LONDON, UK – Lloyd's of London announced November 2024 the elevation of Claims Management to become the fifth fundamental "hurdle Principle" within its Principles-Based Oversight framework, effective January 1, 2026. This landmark decision—following extensive market consultation throughout 2024—signals Lloyd's recognition that claims excellence has evolved from operational necessity to strategic imperative and core market differentiator.
For the global insurance and reinsurance market, Lloyd's move carries profound implications. As the world's premier specialist insurance market, Lloyd's sets standards that influence insurance practices worldwide. When Lloyd's declares claims management equally important to underwriting profitability, reserving, governance, and culture, the entire industry takes notice.
The transition to hurdle Principle status means Claims Management will directly influence syndicate ratings within Lloyd's oversight framework. Syndicates performing below expectations on claims will face the same serious consequences as those underperforming on underwriting profitability or capital adequacy—potentially including restrictions on business writings, increased oversight, or in extreme cases, market exit requirements.
For businesses and individuals purchasing specialty insurance through Lloyd's—whether marine insurance, aviation coverage, energy sector protection, cyber insurance, or catastrophe reinsurance—this transformation promises faster, fairer, more consistent claims handling from one of the world's most important insurance markets.
Understanding Lloyd's Hurdle Principles
The Principles-Based Oversight Framework
Lloyd's operates a unique market structure: Rather than being a single insurance company, Lloyd's is a marketplace where multiple syndicates (insurance-writing entities backed by various capital providers) compete and collaborate. Lloyd's Corporation oversees this market, ensuring all participants maintain high standards.
The Principles-Based Oversight (PBO) framework evaluates syndicates across 13 principles covering business performance, operational excellence, governance, and culture. Each principle receives a maturity rating:
- Well Above Expectations
- Above Expectations
- Meets Expectations
- Marginally Below Expectations
- Below Expectations
- Well Below Expectations
These ratings aggregate into Syndicate Categories ranging from EXCELLENT to UNACCEPTABLE, determining oversight intensity and business permissions.
What Makes a Principle "Hurdle"
Until now, four principles held "hurdle" status—meaning they're so fundamental that poor performance automatically limits a syndicate's overall category regardless of excellence elsewhere:
- Underwriting Profitability: Syndicates must write profitable business
- Reserving: Claims reserves must be adequate and accurate
- Governance, Risk Management and Reporting: Strong oversight and controls required
- Culture: Ethical conduct and healthy organizational culture essential
The hurdle mechanic: If a syndicate rates "Below Expectations" on any hurdle principle, its Syndicate Category cannot exceed "UNDERPERFORMING" even if it excels on all other principles. Hurdles set minimum performance thresholds—fail them, and nothing else matters.
Why Claims Management Becomes the Fifth Hurdle
Lloyd's decision to elevate Claims Management reflects several strategic considerations:
Market differentiation: In increasingly competitive specialty markets, claims service quality distinguishes winners from losers. Excellent underwriting and pricing matter little if claims performance disappoints cedants and policyholders.
Reputational imperative: Lloyd's brand rests on delivering on promises. Poor claims handling—delays, disputes, inconsistency—damages the Lloyd's reputation globally. Elevating claims to hurdle status signals that claims excellence is non-negotiable.
Business partnership reality: Modern insurance recognizes claims as equal partner to underwriting, not merely back-office administration. Lloyd's new hurdle status formalizes this partnership, ensuring claims functions receive board attention, resources, and strategic focus.
Market feedback: Extensive consultation with the Lloyd's Market Association, managing agents, and market participants revealed strong support for elevating claims prominence. The change responds to practitioner recognition that claims excellence drives success.
What Changed: The Revised Claims Principle
Lloyd's didn't just elevate Claims Management to hurdle status—it fundamentally revised the principle, sub-principles, and maturity guidance.
The New Claims Management Principle
Previous version: "Managing agents should ensure that they have a claims commitment in place which is designed to deliver a high-quality claims service which includes a prompt and fair customer service, efficient and effective claims handling, and compliance with legal and regulatory obligations."
Revised version: "Managing agents should execute a Claims Management Strategy that is aligned to and supported by the business, delivering a high-quality claims service which includes a prompt and fair customer service, complying with legal and regulatory obligations."
Key differences:
- "Claims commitment" becomes "Claims Management Strategy"—elevating claims from policy to strategic function
- Strategy must be "aligned to and supported by the business"—requiring integration into overall business planning, not standalone claims department activity
- Emphasis on execution, not just having policies in place
Six Sub-Principles and Their Evolution
Lloyd's revised all six Claims Management sub-principles following extensive workshops with market practitioners:
Sub-Principle 1: Strategic Integration (now Foundational-only maturity level)
Claims management must form an integral, clearly defined component of the Syndicate Business Plan and medium-to-long-term business strategy. All syndicates—regardless of size or complexity—must explicitly address claims in strategic planning.
Why Foundational-only: This requirement is fundamental and universal. Every syndicate must integrate claims into strategy. There's no "maturity progression"—either you do it or you don't.
Sub-Principle 2: Resources and Expertise (now includes Advanced maturity level)
Appropriate resource and expertise must be in place to deliver against the Claims Management Strategy, including methods to measure, monitor, and maintain resource adequacy aligned with expected service quality.
Key addition: Required method to measure/monitor resource adequacy. Syndicates can't simply assert "we have enough claims staff"—they must demonstrate systematic resource planning tied to service level expectations.
Sub-Principle 3: Infrastructure and Proactive Management (now includes Advanced maturity level)
Proactive claims management must be delivered, supported by infrastructure appropriate to business size and complexity, reflecting the Claims Management Strategy and business plans.
Key change: Infrastructure requirements moved from Sub-Principle 2 to 3, combining with proactivity requirements. Third-party experts now fall within this sub-principle as delivery elements.
Sub-Principle 4: Case Reserving
Accurate and timely case reserving must be maintained in line with reserving philosophy. Relevant insights, including development potential, must be exchanged and considered within the overall business.
Key additions:
- Development potential analysis required
- Reserving recommendations by third parties must be addressed
- Case reserve tolerances must be established
- Lloyd's Claims Lead Arrangements (LCLA) reserving obligations incorporated
Sub-Principle 5: Delegated Claims Handling
Delegated claims handling services must be delivered consistently and effectively, aligned to the Claims Management Strategy and business plans.
Key change: Now exclusively addresses delegated claims handling to promote intensive focus. Third-party experts moved to Sub-Principle 3.
Sub-Principle 6: Governance and Oversight (now Foundational-only maturity level)
Robust governance and oversight, including at executive level, must monitor and manage delivery of outcomes against expectations while identifying and realizing improvement opportunities.
Key additions:
- Executive-level involvement explicitly required
- Focus on outcomes, not just activities
- Continuous improvement mandate
The Development Process
Lloyd's didn't unilaterally impose these changes. The revision involved:
- Lloyd's Market Association (LMA) sponsorship
- LMA Claims Committee and NexGen Claims Committee participation
- Market working group representing diverse business models
- Five three-hour workshops over several months
- Iterative drafting incorporating practitioner feedback
- Consultation with Heads of Claims across managing agents
This collaborative approach ensures the revised principle reflects market realities and practitioner expertise rather than regulatory theory disconnected from operational reality.
Timeline and Implementation
Lloyd's established a clear transition timeline recognizing that syndicates need time to adapt:
November 2024: Revised principle published with detailed guidance January-March 2025: Lloyd's Claims support available to help managing agents prepare for attestation March 2025: Managing agents submit attestations against revised principle May-June 2025: Lloyd's issues engagement letters outlining assessed maturity vs. expected maturity December 2025: Oversight letters confirm managing agent ratings and proposed 2026 engagement January 1, 2026: Hurdle Principle takes effect
Managing agents must reach expected maturity on any new elements by January 1, 2026 or face potential rating impacts.
How Hurdle Status Affects Syndicates
The practical impact of hurdle status is substantial:
Rating Mechanics
Syndicate Category cannot exceed lowest hurdle Principle rating:
| Lowest Hurdle Principle Rating | Maximum Syndicate Category | |--------------------------------|----------------------------| | Marginally Below Expectations | MODERATE | | Below Expectations | UNDERPERFORMING | | Well Below Expectations | UNACCEPTABLE |
Example scenario: A syndicate excels at underwriting (Above Expectations), maintains strong reserves (Above Expectations), has robust governance (Meets Expectations), and demonstrates healthy culture (Above Expectations). However, claims management rates Below Expectations due to slow claim handling and poor customer service.
Result: Despite overall excellence, the syndicate's category cannot exceed UNDERPERFORMING because of the claims hurdle failure. This triggers intensive oversight, business plan restrictions, and reputational damage.
Oversight Consequences
Syndicates falling below expectations on Claims Management face:
MODERATE category (Marginally Below Expectations on claims):
- Enhanced monitoring by Lloyd's Claims team
- Required improvement plans with measurable targets
- Quarterly progress reviews
- Potential restrictions on business growth until improvement demonstrated
UNDERPERFORMING category (Below Expectations on claims):
- Intensive oversight including on-site visits
- Detailed remediation plans required
- Business writing restrictions (may be prevented from writing new business in certain classes)
- Elevated scrutiny of all aspects of operations
- Public disclosure of underperforming status affecting market reputation
UNACCEPTABLE category (Well Below Expectations on claims):
- Crisis-level intervention by Lloyd's
- Potential suspension of underwriting authority
- Possible forced exit from Lloyd's market
- Reputational damage that can end a managing agent's business
What Syndicates Must Do Now
Managing agents face clear requirements to meet hurdle standards:
1. Elevate Claims to Board-Level Focus
Claims can no longer be delegated entirely to claims departments. Boards must:
- Receive regular claims performance reports with key metrics
- Discuss claims strategy in business planning sessions
- Allocate appropriate resources to claims functions
- Hold executives accountable for claims outcomes
- Integrate claims considerations into underwriting decisions
2. Develop Comprehensive Claims Management Strategies
Generic "claims commitment" statements are insufficient. Strategies must address:
- Service level commitments with measurable targets (claim acknowledgment within 24 hours, initial decision within 10 days, etc.)
- Resource planning tied to business volumes and complexity
- Technology investments supporting claims efficiency
- Third-party relationships and oversight
- Continuous improvement initiatives
- Customer feedback mechanisms
3. Implement Systematic Resource Adequacy Monitoring
Syndicates must establish methods to:
- Measure claims workload (claims per adjuster, complexity-adjusted volumes)
- Monitor service levels (turnaround times, customer satisfaction, quality metrics)
- Forecast resource needs based on business plan projections
- Adjust staffing proactively rather than reactively
4. Build Proactive Claims Cultures
Move from reactive claims handling (wait for problems, then respond) to proactive management:
- Early intervention on potentially complex claims
- Regular communication with cedants/insureds about claim status
- Anticipating issues before they escalate
- Using data analytics to identify patterns and trends
- Continuous process improvement based on claims experience
5. Strengthen Governance and Executive Oversight
Executive teams must:
- Designate executive sponsors for claims excellence initiatives
- Review claims outcomes in management meetings
- Connect claims performance to compensation and incentives
- Ensure claims leaders have authority and resources
- Create feedback loops between claims experience and underwriting decisions
Broader Market Implications
Lloyd's decision ripples far beyond Lime Street:
Global Insurance Standards Shift
When Lloyd's—the world's premier specialist market—declares claims management equal to underwriting profitability, the global insurance industry notices. Expect:
Other markets adopting similar standards: National insurance markets (particularly in Europe and Asia) often look to Lloyd's for best practices. Claims elevation to strategic priority will influence regulatory frameworks globally.
Insurers differentiating on claims: Market competition increasingly focuses on claims service quality. Insurers advertising "fastest claims payment" or "highest customer satisfaction" reflect this competitive shift.
Cedant expectations rise: Reinsurance buyers and large commercial insurance purchasers will demand Lloyd's-caliber claims service from all markets, forcing universal improvement.
Technology Investment Acceleration
Meeting Lloyd's claims excellence standards requires technology:
Claims management systems: Modern platforms providing workflow automation, real-time status tracking, document management, and analytics.
Data analytics: Tools identifying claims patterns, predicting outcomes, and optimizing reserve accuracy.
Customer portals: Self-service platforms allowing cedants and policyholders to submit claims, track status, upload documents, and communicate with adjusters seamlessly.
AI and automation: Routine claims processing, fraud detection, and predictive analytics powered by artificial intelligence.
Syndicates previously considering technology investments optional now recognize them as essential to meet hurdle standards.
Talent and Training Emphasis
Claims professionals gain elevated status and career prospects:
Compensation increases: As claims moves from back-office function to strategic priority, compensation for skilled claims professionals rises to attract and retain talent.
Career path development: Clear progression from claims assistant to senior adjuster to claims manager to executive claims leader, with accompanying development programs.
Specialized expertise: Growing demand for specialists in complex claims areas: cyber claims, catastrophe claims, professional liability, marine salvage, aviation incidents.
What This Means for Insurance Buyers
For businesses and individuals purchasing coverage through Lloyd's:
Expect Better Claims Service
Lloyd's hurdle Principle creates powerful incentives for syndicates to excel at claims. Benefits include:
Faster claim processing: Syndicates avoiding "Below Expectations" ratings must hit service level targets, meaning faster acknowledgment, assessment, and payment.
More transparent communication: Clear, proactive communication about claim status, requirements, and decisions becomes standard rather than exception.
Fairer claim outcomes: Robust governance and oversight reduce arbitrary denials and ensure consistent application of coverage terms.
Easier claims submission: Technology investments required for hurdle compliance translate to better customer-facing portals and systems.
Understand Syndicate Differences
Not all Lloyd's syndicates perform equally on claims. When purchasing Lloyd's coverage (usually through brokers), buyers can now ask:
- What's your syndicate's Claims Management rating from Lloyd's?
- What service level commitments do you provide?
- How do you measure and report claims performance?
- Can you share claims processing time statistics?
Brokers placing coverage should consider claims capabilities alongside pricing and coverage terms when selecting syndicates.
Hold Syndicates Accountable
If you experience poor claims service from a Lloyd's syndicate:
- Provide feedback to your broker (who can escalate to Lloyd's if needed)
- Reference Lloyd's Claims Management standards in discussions
- Recognize that Lloyd's oversight creates accountability mechanisms
Challenges and Open Questions
Lloyd's bold move raises important questions:
Implementation consistency: Will Lloyd's apply hurdle standards consistently across all syndicates, or will political considerations create double standards?
Resource strain for smaller syndicates: Small specialty syndicates may struggle to implement sophisticated claims management systems and processes. Does hurdle status disadvantage smaller players and drive market concentration?
Measuring claims excellence: Some claims performance metrics are objective (turnaround time), others subjective (customer service quality). How will Lloyd's ensure fair, consistent assessment?
Balancing speed and thoroughness: Pressure to hit service level targets could incentivize quick claim payments over thorough investigation. How will Lloyd's prevent this unintended consequence?
International complexity: Lloyd's operates globally with varying legal systems, regulations, and claim practices. How does the universal hurdle principle accommodate legitimate regional differences?
These questions will be answered as the hurdle principle operates in practice over coming years.
The Bigger Picture: Claims as Competitive Advantage
Lloyd's transformation of claims from operational function to strategic hurdle reflects broader insurance industry evolution:
Commoditization of coverage: In many lines, insurance coverage terms are increasingly standardized. Differentiation based on policy wording becomes difficult.
Service as differentiator: When products are similar, service distinguishes winners from losers. Claims service—the moment of truth when customers discover whether their insurance delivers value—becomes the critical differentiator.
Digital expectations: Consumers and businesses accustomed to Amazon, Uber, and instant digital experiences expect insurance to operate similarly. Claims must be fast, transparent, and customer-friendly.
Reputation economy: In an era of online reviews, social media, and instant communication, poor claims experiences spread quickly and damage reputations. Excellence becomes essential.
For consumers, these trends are positive. Insurance companies competing on claims excellence deliver better experiences than those viewing claims as cost centers to minimize.
Modern insurance platforms like Soma embody this philosophy: Insurance should be transparent, customer-friendly, and excellent at the moments that matter most—especially claims. As traditional markets like Lloyd's embrace this customer-centric approach, the entire industry benefits.
Whether you're purchasing specialty insurance through Lloyd's or standard coverage from domestic carriers, claims service quality should be a primary consideration in your insurance decisions. Lloyd's elevation of claims to hurdle Principle status signals industry-wide recognition that excellent claims handling isn't optional—it's fundamental. Working with insurers and platforms committed to claims excellence ensures that when you need your insurance most, it delivers the protection and service you deserve. Modern insurance providers like Soma are built around this customer-first principle, combining transparent processes, responsive service, and sophisticated technology to make claims handling seamless and fair.
Sources: Lloyd's of London Principles for Doing Business Summary of Revisions November 2024, Lloyd's Market Association Communications, Lloyd's Principles-Based Oversight Framework Documentation, Insurance Industry Analysis