Syndicate results 2019 #18 Syndicate 2010 Lancashire MMX

Active Underwriter J M Barnes

The Lloyd’s syndicates have now published their results and, in some cases, added detail and an outlook for 2020. As in the past two years, IMN is summarizing the results from all syndicates that have a marine interest which have provided some information on the marine side.

The principal activity of Syndicate 2010 remains the transaction of general insurance and reinsurance business in the United Kingdom at Lloyd’s of London. The main lines of business are non-marine and aviation reinsurance and direct and facultative property. Lancashire Syndicates Limited (LSL) is the managing agent for Syndicate 2010. It also acts as managing agent for Syndicate 3010. Cathedral Capital Holdings Ltd (CCHL), registered in England and Wales, is the immediate parent company of LSL. Lancashire Holdings Limited (LHL), incorporated in Bermuda, is the ultimate parent company of LSL.

LHL is the largest group and CCHL is the smallest group which includes LSL and for which the consolidated financial statements are prepared. Within the Lancashire Group there are two (re) insurance companies, Lancashire Insurance Co (UK) Ltd (incorporated in the UK) and Lancashire Insurance Co Ltd (incorporated in Bermuda). In addition, the Lancashire group includes Lancashire Capital Management Ltd (incorporated in Bermuda) which is the underwriting manager for Lancashire Capital Management Ltd, a special purpose insurer. There have been no transactions with this latter company.

N P Davenport, chairman, said that the 2018 year had started to see the demand and supply balance shift in the Syndicate’s favour, albeit slowly. He said that it was the first year since 2012 that the Syndicate had seen positive rate movements across many areas of the portfolio. The 2019 year had seen a continuation of that trend, with further improvement in rating conditions and an average rate increase of circa 6%.

Davenport said that the premium increases attained in 2018 were maintained in 2019, and the top line remained relatively flat at $285.4m.

There were three major catastrophe losses during the year; hurricane Dorian and typhoons Faxai and Hagibis. Despite these losses, the Syndicate recorded an underwriting profit of $3.9m and, helped by a strong investment performance, produced a final calendar year result of $7.8m.

The three 2019 natural catastrophes have largely fallen on the 2019 year of account although a portion has also impacted the 2018 year of account. The 2018 year of account was also impacted by a number of catastrophe losses.

At present the forecast loss for 2018 remains within the published range.

Davenport said that for 2019 a combined ratio of 97.9% in a year where there were three major catastrophe losses represented a positive result, especially when combined with a 3.4% return on the investment portfolio.

On 23rd December 2019 managing agent Cathedral Underwriting Ltd changed its name to Lancashire Syndicates Ltd. Davenport said that this helped to align the Syndicate with the Lancashire brand and marked “the start of a new chapter within the Lancashire Group of companies”.

He concluded that, although the underwriting environment continued to prove challenging, the market was seeing positive signs in most classes.

The result for the 2019 calendar year was a profit of $7.8m (2018: $29.8m loss) and a combined ratio of 97.9% (2018: 115.0%).

Although the catastrophe loss activity in 2019 was more benign than 2017 and 2018, Lancashire said that the year presented the market with some challenges in relation to losses. During 2019 the market experienced loss creep from prior year events such as hurricane Irma (2017) and typhoon Jebi (2018). The most material deterioration coming from typhoon Jebi, which materially increased during the first half of 2019 from the reserves set at December 2018.

At December 2018 the estimated ultimate insured market loss from typhoon Jebi was estimated to be in the region of $8bn. By June 2019 this had increased to about $13bn.

There were some improvements in prior year loss events, mainly on the Aviation account, which helped negate some of the increases from Irma and Jebi.

In addition to prior year loss creep, 2019 was also impacted by new loss events. The most notable of these included hurricane Dorian, which caused devastation in the Bahamas before skirting the US east coast, and Japan, which experienced two significant typhoons, Faxai and Hagibis.

$’000s 2017 account 2018 account  2019 account 31 December 2019 31 December 2018
Gross premiums written (11,705) 22,774 274,306 285,375 292,401
Gross premiums earned (7,282) 107,042 178,284 278,044 277,399
Net premiums earned (4,187) 87,820 104,317 187,950 195,280
Profit/(loss) for the financial year 16,358 22,093 (30,689) 7,762 (29,845)
Loss ratio (%) 441.8 47.8 86.3 60.4 79.1
Combined ratio (%) 437.1 76.8 129.3 97.9 115.0

Sector analysis

2019 $’000s GWP GPE Gross claims Net op exps Reins Bal Total excl inv ret Net tech prov
Direct MAT 6,365 6,201 (4,130) 1,585 (637) 3,019 1,207
Total 107,106 104,354 (59,968) (23,068) (10,719) 10,599 81,629
Reinsurance acceptances 178,269 173,690 (115,093) (47,448) (17,841) (6,692 ) 253,496
Grand Total 285,375 278,044 (175,061) (70,516) (28,560) 3,907 335,125
2018 $’000s GWP GPE Gross claims Net op exps Reins Bal Total excl inv ret Net tech prov
Direct MAT 6,090 5,021 (1,357) (335) (2,095) 1,234 2,377
Total 103,531 93,388 (72,468) (42,212) 3,751 (17,541) 100,362
Reinsurance acceptances 188,870 184,011 (157,863) (33,770) (9,932) (17,554 ) 245,343
Total 292,401 277,399 (230,331) (75,982) (6,181) (35,095) 345,705