Back to Insights
The Growth of Enhanced Underwriting in the Lloyd's Market: The New Normal?
An extract from the Executive Summary
This report is an objective assessment of Enhanced Underwriting in the Lloyd’s Market, capturing viewpoints from market participants representing 77% of Lloyd’s 2023 GWP. It explores the current and future landscape of Enhanced Underwriting – assessing potential growth, impact on the market and how carriers and brokers are responding.
Driven by advancements in technology and opportunities inherent to the hard market, carriers are increasingly investing in tools and data to support underwriting decisions. Digital business models are not new in insurance — UK personal lines has been largely digital since the 2010s — but in the complex and specialty space, new digital and data-driven propositions represent a step change.
Defining Enhanced Underwriting
We define Enhanced Underwriting as propositions that use data and digital technology to enhance underwriting decisions, and propositions that have taken a new strategic approach to follow business. There are four distinct Enhanced Underwriting models, which split into risk-by-risk underwriting and portfolio underwriting.
In Augmented Underwriting, the human underwriter remains central to decision-making. Underwriters are assisted by data and algorithms which triage submissions, score the risk, and/or provide risk-specific insights to support them in their decision-making. Interviewees highlighted this would be key to a strong lead proposition in the future.
In Pure Algorithmic Underwriting, risk decisions and processes are fully automated, removing the human from decision-making. Examples include Ki, Aegis Opal and Canopius’ Vave.
Digital and Algorithmic Broker Facilities are digitised cross-class facilities. Examples include Howden ReThink and McGill’s Auton (the latter of which is about to go live). Other established cross-class facilities are ‘on the verge’ of digitalisation.
Active Portfolio Trackers provide follow capacity to outperforming books of business via quota shares and consortia. While identifying strong lead underwriting teams to follow is not new; the explicit strategic intent and focused economic model of these propositions is innovative. Examples include syndicates Beazley Smart Tracker, Nephila, and Hampden Risk Partners, as well as dedicated internal Portfolio Solutions teams across several other carriers.
This paper was written in collaboration with many, many market participants – including 85 full interviews and 130 surveys, capturing 77% of Lloyd’s GWP – in a very short eight-week period. Thank you to all of you who took the time to share your views with us and we hope this paper offers a balanced perspective on both the supporting and detracting viewpoints that were shared.
Please
click here to access the full report.