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Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

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Capital Markets, Financial

BGC Partners eyes new platform to trade US Treasuries

BGC Partners plans to launch a new platform to trade US Treasuries early next year, in a bid to return to a market in the middle of evolution, according to people familiar with the plans.  The company, spun out of Howard Lutnick’s Cantor Fitzgerald in 2004, sold eSpeed, the second-largest interdealer platform for trading Treasuries, […]

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Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

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Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Categorized | Insurance

Lloyd’s: all at sea

Posted on September 22, 2016

The Lloyds building, City of London,

Ask not for whom the bell tolls, Lloyd’s of London. It will toll for thee, unless thou gettest thy act together. When a vessel sinks, the Lutine Bell is still rung at Lloyd’s, where headline half-year results suggest the market is buoyant. However, a deeper dive shows this flagship City institution is less seaworthy than it should be.

The profits of underwriting syndicates were 22 per cent higher, at £1.46bn, on sales that were 5 per cent better at £16.3bn. But the improvement reflected sterling’s fall against the dollar. This lifted the value of premiums and investments denominated in greenbacks. Lloyd’s underwriting profit crashed £800m to a grisly £206m, it said.

    Canadian wildfires were partly responsible. Higher claims can be a good thing for Lloyd’s, because catastrophes stimulate demand for cover. Less positively, steeper costs were also to blame. Net operating expenses increased £300m to £4.3bn.

    Foreign brokers already gripe that the Lloyd’s Building — a vertical, steel crankshaft on Lime Street — is an expensive place to do business. Costs are around 10 per cent higher than elsewhere, according to one estimate.

    Member-owned markets are good at meeting new demand through internal competition. Lloyd’s, for example, has a fast-growing specialisation in insurance against cyber crime. But they can also standardise terms of business to the detriment of customers.

    Unfortunately for Lloyd’s, its clients are acutely price sensitive because capital has been flooding into insurance as investors flee depressed bond yields, depressing premiums. A lack of disasters to rival the US hurricanes of 2011 exacerbates the problem.

    The market must meanwhile deal with Brexit, which could shave 4 per cent off its top line unless it relocates some operations. That duty will fall to the chairman who replaces the nautically named John Nelson next year, and to Inga Beale, the chief executive he hired to help him accelerate modernisation. Her difficulty is that she cannot command members as directly as a company boss instructs employees.

    If member firms are reluctant to cuts costs and embrace new markets and technology, they will all be in the same boat. And it will be foundering.