Another year and another set of Lloyd’s syndicate results come into the world but after one of the worst years in the market’s 330-year history, four fifths of syndicates posted a loss with 17 of those reporting a combined ratio in excess of 150 percent.
Last year was arguably the toughest since 2001 for underwriters who ply their trade on One Lime Street.
As the rest of the financial services world basked in the glare of a surging bull market, EC3’s specialty (re)insurers had an inkling – even before the autumn catastrophes – that the full year results were unlikely to be pretty.
The Corporation’s overall £2bn loss which it revealed last month only fuelled the anxiety that some syndicates had been mightily scarred by a plethora of losses from a trio of Atlantic hurricanes, wildfires in California and Mexican earthquakes among others – while it also became clear that carriers would be get no reprieve from the underlying attritional claims activity – or their expenses.
Re-Insurance.com has compiled the data, and found that of the 103 syndicates trading last year, 18 posted a combined ratio in excess of 150 percent, with a total of 82 reporting an overall loss for 2017.
Cat losses from the second half of last year clearly played an enormous role in this result, with 13 syndicates reporting a net claims bill that exceeded their total gross written premium (GWP) for the year.
Some of the market’s biggest players had over half of their annual premium wiped out by their bottom line catastrophe burden, including XL Catlin Syndicate 2003 which was hit with a net bill for the year of over $1.7bn, while Boston-based Liberty’s Syndicate 4472 endured $1.18bn worth of claims.
When even the biggest beasts in the jungle are struggling under the weight of their claims you know it has been a hectic 12 months for everyone.
Combined Ratio
The combined ratio: The go-to measure for underwriting performance and, also, the only time in the financial year that (re)insurance professionals are desperate to keep their efforts below 100 percent.
And 2017 produced a few combined ratios to send chills down the spine of even the most-seasoned of Lloyd’s underwriters.
At the wrong end of the scale, Allied World 2232 reported a result of 196 percent for the year, according to figures compiled by re-Insurance.com, with catastrophes in the second half of the year compounding prior-year under reserving issues.
Asta’s syndicate 6126 – the special purpose syndicate (SPS) for Norwegian P&I club Skuld – had a similarly torrid time, coming in a close second last with a combined ratio of 195.9.
Another of the third-party managing agent’s syndicates, the SPS for Blenheim 5886, was the next worst performing, posting a combined ratio of 184.1 percent in its first year of operation after being founded by the former management of Cathedral last year.
Despite a strong overall performance, Bermudian carrier Axis’ Syndicate 6129 had a combined ratio of 180.4 percent pushing it to an overall loss of £31.4mn under the strain of a £21mn claims bill.
On the other end of the scale, the market’s top underwriting performer for the year was Ark’s syndicate 6105, which writes quota share business for its 4020 platform, with a sterling combined ratio of 73.8 percent helping it to a profit of £3.45mn.
Starr’s 1919 managed an impressive 82.2 percent for a profit of £19 mn, closely followed by ArgoSyndicate 1910 which remained in the black at 85.5 percent.
A notable but still impressive omission from the top performers is Beazley – whose syndicates 3623 and 3622 reported combined ratios of 90 and 91 percent respectively, while the London-listed company’s 623 and 2623 businesses managed to escape the worst of the losses at around 100 percent.
Lancashire’s catastrophe-heavy Lloyd’s arm Cathedral also evaded significant pain, posting a combined ratio of 100.8 percent despite suffering net claims of over $209mn.
The Bottom Line
After the claims are counted and the premiums set aside, all eyes turn to the bottom line.
As one might have expected, that paints a similarly grim picture of how the market performed in 2017.
MS Amlin’s Syndicate 2001 posted the second-worst ever recorded syndicate loss in Lloyd’s 330-year history with a £499.7mn deficit for the 2017 year.
The result – which came in the year that long-serving CEO Charles Philipps left the firm – has only been exceeded once before when Tokio Marine Kiln’s syndicate 1880 recorded an $880mn loss from a group-wide reinsurance of the Japanese carrier’s Thai flood losses in 2001.
Syndicate 2001’s result was a quarter of the Lloyd’s market net loss of £2bn for 2017, and was more than twice-as-large as the second-worst performer, XL Catlin’s syndicate 2003, which posted a loss of £213.7mn ($299.2mn).
MS Amlin syndicate 2001 and XL Catlin Syndicate 2003 are two of the largest syndicates trading on the Lloyd’s platform and wrote £2.08bn and £2.18bn in gross written premiums in 2017.
XL Catlin’s result could have been worse were it not for reinsurance it buys from other group entities. The syndicate ceded 8.7 percent of its whole account via quota share arrangements to group entities and also buys a whole account stop loss from XL Insurance in Bermuda.
In contrast, fellow Lloyd’s blue-chip insurers disclosed much better numbers despite the impact of Hurricanes Harvey, Irma and Maria and the California wildfires.
Notable results include Beazley Syndicate 623 and Hiscox Syndicate 33, which both managed to eke out small profits of £8.9mn and £5mn respectively.
Other sizeable losses from syndicates trading on the Lloyd’s platform included:
- Argo 1200 – £112.3mn
- Axis 1686 – $118.95mn
- Apollo 1969 – $87.2mn
- Faraday 435 – £111.29mn
- Tokio Marine Kiln – 510 £98.8mn
The verdict
As expected, the figures borne out in the individual syndicate numbers for last year are not pretty.
A lot of carriers have been hit with massive claims bill that have dealt a severe shock to the system, with the comeback of catastrophes revealing just how dependent the market had become on benign loss activity to mask wider issues.
While there have been hopes expressed in some corners that the scale of last year’s losses should prompt a hardening, or at least flattening, rate environment for 2018, that does not seem to have materialised in the first quarter, with flat to slightly up the best deal going for many underwriters.
This year will be the real acid test for Lloyd’s mettle. The Corporation touts the market resilience in heavy catastrophe years, but with a £2bn loss and questions emerging over the sustainability of the status quo, syndicates will be under pressure to show in the next nine months that they can handle the heat even if another set of catastrophes hits this autumn.
If you are a registered user and would like a copy of the compiled Syndicate-by-Syndicate statistics, please contact Matt Neill at matt.neill@wbmediagroup.com.
