportunity are two sides of the same coin. Greater volatility should drive demand for insurance. The push for economic growth should increase risk sharing, which has a catalytic effect on economic activity. 

And yet, insurance penetration is still too low. Product innovation isn’t keeping pace with the proliferation of risk. We must continue to make the case for the value insurance brings to the economy by innovating and distributing to those who would benefit most from the reduction in uncertainty insurance provides.

That’s why the role played by the Lloyd’s market matters more than ever. Lloyd’s is a marketplace that utilises the wisdom of crowds to price risk and share exposure. Our global network of people and licences allows syndicates to deliver coverage quickly, wherever it’s needed. Our balance sheet absorbs more risk per pound sterling of capital than any other financial institution.

And it's underpinned by dedicated Corporation staff working relentlessly to help the market deliver.

None of this works without trust. The sustainable risk-adjusted performance through the economic cycle is ultimately how the Lloyd’s market earns and retains that trust.

Over the first six months of the year, the Lloyd’s market delivered solid results in more normal major loss conditions:

• Gross written premium of £32.5bn grew at 6.2% in line with expectations 
• Pricing softened by (3.5)% on a risk-adjusted basis
• Underlying combined ratio of 82.1% was consistent with prior periods but will need to improve if the volatility of the portfolio continues to tick up 
• Major losses returned to long term trends, adding 10.4% to the combined ratio
• Reported combined ratio is solid at 92.5% 
• Investment return of £3.2bn (or 3.1%) was achieved through a conservative portfolio, providing stability amid turbulent economic conditions
• The market produced a creditable £4.2bn of profit for the half year

Claims paid by the market totalled £14bn driven by the California wildfires and aviation settlements related to the conflict in Ukraine, while cash returned to members was £4bn as previous profitable years closed. These two figures well illustrate the dual purpose of the market.

The Lloyd’s balance sheet remains very strong. Capitalisation is healthy. As a result, Lloyd’s is well positioned to absorb volatility and support growth.

That said, premiums in certain lines are falling at a concerning rate. In a market with elevated risk, reinvestment of profits and top-line targets are having a softening effect in certain wholesale-dominated sectors of the market.

The quality of underwriting decisions, especially among the market’s top-performing syndicates, has been maintained. But the quality of earnings must also be maintained. At Lloyd’s, underwriting discipline and vigilance are fundamentals to ensure sustainable returns; this is at the centre of our principles-based oversight regime.

To grasp the opportunity presented by the prevailing risk environment, Lloyd’s can take nothing for granted. Trust, efficiency, operational reliability, focus on core issues, and the ability to attract the best and broadest array of talent are features we must continue to improve – and, in some cases, radically.

In June, I made it clear that Blueprint Two, the re-platforming of the market to a resilient, cloud-based operational infrastructure, is a top priority. This work continues to be mission critical and I reiterate Lloyd’s commitment to this essential improvement.

Years of hard work by many talented and dedicated individuals have brought us closer to success than ever before. But progress in this type of project is rarely straightforward. The market systems handle thousands of messages a day, resulting in gross cash settlements of nearly a quarter of a trillion pounds annually. Therefore, it is imperative we take the care required for such a complex transformation to maintain the operational resilience of the market.

In taking responsibility for the Lloyd’s market, I required a clear picture of the status of Blueprint Two. I commissioned an in-depth, independent, expert-led analysis of the existing estate to get an objective view of the progress of the transformation projects. Because binding commitments require hard facts and a solid understanding.

I am grateful to DXC and Velonetic for the spirit and urgency of their engagement, and to the International Underwriting Association and the Lloyd's Market Association (LMA) for their trust, counsel and support. In partnership, we are establishing a framework to work through the issues and agree what the project will deliver and when. 

As chief executive I said 'openness' would be a watchword of my tenure. In that spirit I want to share the key findings of this review.

As such, I need to reset expectations around the milestones of market testing, dress rehearsals and safe cutover.

• Market testing will not commence before 2026. 
• When it does commence, due to earlier design choices, extensive testing is vital in order to verify that the re-platforming will deliver to the market’s needs. That process takes time and should not be rushed.
• As required, dress rehearsals and parallel runs will be conducted to provide assurance to the market before cutover. Again, this process needs time. 
• As a result, we do not expect the re-platforming element of Blueprint Two to be completed before 2028. 
• For this reason, we are committing to keeping heritage systems operationally resilient until at least 2030, so the market can be assured of long term stability.

There will be cost implications of this more realistic timeline. We have not yet completed the full assessment of what these may be and I’m therefore not able to share them with the market today. However, my expectation is that it will not require any further market levies or capital raises. This will be confirmed once the full assessment has been completed. I have committed to keep the Council and the LMA board updated quarterly on all aspects of this programme including past and future costs.

Completion will not automatically yield material savings to the existing cost base, as has been floated previously. But market participants will have more scope to compete on differing operating models.

I recognise that this update will come as a disappointment to many. I am fully aware that the market has waited too long for the delivery of this project. I acknowledge the challenges this has posed for firms seeking to plan their own technology initiatives with confidence.

The market asked me for transparency. Today I’m delivering that transparency on operational resilience.

However, we must be clear-eyed about the remaining challenges. A shared, open and honest view of the issues we face will allow us to collaborate and resolve them. I hope greater transparency on the Corporation’s part will at least alleviate the current uncertainty.

I am very grateful to our partners in this project who have worked with us at pace over the past 100 days. We need to continue to keep up the pressure and intensity in the coming weeks to finalise our agreements on governance frameworks and contractual terms. 

Lloyd’s role as a shareholder in Velonetic is to ensure that the programme is governed and overseen appropriately, representing the views of the market. The responsibility for regulatory and reputational risk now sits with me. It is a responsibility I and the executive team take very seriously. We will work tirelessly in partnership with the other shareholders and the LMA to deliver for the market.

The work to earn your trust begins today by being open and by avoiding making promises I cannot keep. This does not mean more communication and information. I’m not going to give a running commentary. I will provide concrete updates when I have new and credible information to share. I hope the next update will be a positive one, but I assure you it will be a substantive one.

At this point I must, therefore, ask not only for your continued patience but also for your support in getting this project over the line.

Our Chair has set a clear vision for Lloyd’s to be the preeminent global market for risk. We are working to provide the Council and the market with a strategy that can deliver this vision.

I want to thank all those who have taken part in what has been an extensive stakeholder engagement process thus far. It has been an invaluable exercise listening to your insights. My team and I will take time to absorb the findings before presenting final options to the Council and launching our refreshed strategy in March 2026.

I don’t want to pre-empt that process. However, some of the broad outlines of how we can improve Lloyd’s are already becoming clear.

When finalised, our strategy will be for the market. The Corporation will not dictate the direction of travel. We will help market participants get to where they want to go prudently but as efficiently as possible.

The overwhelming message from all those we have heard from so far is that the Corporation’s focus must be on facilitating sustainable and attractive returns on capital through the economic cycle.

I will deprioritise or end those activities which are not serving that purpose. The 'shadow costs' of Lloyd’s, which can result in higher cost or greater bureaucracy for market participants, must be reduced.

This can only be achieved by focusing on areas of advantage and ensuring oversight is principles-based and not unnecessarily overbearing.

This will result in a relentless and comprehensive focus on cutting the cost and complexity of operating at Lloyd’s. We will compete on quality of service and strategic offering. And, over time, the only difference between the cost of doing business inside and outside Lloyd’s should be the 1% charge for access.

We will only invest where we hold, or can build, a clear and demonstrable advantage. We will strive to increase the attraction and relevance of the Lloyd’s market by better tailoring propositions to specific stakeholder groups.

We will not pursue top-line growth. The size of the market will be an outcome, not a target.

We will look to extol the advantages of wholesale and new markets over the longer term. We will seek to expand the multiplying effect of our network to developed and developing markets alike. From geographies where we already have a strong presence, such as North America, the United Kingdom and Asia-Pacific, through under penetrated markets such as Europe and into expanding markets such as the Middle East.

Lastly, we must remain apolitical. Our neutrality is part of our value. In a world of strained trade relations, Lloyd’s licence network can be a safe harbour.

In the past six months, Lloyd’s has, as ever, been working hard to foster innovation, broaden our talent base and attract new sources of capital to strengthen the market.

Lloyd’s Lab continues to be a powerful engine of innovation for the market. This year, the Lab was named the UK’s leading finance start-up hub by the Financial Times and won Best Accelerator of the Year at the London Fintech Awards.

Investor appetite for innovative reinsurance structures remains strong, with £2.2bn of new capital coming through London Bridge 2 supporting new sidecar-style syndicates and reinsurance start-ups at scale such as Oak Re.

Our strategy to attract leading global insurers is also bearing fruit. Inwards interest in our market – both organic and M&A – is exciting. Convex began underwriting at Lloyd’s in the first half of the year, while Atradius, Coface and Santam all received approval in principle to establish syndicates, broadening the market’s reach into trade credit and African insurance.

All of these initiatives, and many more in the works, provide good illustrations of how Lloyd’s is committed to making progress at pace for the benefit of the market and the global economy.

These outcomes, supplemented by our emerging strategy, are how Lloyd’s will pursue our vision to be the preeminent market for risk in the world.

This is a solid set of half year results and the market is at a very exciting juncture. Lloyd’s is ready to meet the challenges ahead. My thanks to everyone across the market and to my colleagues in the Corporation for their contribution.

Patrick Tiernan

Chief Executive Officer