Lloyd’s of London offers insurance through 94 syndicates that spread risk across 57 managing agents. The number of managing agents rose by almost 10% in just 4 years between 2010 and 2014. But it is not just the number which is growing, so is their relative size.
The rush of capital towards insurance has increased competition, pushing premium prices lower. In 2014 the market wrote coverage worth £25.3bn, down £0.3bn on the previous year. Lloyd’s of London had a combined ratio (measuring claims and other costs against premiums earned) rise from 87% to 88%. Any percentage under 100 suggests an insurer is profitable. This makes the strength of the managing agents therefore even more impressive.
In May 2015 XL Group acquired Catlin, the largest managing agent at Lloyd’s (measured by gross written premiums). XL Catlin is now reaching 10% of the Lloyd’s Market, which is significantly bigger than the next competitor.
The combination of challenging market conditions and a pattern of consolidations has put the traditional business models under threat. Those within the industry believe that the competitive nature of the market is increasing, compressing operating margins and therefore will ultimately lead to further consolidation.
Although Lloyd’s must approve all takeovers of companies with operations in the market, alongside the financial regulators, consolidation still looks to be the trend. However Inga Beale, the chief executive of Lloyd's has said the group would put the brakes on consolidation if it led to one underwriter controlling more than 15pc of the overall market. Nobody has been discussing takeovers of that magnitude.
So what does this mean for hiring? In 2013, London Market companies employed an estimated 34,000 people (full-time equivalents) in London. 21,000 of those within London Market risk carriers, Lloyd’s managing agents and Lloyd’s. Interestingly 45% of the London Market’s employees are female. This equates to the UK national average.
There has always been an element of apprenticeship style learning in the London Market. This model has preferred training on the job and has been an effective way to accelerate employment without the need for higher education. But as the requirement for analytical capability increases in the market, things are already changing, with differing skill sets being required
If the growth continues and competition remains strong, then there is likely to be a growing number of opportunities within the sector. If on the other hand managing agents continue to consolidate, there are likely to be fewer roles and the sector will become squeezed.
Of course this assumes that the focus is on London. Internationally the picture is different. As an example, Lloyd's currently has nine managing agents in its Dubai office, with plans for as many as 12 firms by the end of 2015. If this global growth is seen, then there could well be an explosion in job opportunities. The issue for many would then be whether they would be prepared to relocate. This subsequently opens up a number of concurrent opportunities. Firstly for new entrants, but also secondly for people who may wish to change industry. We could see one of the biggest change in employee mixes for a generation.
The growth of managing agents is clearly the first step in a bigger change within the industry. What is definitely certain is that much is in fact uncertain, however the impact and effect on staffing within the industry could be unprecedented.