Paul Carroll
We’re in an exceptionally volatile period, with major geopolitical and economic risks on top of climate-driven catastrophes, nuclear verdicts, and more. The International Insurance Society’s annual Global Insurance Forum in November, which you’re sponsoring and hosting at Lloyd’s, has as its theme this year: "Turning Volatility Into Value." How do we do that?
Dawn Miller
I'm just coming off some time at CIAB [Council of Insurance Agents and Brokers] in Colorado, and the topic that is on everyone's mind, in addition to market conditions, is how multiple perils are intersecting with global trends to create an increasingly varied and complex risk landscape, with some risks well modeled and others less so.
In the past, our market would focus on certain CAT risks, certain natural perils happening in one place at one time. Now we're seeing multiple risks interact at the same time, from natural catastrophes and supply-chain disruption to inflation, geopolitical uncertainty and demographic risks. And those are just to name a few. It’s the interaction among these different risks that is adding new layers of complexity.
We have innovations that allow us to model with more transparency, and we can bring in supplementary models to assess risk. That's a good thing. But it takes an enormous amount of creativity to predict the layers of complexity around us today.
Paul Carroll
Yes, some people who’ve written for us refer to a “polycrisis.” You mention modeling. Is that the main way insurers make sense of all these complicated connections, or is it improvements in scenario planning, or something else?
Dawn Miller
I believe it's multiple things. We're seeing innovations in modeling—additional data transparency being plugged into some of those core models that we've always used to look at some known perils. The perils aren't changing, but our ability to understand them is getting better, sometimes dramatically.
There's also an opportunity for geopolitical assessments, economic assessments, and social demographic assessments to all play a role. The modeling itself is a bit of a Rubik's Cube with multiple facets to it.
Paul Carroll
Wall Street talks a lot about alpha and embraces volatility because it creates opportunities. Historically, insurers have not liked volatility. How do you change that thinking?
Dawn Miller
Given that Lloyd’s is guiding a marketplace, we're creating the conditions for success for the world's best risk takers to attach the risks they want to underwrite with capital. We see a mix in our marketplace. We do see investors coming in looking for some of that volatility. That’s what they like, and it fits as a diversifier into their portfolios. We see others wanting the longer-tail risk. This may not be as volatile, but they want it for their own investment reasons.
Our role is to create the environment for all those different profiles to exist and to all benefit from the diversification of our marketplace. It's not an either-or—the alpha seekers or the beta seekers. It's having both in an environment where they can coexist.
Paul Carroll
Volatility requires agility not just for those transacting in your marketplace but for you, too. How is Lloyd's getting faster at identifying opportunities and scaling the winners as quickly as possible?
Dawn Miller
In March, we launched our new five-year strategy, Advance and protect. It is designed to sharpen Lloyd’s financial edge and maximize our unique capital advantage, including by creating a more efficient and flexible marketplace by making the platform more investable, clear, transparent and agile.
Right now, there's some additional reporting, different ways of working, maybe some duplicated oversight here and there—things that have grown up over time for all the right intentions, but maybe as we evolve are not as pragmatic any more. All of those cause a little bit of extra cost, whether it's in time or resources, because time is money at the end of the day.
So we're making things much clearer, making it much more cost-efficient, making sure we are an engine for driving new talent into the marketplace, attracting the best talent and then recycling them back out as advocates and having the marketplace stronger for their being with us. You're creating an ecosystem that is the center of attracting the world's best risk takers, the best capital together with the best brokers, best clients, the best risk.
What that gives us is the ability to innovate. When we think about Lloyd's and the underpinnings of our strategy, our superpower is our capital diversification benefits. Our other superpowers are around our license structure, the framework we have for innovation, the ability to syndicate risk rapidly, our very strong financial strength ratings.
Innovation, whether it is the birth of a new product, or the birth of a new structure, or how we deal with some of the extreme large-scale infrastructure, energy, supply chain, and transportation issues that we see around the world—that is going to take more than one mind to solve. And we are the marketplace for that sort of solution creation.
Paul Carroll
At ITL, in our little way, our mantra is: Nobody is as smart as everybody.
Dawn Miller
That's exactly right. Our role is to convene a marketplace, creating those conditions for success.
It happened 338 years ago when people came together over a cup of coffee and said, Let's share this risk so we can get these ships across the globe. Today, the same principle of combining expertise and capital continues across the underwriting room, Lloyd’s Lab and Lloyd’s Academy.
Paul Carroll
I’m glad you mentioned the lab and the academy, because, as an old hand on innovation efforts, I wanted to ask how they fit into your broader innovation ecosystem.
Dawn Miller
Absolutely. As you know, Lloyd's Lab launched in 2018 to make sure we had a place to accelerate—not necessarily incubate, and I want to make that distinction—new risk-taking ideas or risk-servicing ideas. Over time, we've grown to have about 160 alumni.
This past cohort, Cohort 17, just went through a selection process. We received 280 applications from 31 countries. Fifteen companies were invited to pitch to the market, and 10 were selected for the 10-week Accelerator program. The market plays a central role in that selection process because the Lab is designed to respond to real market needs.
The focus of Cohort 17 has been in areas where the Lloyd’s market is actively seeking solutions that improve how the market operates day to day to strengthen its ability to respond to the complexity of today’s risk landscape and this can be seen through the themes: operational efficiency, new products and experimental innovation.
What does that mean? They come in at all different stages of businesses and ideas. They have mentors from the marketplace. They hone, shift, and massage their product and their service. Then they exit the other end, generally about 80 to 85% of them, with either capacity for a proof of concept or a service contract or service proof of concept into the marketplace. That ranges from new products—cloud downtime, wildfire, data analytics—to a whole variety of services.
They work their way through the market, with an accelerated cover holder process. Some of them, like Parsyl, started in the Lloyd’s Lab. Parsyl began by using data and technology to tackle risks in global health supply chains, then became a Syndicate-in-a-Box and now has in-principle approval to become a full syndicate. That’s the process of taking innovation, testing and proving it in the market, and ultimately giving it the opportunity to scale.
They're a part of our ecosystem once they come out as alumni, and they stay within our ecosystem around the world. We continue to help by giving them opportunities to be exposed to end clients, to regulators, to investors, etc.
Paul Carroll
How do you expect these topics—including innovation, geopolitical risk, and emerging technologies—to be developed at the Global Insurance Forum?
Dawn Miller
I always look forward to the Global Insurance Forum; it's a place where market leaders and market practitioners are coming together to exchange on an equal level. We’re reflecting the trends of the times, whether that’s private credit, scaling innovation or how we move beyond the tactical. This year’s theme, “Turning volatility into value,” really captures that. It’s about moving beyond reacting to uncertainty and using better insight, specialist expertise and flexible capital to anticipate changing needs, build solutions and give customers the confidence to invest and grow.
The companies that come together are from all around the world. Everybody's lens is going to have a slightly different take on how they deal with geopolitical risk or how they're dealing with supply chain or how they're dealing with credit risk or what they're facing at that exact moment. Bringing all of that together allows us to create a narrative that firmly implants how our industry is driving resilience forward.
Our industry provides the oxygen for the economies around us. And I believe we allow our industry to represent itself or be represented by others in a way other than that. I wish we talked more about the outcome our industry enables: resilience. We need to explain insurance through communities, businesses and economies it enables to recover and thrive and persist.
The forum also creates a great opportunity to bring some of our young leaders to the table. Their perspectives are varied and rich, and we need that diversity of thought.
Paul Carroll
As someone who’s covered technology innovations for decades, I confess that it was only about 15 years ago that I realized that none of that happens without insurance. Every major innovation—the personal computer, the internet, the smartphone, social media, search engines, GPS, the driverless car—comes with risks, and nobody can take those risks without some sort of protection.
Dawn Miller
Right. Isn't it funny? We all sort of take it for granted.
If we could just reframe the conversation and talk more clearly about how insurance creates resilient communities, helping them thrive, we would give people a much better understanding of the value our industry provides. At Lloyd’s, we don’t just seek to understand risk, we take it on, bringing together expertise, capital and risk appetite to help businesses move forward.
The issue couldn't be more important than it is right now, with the multiple layers of risks that surround us.
Paul Carroll
Thanks, Dawn. It’s always great talking with you.
Dawn Miller
Thank you for having me, Paul; always a pleasure.
If you’re interested in attending the Global Insurance Forum, you can register here.
