LONDON: Lloyd’s of London posted a fall in profits in the first half of 2015, down from 1.65 billion pounds (2.55 billion U.S. dollars) in the first half of 2014 to 1.19 billion pounds now.
The fall in profit at the specialist market for insurance and reinsurance was against the backdrop of difficult trading conditions, which have seen low interest rates reduce investment returns and increase competition on insurance premiums around the world.
John Nelson, chairman of Lloyd’s, told Xinhua on Thursday morning as the results were unveiled, “We have got two things going on – one is there is enormous competition in the insurance and reinsurance market. In the first half we went through a period of extremely difficult investment conditions which accounts for the majority of the drop in profits for the market.”
Last year and its better profits, was an exceptional year said Nelson, with a return on capital of 16 percent and in addition there were very low numbers of claims.
Nelson said he foresaw a continuation of the competitive conditions. However, he said that at some point investment returns and interest rates will improve, which “would tighten up capital and that means there will be more competition for capital away from insurance”.
Lloyd’s had made progress in the China market. Nelson said that the Shanghai hub was now well established with 22 managing agents on the platform out of the total of 57 operating at Lloyd’s. In addition, Lloyd’s gained a licence to open a Beijing office, which would allow it to get closer to the major carriers in the reinsurance business.
“We think that our business this year on a run-rate (performance extrapolated into the future) basis is going to double and that is admittedly from quite a low base but the rates are high.”
He added, “This is a combination of circumstances. The Lloyd’s platform is seen to be very attractive to our carriers because it is a domestic reinsurance platform mainly, in China. It is a very good platform to grow your business in China. It has become more popular partly because of regulatory reasons. We have seen a lot of regulations which mean carriers want to be domestic.”
