Lloyd's of London has built up its Canadian business by taking on unusual risks. The insurer already offers coverage of offshore oil production, corporate jets and even hockey players, and now it's looking for pockets of emerging risk to take on, from manufacturing in Ontario to cyber security.
Lloyd's has a 326-year history of insuring quirky and one-off items, and recently its Canadian business has been growing. The country is now Lloyd's second-largest generator of premiums outside of its U.K. home base, making up 5 per cent of the insurer's global premiums.
Nearly 50 per cent of the risk underwritten in Canada by Lloyd's is liability insurance, a category encompassing directors' and officers' liability and medical malpractice. Commercial property, marine and aviation are also large business lines, as is reinsurance, or taking on risk from other insurers.
"We're focused on highly complex, specialized risk," said Sean Murphy, chief executive of Lloyd's in Canada. Lloyd's also specializes in risk that is difficult to place elsewhere. He gives the example of roofers, a business that might be undesirable to other commercial insurers.
Mr. Murphy's business targets are shaped by the economy and emerging areas of risk. With a weak dollar and new trade agreements, Lloyd's is targeting manufacturing in Ontario. But the business is also growing its cyber risk team amid increasingly frequent data breaches.
Insuring cyber risk can be a challenge because it requires companies to let insurers probe deep into their businesses to fully understand what impact a cyber-attack could have. Some companies are reluctant to expose their businesses' inner workings as much as insurers insist is necessary.
"There's also a lot of talk about the Google driverless car – what does that do for car insurance? How does it work and can people hack into it? It opens up other types of risk," Mr. Murphy said, indicating the technical and specialized skills needed to underwrite these new insurance policies appeals to Lloyd's. "When one line of business may be closing, it opens up a whole different set of risks we'd be interested in writing."
Lloyd's is an insurer, but it's not a company in the traditional sense. It's actually home to a network of 93 different member companies as well as individuals and groups backing policies with private capital. Each has a different risk appetite and some have specific insurance specialties.
When a client wants to take out insurance, that bundle of risk is shopped around to different members of Lloyd's market, who may divide up the coverage.
Mr. Murphy said he spends a lot of time explaining this concept to people, from regulators to government to brokers and others in the insurance industry. (The company has developed an animated video to show how the relationship works.)
Even in the age of technology, most of these deals are still worked out face-to-face between a broker and different insurance groups, who may be willing to underwrite only one portion of a client's total insurance need.
"Part of it has to do with the high degree of complexity in the types of risk that we write," Mr. Murphy said. "Lloyd's is built on trust, and a lot of it is relationship driven."
Lloyd's says the advantage to this system is that its smaller specialty insurers benefit from the Lloyd's brand, sales platform and global licences. Clients can spread their risk between different insurers.
But Lloyd's doesn't want to be pigeonholed as an insurer that's sought out only for esoteric risks others won't accept. It recently hosted an event in Toronto to try to build the brand further by introducing local insurance practitioners to representatives from companies in the Lloyd's market. At the same time, the event was designed as a platform for those market participants to get a feel for the amount of interest there is for different classes of insurance and reinsurance.
Mr. Murphy said events like these are important to show that Lloyd's is committed to the Canadian market. "We want to be treated as one of the first contacts," he said.