Aon Plc, the broker that was criticized by Lloyd’s of London for a deal with Warren Buffett’s Berkshire Hathaway Inc., said the relationship actually helps make the U.K. insurance market more attractive.
“It has reinforced the value proposition of London,” Aon Chief Executive Officer Greg Case said today in his first speech at the market since Aon moved its headquarters to the U.K. capital from Chicago in 2012. “The premium volume placed by Aon clients into Lloyd’s increased 3 percent in 2013.”
Aon announced a first-of-its-kind deal last year in which Berkshire would automatically assume a portion of the risk on contracts arranged by the broker with other insurers in the London market. The relationship increases premium revenue for Buffett’s Omaha, Nebraska-based company while sparing it the cost of risk-assessment.
Lloyd’s Chairman John Nelson has criticized the approach as “blind” underwriting that could be risky if expanded, according to an article last year in the Financial Times. He also dismissed the importance of new premiums generated through Aon’s partnership.
Case said client premium growth at Lloyd’s was highest in lines such as construction and energy where the so-called sidecar with Berkshire is most used.
“Twenty-six percent of all sidecar placements resulted in an increased London order, either through business being placed in London for the first time or because the sidecar order was incremental to the existing order,” Case said today. “This is one example where an innovation in capital provides us evidence of what is good for clients is, in turn, good for London.”
–With assistance from Noah Buhayar in New York.