New Underwriting Report From the LMA and Oxbow Partners

New report from Oxbow and the LMA for you;

The Lloyd’s Market Association (LMA), in collaboration with Oxbow Partners, has published a comprehensive new report, The Growth of Enhanced Underwriting in the Lloyd’s Market: The New Normal?, exploring the digital and strategic evolution reshaping the insurance industry.

The report assesses the different models of Enhanced Underwriting, outlining how they work and why people are implementing them, their associated opportunities, growth potential, risks and required capabilities. It also examines the broader impact on the industry and sets out how carriers and the market as a whole could respond.

Conducted over twelve weeks between August and October 2024, the research is based on a series of interviews and a quantitative survey involving carriers, brokers, MGAs and capital providers. Between the carriers interviewed, they represent 77% of the total GWP of Lloyd’s. The report reveals a clear consensus that Enhanced Underwriting is not only here to stay but is set to grow substantially in scale over the next decade.

Key findings from the report

• Market consensus: The report takes in views from supporters and detractors alike, but interviewees consistently expressed a positive view on the concept of Enhanced Underwriting and its importance. This was backed up by a broad consensus that Enhanced Underwriting will grow significantly in the coming years. 35% of participants expected rapid expansion, and 65% a gradual expansion. None expected limited or declining adoption.
• New models for a digital age: The report categorises Enhanced Underwriting into four distinct models that split into risk-by-risk underwriting – 1. augmented underwriting; 2. pure algorithmic underwriting; and portfolio underwriting – 3. digital and algorithmic broker facilities; and 4. active portfolio trackers.
• Growth trajectory: As Enhanced Underwriting evolves, it is anticipated by respondents to account for significant portions of Lloyd’s premiums, with some models expected to grow by over 50% annually in the coming years.
• Industry impact and bifurcation: Enhanced Underwriting is catalysing a structural shift in the market, creating clear distinctions between lead and follow market roles and streamlining capacity allocation.
• Opportunities and risks: The report emphasises the potential for Enhanced Underwriting to improve market efficiency, reduce premium volatility and open access to underserved markets. However, it also flags potential challenges, such as the risks associated with algorithmic underwriting, potential talent gaps and questions surrounding regulatory oversight and transparency.

Elizabeth Jenkin, Underwriting Director at the LMA, said: “Although Enhanced Underwriting is in the early stages of its maturity, this report shows that there is almost universal belief that it will be a fundamental part of Lloyd’s future, presenting an opportunity for the market to apply its deep specialty expertise in new ways. By thoughtfully integrating these models, market participants believe they will drive efficiency, improve risk selection and access underserved business, while reinforcing Lloyd’s position as a leader in complex, high-value risks.”

Greg Brown, Partner at Oxbow Partners, said: “Our research suggests Enhanced Underwriting will change the shape of the insurance market, driving bifurcation as leaders and followers become more distinct in both their market positioning and supporting operating model. This could reshape the dynamics of capacity allocation, and the slip of the future may look significantly different. With leaders seeking a stronger position and more automation of follow capacity, the result could be a significant squeeze on traditional follow markets and more reliance on the lead to ensure robust risk assessment.”