Syndicate results 2019 #27 Syndicate 3010 Lancashire

Active Underwriter J D Spence

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.

Lancashire Syndicates Limited (LSL) was formerly Cathedral Underwriting Ltd and is the managing agent for Syndicate 3010.

The main lines of business for the Syndicate are marine cargo, energy, aviation all risks including deductible and hull war, terrorism, power utility and marine hull.

KPIs $000s 2017 account 2018 account 2019 account 31 December 2019 31 December 2018
Gross premiums written 359 15,353 113,154 128,866 84,691
Gross premiums earned 4,766 53,593 46,379 104,738 67,415
Net premiums earned 3,580 41,580 27,009 72,169 49,842
Profit for the financial year 3,039 11,520 (7,358 ) 7,201 1,675
Loss ratio (%) (36.1) 42.3 65.8 47.2 43.0
Expense ratio (%) 40.4 30.7 62.3 43.0 54.6
Combined ratio(%)* 4.3 73.0 128.1 90.2 97.6

The combined ratio excludes managing agent’s profit commission and is the basis used throughout these accounts.

Gross written premiums for the calendar year rose by 52.2% to $128.9m (2018: $84.7m). The Syndicate increased the amount of premium income written across existing divisions, comprising a combination of new business and increased pricing on renewal business. The new classes that were added in 2018 were Power, Marine Hull and Aviation Deductible, all of which made valuable contributions.

The Syndicate said that the rating environment improved materially (“at last”). It said that the Lloyd’s performance actions and Decile 10 approach led to some competitors withdrawing from various classes and some syndicate closures. “The result was a very different landscape for some of our classes”, it said.

Reinsurance premiums ceded in the year increased by 84.0% to $39.7m (2018: $21.6m). The increased programme spend reflected the extended coverage of the new classes and increased income.

The underwriting result was impacted by losses from T1 Power Holdings and Talen Energy. The Korea National Fire Agency H225 Helicopter loss also had an impact. As with previous years, losses from major catastrophes had little impact.

The net loss ratio for the 2019 calendar year was 47.2% (2018: 43.0%).

Outlook

The Syndicate said that the well-publicized performance drive initiated by Lloyd’s during 2018 and 2019 had resulted in the closure of some syndicates and the withdrawal of some syndicates from classes in which they were underperforming. This had resulted in a very changed marketplace in these classes.

Lancashire Syndicate said that its underwriters were now able to set pricing at levels that were “adequate” and were able to amend terms and conditions to eradicate terms and conditions “creep”.

The Syndicate said that the demise of many lineslips permitted its underwriters to underwrite risks selectively. With the income of the Syndicate increasing, it was benefiting from economies of scale; the expense ratio was reducing.

For 2020 income was planned to increase through organic growth of the Cargo, Aviation and Power classes. The syndicate anticipated the continuation of improved rating conditions that would contribute further to this growth. The Energy and Terrorism accounts were both showing early signs of improvement.

The Syndicate capacity for the 2020 year of account is increased to £150m from £100m.

Sector

2019 $000s Gross premiums written Gross premiums earned Gross claims incurred Net operating expenses Reinsurance balance Total excluding investment return Net technical provisions
Direct MAT 55,443 45,062 (20,505) (16,069) (7,934 ) 554 36,035
Direct Total 74,522 60,571 (26,901) (19,403) (10,664 ) 3,603 45,814
Reinsurance acceptances 54,344 44,167 (21,308) (12,017) (7,778 ) 3,064 41,787
Grand Total 128,866 104,738 (48,209) (31,420) (18,442 ) 6,667 87,601
2018 $000s Gross premiums written Gross premiums earned Gross claims incurred Net operating expenses Reinsurance balance Total excluding investment return Net technical provisions
Direct MAT 30,544 24,733 (13,093) (10,482) (3,006 ) (1,848) 35,233
Direct Total 48,221 40,692 (13,819) (16,550) (6,822 ) 3,501 43,717
Reinsurance acceptances 36,470 26,723 (14,201) (11,238) (4,156 ) (2,872) 28,849
Grand Total 84,691 67,415 (28,020) (27,788) (10,978 ) 629 72,566

https://www.lloyds.com/investor-relations/financial-performance/syndicate-reports-and-accounts/2008/05/3010