latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/pruning-continues-as-loss-making-lloyd-s-syndicates-strive-for-profit-58165477 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

In This List

Pruning continues as loss-making Lloyd's syndicates strive for profit

Part Two IFRS 9 Blog Series: The Need to Upgrade Analytical Tools

2018 US Property Casualty Insurance Market Report

Fintech

Fintech Funding Flows To Insurtech In February

Lemonade Growing Premiums Faster Than Esurance's Homeowners Business Did


Pruning continues as loss-making Lloyd's syndicates strive for profit

Some Lloyd's of London syndicates are continuing to exit lines of business as the marketwide push for underwriting profitability forges on, but others are pushing for growth as rates continue to harden in response to the profitability measures, three years of catastrophe losses and deteriorating casualty performance.

The Lloyd's drive to improve underwriting performance, part of which involves syndicates improving or removing the worst-performing 10% of their books, known as Decile 10, is now part of standard operating procedure in the 334-year-old insurance market following its initial launch in 2018.

Several syndicates have left Lloyd's altogether because of poor performance since then, and four decided not to continue into 2020.

SNL Image

Getting out

Despite lower catastrophe losses in 2019, and the remedial work already started in 2018, underwriting performance has continued to worsen at some syndicates. S&P Global Market Intelligence data shows that more than 30 syndicates reported worse combined ratios in 2019 than in 2018.

Excluding run-off and special purpose syndicates, Aspen Syndicate 4711 suffered the biggest year-over-year deterioration in combined ratio, a key measure of underwriting performance. Syndicate 4711's ratio jumped 27.53 percentage points to 138.71% for 2019.

SNL Image

The syndicate said in its annual report that it had stopped writing marine and energy liability in February 2020 because of "significant deterioration on prior years and loss activity in the current year in a market where pricing is not correcting sufficiently enough." It also withdrew from accident and health business in March 2020 because of "adverse claims development versus plan and uncertain sustainable profitability of this type of business with high acquisition and operating costs."

The syndicate had already withdrawn from aviation and marine hull, cargo and professional indemnity in 2018.

SNL Image

Aspen is far from alone. Hartford Financial Services Group Inc.-owned Navigators Syndicate 1221, whose combined ratio deteriorated 21.73 points to 126.39% in 2019, exited hull business in the fourth quarter of 2019 "due to poor performance and stagnant market conditions." It has stopped renewing marine war business "outside a handful of strategic accounts" and is not considering any new marine war business.

Other syndicates exiting multiple lines during 2019 included MS Amlin Syndicate 2001, which stopped underwriting aviation insurance, domestic U.K. property and casualty, pro rata and international casualty, and Argo Syndicate 1200, which pulled out of hull and onshore energy, put its Lloyd's platforms in Singapore and China into run-off and closed its Miami office. Brit Syndicate 2987 also exited Singapore and China, as well as withdrawing from Latin American property facultative reinsurance, casualty, inland marine and engineering.

SNL Image

SNL Image

Scaling back

Others are seeking to pare back business lines rather than withdraw from them outright. Travelers Cos. Inc.-owned Syndicate 5000, which reported a 25.77-percentage-point increase in combined ratio to 136.07%, said it had conducted "a significant amount of remediation work during 2019 within a number of lines of business." It added that this work, coupled with further remediation and rate increases in 2020, "provide encouragement that 2020 will see the syndicate return to an underwriting profit."

Qatar Insurance Co. QSPC-owned Antares Syndicate 1274 said it shed around a third of its property portfolio "in its drive for improved profitability." Sirius International Syndicate 1945 reported a "significant re-underwriting of the property direct and facultative book" in 2019, and Lancashire Syndicate 2010 also reduced its property direct and facultative business "to reduce attritional losses in the portfolio and improve overall profitability."

SNL Image

Going for growth

Not all syndicates are cutting back. The Lloyd's profit push, in tandem with recent catastrophe and man-made events and concerns about casualty reserving, are pushing up rates in many lines of insurance and reinsurance business.

Some syndicates, including Hiscox Syndicate 33, Munich Re Syndicate 457 and Managing Agency Partners Syndicate 2791, have been given "light touch" status by Lloyd's, and so face less scrutiny of their underwriting plans. Syndicate 457 increased its 2020 underwriting capacity by £100 million to £525 million from £425 million, for example.

Some are concerned that Lloyd's will not allow them to grow fast enough. Blenheim Syndicate 5886 said growth agreed with Lloyd's in the most recent planning process would not be enough to accommodate the rate rises and opportunities it sees in its direct property and specialty treaty and so would be applying for a mid-term increase in the 2020 plan "in due course."

The syndicate said in its annual report: "If Lloyd's syndicates are to take advantage of the growing opportunities presenting themselves then Lloyd's centrally need to be able to move as quickly as the market does. If not, then opportunities will be missed and will go elsewhere as unfortunately they are beginning to do."

SNL Image