Lloyd’s of London is to give staff earning less than £75,000 per year a £2,500 one-off payment later this month to help with surging inflation.
Chief Executive John Neal told City A.M. this morning that it was set to be a “pretty rotten winter” and “as employers we’ve got an obligation to think, to care and to look after our employees.”
Neal was speaking after the insurance marketplace announced a bump in underwriting profits in the first half of its financial year to £1.2bn, up from just shy of £1bn in the first half of 2021.
The firm also saw a fall in the combined ratio, where a drop is a measure of increased profitability for insurers, despite what Lloyd’s called “a challenging year of natural catastrophes, the invasion of Ukraine, inflation and other geopolitical factors.”
Neal said Lloyd’s and the insurance industry at large had shown its value during a difficult 12 months on the global stage.
“There are points in time in history when insurance matters, and uncertainty is really critical to that way of thinking,” he said.
“When you think of financial crises, when you think of systemic risk and the issues from Covid-19, or dare I say it appallingly Russia invading Ukraine, that creates a crisis of confidence for customers and businesses and that’s when as insurers we’ve got to lean in.”
WAR AND SANCTIONS
Neal said that the firm had placed £1.1bn in reserve for claims related to the war in Ukraine, but warned the “manifestation of claims is going to take a long, long time.”
However Neal said he felt as if “we’ve got our arms around the financial consequences of it and it’s not that difficult for us to manage financially.”
There had been fears early on the crisis that losses related to the war could be systemic for the marketplace and some syndicates, particularly when the Russian government expropriated hundreds of foreign-owned aircraft, but the firm said yesterday in its results presentation that it expected the war to be a “major but financially manageable event (with) no concerns for capital or solvency at a Lloyd’s or syndicate level.
Neal said the job of insurers would be easier if global governments could join up their responses to the Ukraine crisis, with Lloyd’s sitting at the heart of the sanctions regime.
“The challenge is really understanding what governments do and don’t want us to do. The respective sanctions being imposed in the UK versus Europe versus the US is head in your hands, let’s get this right, let’s understand what’s needed,” he said this morning.
“And then you’ll get obvious requests in the middle of it to say can we affect and allow the transportation of Ukrainian food and Ukrainian fertilisers? The answer is yes, of course we can, but administratively it becomes complex.”
Lloyd’s underwrote the passage of Ukrainian grain ships in the middle of this year, but Neal said it would be “helpful” if the sanctions regime was clearer and more aligned.
Neal said the balance sheet was “rock solid” and the strongest it had been in 300 years, though Lloyd’s did record a paper loss of £1.8bn due to rising interest rates creating unrealised mark-to-market losses.
Lloyd’s were keen to stress this morning that its investment maturities are short dated and therefore the market will begin to feel the benefit from higher interest rates in 2023.