December 2015

Inside This Issue

1 Overview

2 Syndicate Forecasts

7 Broker Strategy

9 VW Emissions Scandal

10 Tianjin

11 BHP Billiton

12 Storm Desmond

13 Whiplash Claims

14 Tom Bolt

Quarterly Review Argenta Insurance Research Limited

Happy Christmas to all our readers and a prosperous New Year!

The Atlantic Hurricane season is deemed to run from 1 June until 30 November. On 1

December a press report duly noted that the season had ended, with a decade having

now passed since a major hurricane made US landfall.

We have had constant reminders that the results have been good (for a number of years

better than expected), and that the open years 2013, 2014 and 2015 look promising. All

of which is in stark contrast to the current market conditions where surplus capital and

the absence of major losses has created downward pressure on rates, with the erosion of

terms and conditions. In short, a soft market which shows no signs of coming to an end.

In the recently reported third quarter results, few of the insurance market analysts had

much to say on pricing - perhaps because the predictions were so little changed from the

previous quarter. Overall, modest rate decreases were expected across most commercial

lines, likely resulting in a core underwriting margin contraction in 2016. Investment

income remains low and uncertainty persists as to how much longer reserve releases will

bolster overall returns. The good results have been due largely to profitable underwriting

and everyone is aware that a return to a more ’normal’ loss frequency and size will erode

those reducing margins very quickly.

When Lloyd’s published its results for the first half of 2015 in September, the statement

from the Chairman and Chief Executive, whilst noting that Lloyd’s had achieved ‘solid’

results, highlighted the difficulties to come.

‘Looking ahead, market conditions globally, combined with the investment outlook mean

that the pressure on financial performance for Lloyd’s will be as intense in the medium

term as at any time over the last decade. We should expect that an extremely challenging

time lies ahead.’

Contact Details

Jeremy Bray jeremy.bray@argentaplc.com T +44 (0)20 7825 7174 Andrew Colcomb andrew.colcomb@argentaplc.com T +44 (0)20 7825 7176 Robert Flach robert.flach@argentaplc.com T +44 (0)20 7825 7179 Argenta Insurance Research Ltd Fountain House 130 Fenchurch Street London EC3M 5DJ www.argentaplc.com

2

In this issue, we begin by reviewing the Syndicate Forecasts as at Quarter 3 (30

September 2015) (Q3). The good news is that results for the open years are holding up

well and the 2015 year of account in particular has some encouraging loss ratios so far.

We also look at premium income targets for the current year and express some

scepticism that certain targets will be reached. Although this might result in a lower profit

as a percentage of capacity, this is greatly preferable to underwriting the business at the

wrong (too low) price.

In addition, there is evidence that syndicates continue to reserve prudently, thereby

allaying fears that reserve releases could dry up in future years.

We also dwell on a number of recent loss events, including the VW emissions scandal and

the explosion in the port of Tianjin, and the ways in which insurers and Lloyd’s syndicates

might be exposed to claims – generally not to the extent originally feared.

For those interested in the mechanics of the Market and how it might be changing, we

consider in ‘Broker Strategy’ how the soft market is affecting the way in which business

reaches underwriters, which could lead to a permanent structural change in the Market.

Finally, we note that Tom Bolt will be stepping down as Lloyd’s Director of Performance

Management in mid-2016. As Lloyd’s CEO Inga Beale noted, in his seven years at the

corporation he has worked ‘…losely with the underwriting community to ensure that the

Lloyd’s market can flourish in what have been challenging times.’ Challenging times

indeed, but we are confident that Lloyd’s is well equipped to meet such challenges.

Syndicate Forecasts

As a reminder, our analysis is based upon the Syndicates open to third party capital and

our forecasts should be read in conjunction with the supporting narrative in our Lloyd’s

Syndicate Profiles 2015.

All three open years continue to develop well. The major contributor continues to be

absence of major catastrophe losses. Chart 1 shows the development of incurred loss

ratios by year of account for the aggregate of all Argenta clients.

Chart 1

3

For the 2013 account, a mid-point profit of 8.1% of capacity is forecast for the Lloyd’s

Market as a whole and for 2014 a profit of 4.5% of capacity. The average result for

Argenta clients is around two percentage points higher than the Market average figures

for both years.

The loss ratio for 2015 is better than any year we have seen since 2006 and it appears

that the low level of attritional losses is also a factor.

As syndicates have increased the share of longer tail against short tail business, and

insurance as opposed to reinsurance business, it is possible that the comparison is not

strictly apples against apples, but we are comfortable that the low incidence of loss has

got the year off to a very good start. As we saw in the 2010 account, when there was a

series of catastrophes during the first half of 2011, the 2015 account remains on risk and

the profit cannot be banked yet.

There is definitely good cause to suggest that the annual (GAAP) accounts at 31

December 2015, which include reserving movements on years up to and including 2014,

will show a respectable level of profit. In 2014, Lloyd’s declared a profit before tax of £2.9

billion and a combined ratio of 89%.

Turning to the underwriting year of account (not GAAP), at first sight premium income

levels on the 2015 account appear to be holding up well. In aggregate, our syndicates’

forecast income is 1% behind the business plan.

Dig a little deeper, and we find that things are not quite so rosy.

First is the change in the exchange rates. Sterling has strengthened against many major

currencies in the past fifteen months, but has weakened against the US Dollar, which

accounts for around 60% of Lloyd’s overall premium income. The business planning rate

for 2015 was US$1.71:£1, but Sterling had weakened to US$1.51:£1 by the end of

September, a fall of almost 12%. The foreign exchange gain adds 5.5% to premium

volumes for 2015.

Second, we believe that a number of managing agents may be overly optimistic in their

premium projections. For the 2012 and 2013 underwriting years, written income by the

end of the third quarter was 69% of the most recent forecast to ultimate. For 2015, the

Q3 numbers suggest that the syndicates have only written 64% of the total income they

expect to write for the full year.

To put this into perspective, written income as at 30 September 2011 for the 2011

account of our subset of syndicates was £3,974m (at today’s rates of exchange). This

account is now mature and the final written income is £5,473m. For the 2015 account for

the same subset of syndicates, the income written to 30 September is almost identical at

£3,971m but the managing agents are indicating that they expect the final income to be

£6,207m – £734m more than 2011.

2013 and 2014 years

of account

profitable

2015 off to a good

start but premium

income forecasts

perhaps overly

optimistic

4

We expect reserve

releases from prior

years to continue,

although there are

exceptions

There are reasons why this earning pattern could change. Reinsurance business is

generally written in the first half of the year, insurance business more evenly spread

throughout the year, and business written under delegated authority (where the premium

is signed back to the year that the binder was signed at Lloyd’s) will continue to

accumulate well into the second year of an underwriting account. Also, syndicates need

to have a provision for reinstatement premiums on catastrophe reinsurance business that

only becomes payable if there is a loss. This will fall away when policies run off.

Nonetheless, we remain sceptical as to whether the syndicates will achieve their income

projections for 2015 and our forecast results are informed by this scepticism.

The forecast income, as per the business plan, is based on projections for the 2014 and

2015 accounts and, as we believe that the income for 2015 looks optimistic, we think

there will also be an undershoot on the 2016 account; again this expectation colours our

view of the 2016 account at this stage.

More optimistically, there is strong evidence that the run of reserve releases will continue

at the close of the 2013 year of account and beyond. In the third quarter forecasts, just

two syndicates have a reserve deficiency in excess of £1m.

Syndicate 2526 (which has never been recommended for support by Argenta) underwrote

a non-US book of professional indemnity, medical malpractice and financial institutions

business under the turnkey management of Asta Syndicate Management. The service

company was acquired by the US insurer AmTrust, in July 2012 and AmTrust began to

acquire capacity on the syndicate for the 2013 account. Although the syndicate had

initially enjoyed a good run of results, the results began to deteriorate and there was a

lack of enthusiasm for the syndicate which allowed AmTrust to increase its share of the

syndicate from zero in 2012, to 16% in 2013, 61% for 2014 and 99.5% in 2015.

Management of the syndicate was transferred to AmTrust on 1 April 2015, following the

closure of the 2012 account. A limited review of reserves was carried out during 2014,

leading to an increase, and the 2012 account was closed with a deficit of almost £18m on

the 2011 and prior years. There had previously been reserve shortfalls on prior years

when the 2011 and 2009 years were closed (in both cases these deteriorations were

under £2.5m). During the summer, AmTrust commissioned a further review of reserves

which identified further substantial shortfalls in reserving.

QBE Syndicate 386, which enjoys broad support from the third party sector, is also

forecasting a prior year deficit, which has increased by £1.7m to £16.5m between

quarters two and three. However, in our most recent communication from QBE it is

stated that this forecast predated a further reserve review, “the early indications of which

are positive”. This suggests that the prior year deficit may reduce, or disappear

altogether.

5

By contrast, 16 of our supported syndicates (there were 31 in total in 2013) are

forecasting a reserve release of at least £1m, with the overall forecast release adding

more than 2% of capacity to the current forecast result. Our experience has been that the

reserve movement increases when the account is finalised at the year-end (over the past

five closed years, 2008 to 2012, this element has improved by an average of 2.3% of

capacity) and we anticipate that this year will be no different.

The insurance regulator in the UK, the Prudential Regulation Authority, has warned UK

insurers not to be tempted to dip into reserves in order to flatter results in what has been

a prolonged soft market (reserve releases improved the combined ratio of the UK motor

insurers by more than 10 percentage points). Our view continues to be that our portfolio

of syndicates is well reserved and that reserve releases are more likely than not, especially

for those syndicates where the reserves are held at a margin in excess of actuarial best

estimates. We will review the position on the closure of the 2013 account at 31 December

2015 in the next Quarterly Review.

Forecasts for 2013 and 2014

2013 2014Managing Agent AIRL Managing Agent AIRL

Q215 Q315 Q215 Q315 Q215 Q315 Q215 Q315 33 Hiscox 10 10 13 15 5 5 10 10

218 ERS 0 1 0 0 -3 -3 0 0

260 Canopius -6 -5 -6 -3 -18 -18 -13 -14

308 TMK -1 0 -1 0 3 1 3 1

318 Beaufort 12 14 12 14 2 2 3 4

386 QBE 7 7 7 7 8 7 8 7

510 TMK 9 10 10 11 6 7 8 8

557 TMK 14 14 15 15 19 18 22 20

609 Atrium 12 12 13 15 8 8 10 10

623 Beazley 7 8 9 10 5 5 8 10

727 Meacock 8 8 10 10 5 5 8 8

779 ANV 2 0 2 0 -7 -7 -7 -6

958 Canopius 5 7 5 7 4 4 4 4

1176 Chaucer 43 48 43 48 30 35 35 40

1200 Argo 5 5 5 5 6 6 5 6

1969 Apollo 1 1 0 1 5 5 5 5

1729 Asta -3 -3 -3 -3

1991 R&Q -7 -7 -7 -7 -4 -4 -4 -4

2010 Cathedral 13 13 15 15 6 6 8 8

2014 Pembroke 2 1 2 1

2121 Argenta 10 10 10 12 8 8 9 11

2525 Asta 12 18 12 22 3 3 9 9

2526 AmTrust -9 -52 -9 -52 -8 -9 -8 -14

2791 MAP 11 11 12 13 6 7 11 11

5820 ANV -2 -2 -2 -2 0 0 0 -1

6103 MAP 34 34 34 37 18 18 18 20

6104 Hiscox 40 43 42 43 25 30 29 30

6105 Ark 10 10 10 10 6 6 6 6

6106 Amlin 36 38 37 38

6107 Beazley 15 15 15 15 15 15 21 21

6110 Pembroke 1 1 1 1

6111 Catlin 13 12 13 12 9 9 9 9

Market (Argenta Clients) 10 10 11 12 6 6 8 8

6

AIRL FORECASTS FOR 2015 AND 2016

2015 2016 AIRL AIRL

Q215 Q315 Q215 Q315 33 Hiscox 5 7 5 5

218 ERS 1 2 4 4

308 TMK 2 0 4 4

318 Beaufort 4 5 4 4

386 QBE 6 6 6 6

510 TMK 6 7 6 6

557 TMK 10 12 8 8

609 Atrium 6 8 7 7

623 Beazley 6 7 6 6

727 Meacock 7 8 7 7

779 ANV 0 -8 2 -5

958 Canopius 5 5

1176 Chaucer 39 36 37 34

1200 Argo 4 6 4 4

1969 Apollo 4 3 5 5

1729 Asta 1 0 3 3

1884 Charles Taylor -9 -9 -1 -1

1991 R&Q 0 0 3 3

2010 Cathedral 6 8 5 5

2014 Pembroke 1 2 2 2

2121 Argenta 5 5 5 5

2525 Asta 6 7 5 5

2526 AmTrust -4 -13 0 -3

2791 MAP 6 7 6 6

4444 Canopius 5 5

5820 ANV 2 0 2 1

6103 MAP 10 24 9 7

6104 Hiscox 11 23 9 9

6105 Ark 5 6

6107 Beazley 15 24 11 9

6111 Catlin 5 4 4 4

Market (Argenta Clients) 5 6 6 6

7

Broker Strategy

Fundamental shifts are taking place in how risks are placed by the larger brokers.

London market underwriting businesses are finding themselves caught between the rock

of an increasing appetite for underwriting specialty insurance in hubs away from the

London market, and the hard place of their main source of business – the London market

brokers. The London brokers are seeking to both charge more for offering the same

services and to find additional revenue streams for providing services to the Market.

Although results from Lloyd’s and its syndicates do not show it, the ‘soft’ pricing cycle

(i.e. falling premiums) has been going on for at least five years. There is a global glut of

capital that enables brokers to place their business with underwriters who offer ease of

transaction, as well as higher commissions.

Previous soft cycles have always been marked by an erosion of rating levels accompanied

by demands from brokers to increase the commission paid to them for bringing the

business to the underwriter.

Whilst this cycle is no different, the brokers are adding two new weapons to their

armoury.

The first is around data. Brokers have a great wealth of premium and claims data; in

many cases, with global and verticalised insurance placements (verticalisation is the

practice of placing the insurance of a major risk buyer in various tranches in order to

complete the placement at the best terms); it is only the broker who really knows what the

price for the entire risk is. Brokers are increasingly seeking to charge both underwriters

and clients for access to this data. In some cases, they are seeking to link the charge for

data to access to preferred panels of insurers.

Secondly, brokers want to simplify the placement of business across the subscription

market. This represents a change in their business model, employing fewer “foot-

soldiers” dealing day to day with individual London market insurers, but more people

within their analytics team.

Their preferred model is therefore to place an increasing amount of business under

general facilities. A few recognised leading insurers will continue to set prices and terms

and settle claims, but with the following market bound as a pre-agreed block, receiving

their share of premiums and claims, and little more than monthly listing of policies written

on their behalf.

Aon, which is perhaps the largest single broking group placing business in the Lloyd’s

market, has been the most aggressive, with the emergence of the AON Client Treaty,

which is designed accept 20% of all London market business (other than treaty

reinsurance) placed by the group - potentially $600m of gross premium.

Brokers search for

additional sources of

revenue

Data has value

Place business with

fewer insurers

More analysts, fewer

placing brokers

Result: broker

facilities

8

Aon Client Treaty

incepts 1 January

2016

A structural change

in the insurance

market

This facility, which comes into effect on 1 January 2016, replaces one placed in 2013 with

reinsurance giant Berkshire Hathaway writing 7.5% of all Aon placed business (again

other than the reinsurance book). Although there were fears at the time that this treaty

would reduce the overall premium placed into Lloyd’s by Aon, it seems that Lloyd’s was

satisfied that the treaty’s existence was sufficient to increase Aon’s premium volumes by

more than enough to compensate for the 7.5% cession to Berkshire Hathaway. Berkshire

has elected not to renew the facility; whilst rate movements since 2013 suggest that the

prospects are less appealing now, Berkshire has also formed a specialty insurer of its own

in the interim, writing many of the classes of business that it would have been ceded

under the treaty.

The Aon Client Treaty, because of its size, has attracted much attention and comment,

but there are many such facilities. Facilities such as Aon’s underline the power the major

brokers wield: carriers either have to sign up or risk losing a big chunk of business to their

competitors.

Is that a problem? If the economics of the facility are right in terms of rates, expenses,

fees and loss ratios, then everyone wins – at least those on the facility do.

Those syndicates that have decided to write lines in Aon’s facility appear to be attracted

by the major expense advantage and the book’s past profitability.

But critics worry about underwriting controls, particularly in a soft market, and see it as a

revenue chasing initiative. They also fear the impact on rates, predicting that it will drive

competition and pricing down further.

For the underwriter faced with a choice as to whether to participate in a facility or not,

there is a spectrum of options: from at one end being part of a preferred panel to signing

up ‘blind’ at the other. Underwriters are being pulled in two directions; on one side the

desire to retain control over the business written and on the other access to business,

which in the current soft market often means retaining business.

At times it can be difficult to separate the cyclical from the secular changes. Brokers will

typically seek to increase commissions payable by underwriters in soft markets, and as

the underwriters are keen to keep the business, they often succeed. The difference this

time is in the way that the brokers are scaling back their placing operation and focusing

their efforts on business production and analytics. In our view, when a harder market

returns, there will not be a reversal of the trend away from large placing teams and this a

structural change in the way that the Market operates.

9

Volkswagen Emissions Scandal

The German carmaker is reeling from revelations of cheating in tests for emissions of

nitrogen oxides (NOx) and carbon dioxide (CO2), with up to 12 million vehicles affected in

regions across the world. Most of the cars have diesel engines fitted with software-based

“defeat devices” capable of understating emissions in official tests.

Industry reports of the potential costs to VW (which also manufactures Audi, Seat and

Skoda cars and commercial vehicles) are as high as €30 billion. This figure includes legal

costs and financial penalties, as well as the cost of remedying and replacing the software

in the affected vehicles.

There are a number of areas where insurers could potentially become liable for claims

against VW, although our current understanding is that claims against Lloyd’s syndicates

are unlikely to be substantial. Outside Lloyd’s, few companies have given an estimate of

potential cost of claims, although Zurich Insurance recently published a figure of $30m

when reporting third quarter results, adding that such small scale losses would probably

not be disclosed.

Product recall

Manufacturers often buy insurance against the costs of sending out notice of a fault to all

owners of a particular model, publicising the fault as well as replacing parts. Our

understanding is that this insurance is bought by component manufacturers, rather than

the car manufacturers. It can also be argued that there was no fault in the product as the

software worked exactly as intended, and indeed evaded detection for a number of years.

Directors’ and Officers’ Insurance

VW is understood to have two main directors’ and officers’ programmes, one in Germany

and one in the US. There is limited appetite within Lloyd’s for exposure to companies that

are listed on US stock markets and it is understood that neither is placed in the London

market.

GAP insurance

Buyers of new cars are offered this cover. It pays out in the event that they have a total

loss while the car is still relatively new and the insurers’ valuation of the write-off is less

than any finance outstanding, or the list price of a replacement new vehicle. The value of

second hand VWs did reduce slightly in September, with Glass’s guide showing a 0.2%

fall against a rise of almost 3% in the wider second hand market. Cover is contingent on

both the incidence of a loss and also on the second hand values of the vehicle at the time.

If car values were to fall due to a loss of confidence in VW and its other brands as a

manufacturer (and this could include vehicles that did not have defeat devices installed)

loss costs for GAP insurers could increase. As a retail line of business, with significant

exposure to conduct risk, only small volumes of this class of business are underwritten at

Lloyd’s.

Few claims against

Lloyd’s syndicates

expected

10

Largest loss in

Quarter 3; still

subject to

considerable

uncertainty

Public Liability

By VW’s own admission (after initial denial), its vehicles have been emitting levels of NOx

and CO2 that are deemed unsafe. CO2 is widely considered to be a greenhouse gas,

contributing to climate change, although it is not toxic in its own right (providing it is taken

with a little O2). NOx (which includes nitric oxide and nitrogen dioxide) can cause a

variety of health and environmental impairments; it can contribute to both acid rain and

petrochemical smog. It is considered particularly dangerous to people with asthma but

can prompt an adverse reaction in healthy people. It is difficult to judge whether this

scandal will result in claims against VW as regards the emissions, given the challenges in

proving cause and effect. This may in the future become an issue for motor

manufacturers in general, but it seems unlikely that VW will face significant public liability

claims on this front.

Warranty

This is another retail product that will protect against failure of one or more components.

Warranty policies tend to be very specific in the components that they are covering as

some parts exposed to wear and tear (such as tyres, exhausts and brake pads) are not

suitable for cover. It seems unlikely that warranty policies will respond to the defeat

devices as they are not faulty.

Tianjin

On 12 August a massive explosion in the port of Tianjin, China’s fourth largest city,

caused catastrophic damage in the area, prompting fears of multibillion-dollar losses

throughout the industry.

A fireball and shockwave from explosions at the site blasted shipping containers, vehicles

in the port and on a nearby highway overpass. It destroyed warehouses, production

facilities and dormitories, hit the nearby Donghai Road railway station and blew out

windows within residential structures in a radius of several kilometers.

The Tianjin blast is the costliest industry loss of the quarter, with the total bill still subject

to considerable uncertainty. Access to the site has been restricted, leading to much

speculation as to the cost of the event.

Reinsurance broker Guy Carpenter estimated the cost to insurers and reinsurers to be

between $1.6bn and $3.3bn, while broker JLT has warned cyanide contamination to

containerised cargo could see the industry loss figure balloon to between $5bn and $6bn.

11

It is clear however that the loss will be complex, with a multitude of lines and geographies

affected.

Property damage claims will form the majority of the losses. Marine and cargo lines are

also likely to see a large impact from the event because of damage to containers and

contents.

Cargo insurers are also expected to see considerable losses. Early reports from Lloyd’s

Agency Network said more than 10,000 motor vehicles were destroyed.

Business interruption will be a major contributor to the final loss total, with extensive

business interruption and contingent business interruption claims across China,

particularly given the importance of the port in the region.

How will this impact Lloyd’s? In the press release from the Chairman and Chief Executive

that accompanied publication of Lloyd’s results for the first six months of 2015 in early

September, less than a month after the event, it is stated: ‘The catastrophic explosions in

the Chinese port city of Tianjin in August will lead to insurance and reinsurance claims. It

remains too early to assess accurately the impact on our business, but at this stage we

would not expect Lloyd’s loss to exceed its market share in the affected lines.’

In the recently published third quarter results, companies refer to ‘small’ or ‘manageable’

losses from Tianjin, but acknowledge that there is still much uncertainty given restricted

access to the site, and have not yet declared an official loss estimate.

BHP Billiton

On 2 November, 2015, a tailings dam from an iron ore mine part-owned by BHP Billiton

and part-owned by Vale, burst. The entire sub-district of Bento Rodrigues was flooded

with toxic waste. 13 people have died so far.

12

Mining underwriters

facing a large loss

The knock-on effects are catastrophic. 60 million cubic metres of iron ore waste soon

reached the Rio Doce, which has a drainage area of, according to Wikipedia, 86,715

square kilometres, with 230 municipalities relying on it for subsistence. Flowing down the

Doce, 17 days later the poisonous mudflow reached the Atlantic Ocean. Now it is

spreading up and down the Espírito Santo coast.

The consequences to the river and its wildlife, not to mention the livelihoods of all those

depending on it in some way, are still unknown. One biologist, Andrew Ruschi, has put a

timeframe of 100 years for the waste to dilute.

It remains to be seen how negligent BHP and Vale have been. Both companies already

have preliminary fines. The figure of $5bn is being bandied about for further down the

road.

There are suggestions in the market that mining underwriters could be facing an eventual

loss in excess of $1 billion, with a Willis property programme at least partially placed in

the London market, including Lloyd’s. Business interruption, potential liability and the

cost of cleaning-up losses could increase this figure.

Storm Desmond

The UK’s Met Office has decided to give major storm systems names this year, and the

fourth named storm, Desmond, has wrought damage in Cumbria, Ireland, the Isle of Man

and parts of Lancashire. More than 341mm of rain (13½ inches) fell in a 24 hour period

(believed to be a record in the UK) between Friday 4 and Saturday 5 December. Over

3,500 homes and businesses were flooded, and many homes were without power.

Damage centred on the city of Carlisle and the town of Cockermouth, both of which have

suffered recent floods. Rural bridges were washed away and several more were left

structurally unsound.

13

Flooding in Carlisle cost insurers £272m in 2005, while those in Cockermouth in 2009 cost

£174m. The extent of the insured loss bill remains uncertain. Whilst PwC has estimated

the economic loss at between £400m and £500m, with insurers expected to pay between

£250m and £325m, it has warned that the bill could rise further if the rain keeps falling

(which it has). The AA estimates insured losses at £250m. Lloyd’s will have a small

amount of direct property exposure, but claims would have to exceed £1 billion before it

became involved as a reinsurer, which is where its main exposure lies.

Whiplash Claims – Chancellor’s Autumn Statement

On 25 November, UK Chancellor of the Exchequer, George Osborne, announced

measures designed to crack down on whiplash claims made by victims of motor

collisions. Currently, more than 500,000 whiplash claims are made against motor insurers

in the UK every year, costing insurers more than £2 billion and adding more than £50 to

the cost of the average motor insurance premium. It is believed that many claims are

either bogus or exaggerated, as such soft tissue injuries do not show up on x-rays.

Although there will be a consultation on the exact details in the New Year, it is expected

that the measures will remove the right to general damages for minor soft tissue injuries

but increase the limit for personal injury in the small claims court from £1,000 to £5,000.

Actions in the small claims court are expected to cost insurers less than going to the

Crown Court; raising the limit should therefore discourage the latter.

14

Tom Bolt to step down

On 3 December, Lloyd’s announced that Tom Bolt will be stepping down as Director of

Performance Management in mid-2016 after almost seven years. He has built on and

enhanced the work started by his predecessor and Lloyd’s first franchise director, Rolf

Tolle. Tom has fully engaged with private capital and will be well known to many of our

clients, having presented at a number of our London meetings. During his tenure, he has

overseen the introduction of the minimum standards framework for managing agents and

delivered the claims’ transformation project that has accelerated the payment of claims.

The performance of Lloyd’s bears favourable comparison with the best performing

insurers in the world, and importantly, the performance of the fourth quartile businesses

(which will always exist) has not been a drag on the overall performance and rating of the

Market. Tom will leave Lloyd’s in a stronger position than he left it. He has also been

great fun to have had dealings with. The process of appointing a successor has started.

15

16

Caveats

This Quarterly Review publication is issued for general information purposes only and should not be

construed as an invitation or inducement to engage in underwriting activity, nor investment advice. The

document has nevertheless been prepared in accordance with the general principles of the Financial

Conduct Authority (FCA) financial promotion rules, in addition to those stipulated by the Code for

Members’ Agents: Responsibilities to Members.

Whilst all reasonable care has been taken to ensure that the information contained in this document is

accurate at the time of publication, Argenta does not make any representations as to the accuracy or

completeness of such information. Further, Argenta does not represent, warrant or promise (whether

express or implied) that any information is or remains accurate, complete and up-to-date, or fit or suitable

for any purpose. This document provides information about syndicates' past performance. Past

performance is not a guarantee for future performance. The forward-looking statements (including, but not

limited to, the AIRL forecasts) in this document are subject to uncertainties and inherent risks that could

cause actual results to differ materially from those contained in any forward-looking statement. Whilst it

intends to publish future Quarterly Reviews, Argenta undertakes no duty to update publicly any forward-

looking statements contained herein, in light of new information.

Unauthorised use, disclosure or copying of the document is strictly prohibited and may be unlawful.

Argenta Private Capital Limited is authorised and regulated by the Financial Conduct Authority.

Argenta Insurance Research Limited is a wholly owned subsidiary of Argenta Private Capital Limited.