Lloyd’s Syndicate Results 2017 (42): Hamilton Underwriting Syndicate 3334

With the 2017 numbers for the Lloyd’s syndicates now in, IMN over the next few weeks will report on the marine numbers for those syndicates with a significant interest in this area.

Under the initial ownership structure from inception of the Syndicate in August 2006 to change of control on April 1st 2015, Syndicate 3334 was a specialist insurer of sport and leisure risks, providing liability, personal accident, property and contingency cover. During 2015 the majority of the previous sports and leisure business was placed into run-off.

Hamilton said that the management action post change of control of the managing agency arose as a consequence of the consistently unprofitable nature of the previous business portfolio and a lack of strategic fit going-forward with the Hamilton group strategy.

After change of control the managing agency put forward new plans to Lloyd’s for 2016 which saw the implementation of the Hamilton group strategy to provide a diversified Lloyd’s platform for the group’s international business, benefiting from the Lloyd’s brand, international licenses and strong ratings.

The managing agency actively recruited specialist insurance and reinsurance underwriters to write this business with effect from January 1st 2016 across a core base of five specialist areas:

  • treaty reinsurance
  • casualty/professional
  • speciality
  • property
  • space business.

The subsequent plan for 2017 built on this new structure and was supplemented with an additional class underwriter employed to write marine business.

The capacity of the 2017 year of account was £98.8m, supporting planned gross written premiums of £122.5m.

GWP for the first calendar year of the 2017 underwriting year of account was £91.2m (2016 year of account at 12 months: £61.9m).

On an annually accounted basis the result for the calendar year 2017 was a loss of £38.9m (2016: loss of £21.0m), comprising a loss on the technical account of £37.8m (2016: loss of £19.1m) and an investment return of £0.3m (2016: return of £0.7m), and exchange loss of £1.1m (2016: loss of £1.9m).

The split of the result for the calendar year between open years and run-off years is a loss of £30.9m for the open years and a loss of £8.0m for the run-off years.

The two defining events in calendar year 2017 were the CAT losses arising from three major hurricanes Harvey, Irma and Maria, impacting the open years and the external RITC premium attaching to the run-off years.

The key performance indicators for the calendar year are set out below:

Key performance indicators 2017 (Calendar Year) 2016 (Calendar Year)
Gross premiums written£109.4m£61.8m
Gross premiums, net of acquisition costs£88.3m£50.9m
Total comprehensive income£(37.1m)£(21.0m)
Combined ratio161.9%181.1%
Cash and investments including overseas deposits£54.5m£28.8m

The high combined ratio was driven by the continued loss exposure of the syndicate run-off years with no premiums against which to offset these losses and the incurred administrative expense base for the new Hamilton years exceeding the low earned premium base at an early stage in development.

Hamilton said that this remained the case in 2017, with the additional factor of the hurricane losses contributing to a higher than planned combined ratio for the 2017 year of account.

However, Hamilton said that overall the open years combined ratio saw a modest improvement due to the favourable impact of the earn out of premiums. “Significant investment has been made by the Hamilton Insurance Group to build-out and support the 2016 and 2017 year of accounts and future Hamilton years, with headcount in the managing agency having risen from 48 to 72 between the 2016 and 2017 year-ends”, Hamilton said.

The net loss impact of the HIM losses booked in the 2017 year of account was £14.6m. In addition a further £1.5m of net claims arose from the Mexico earthquake in September 2017. Excluding these losses, the result for the year becomes £10.3m, which was in line with the 12 months forecast in the 2017 plan.

Hamilton recognized that the Syndicate needed to get to a scale such that it can absorb the costs of a full service Lloyd’s Syndicate; as such it was expected that 2018 would also run at a net loss position.

Hamilton said that it would “continue to build out the infrastructure needed to support a fully-fledged Lloyd’s syndicate, whilst ensuring we keep to a simple and relatively low-cost operating model”.

Hamilton said that the risks to UK economic growth remained significant, not least because of the UK’s decision to leave the EU, but noted that the proportion of business arising from the EU was not material to Syndicate 3334. “The Syndicate is committed to putting in place the necessary systems and processes at be able to participate in the Lloyd’s Brexit solution, i.e. the proposed Lloyd’s Insurance Company, based in Belgium”, Hamilton said.

The Hamilton Group has provided the Funds at Lloyd’s for the 2018 year of account. Business is predominantly written in US dollars so the capital base has been put up in USD to avoid currency mismatching. The forecast gross written premium for this year of account is £149.5m, which builds on the 2017 year of account underwriting base (plan for 2017: £122.5m). Growth enhancements include the addition of a cyber class and recruitment of a political violence underwriter.