The Lloyd’s syndicates have now published their results and, in some cases, added detail and an outlook for 2020. As last year, IMN is summarizing the results from all syndicates that have a marine interest which have provided some information on the marine side.
Talbot Underwriting Ltd CEO Chris Rash
Active Underwriter:
Ian Peterson (Appointed 11th January 2021)
David Morris (Resigned 11th January 2021)
In his summary of the year, CEO Chris Rash said that 2020 had been one of challenge and change, with everyone having to adapt to living and working in a Covid-19 environment.
At Talbot Underwriting all staff had been working remotely since March 17th 2020 and this remained the case as at the time of this report.
Premiums for the year increased by 7.4% to $1,059.1m (2019: $985.7m). Claims were significantly impacted by Covid-19 losses arising from event cancellation policies in the Contingency class.
Together with a lower investment return of 2.4% (2019: 3.8%), this meant the result for the year was a loss of $42.3m (2019: profit of $89.4m).
The combined ratio for the year deteriorated to 110.0% (2019: 94.6%).
Rash said that the underlying performance of the business, excluding Covid-19-related losses, remained strong with an underlying combined ratio of 85.7% (2019: 94.6%).
The syndicate capacity for the 2021 year of account has increased to £760m (2019: £650m). Talbot expects to see a continuation of rate improvements in 2021.
| Results for the financial year ($m) | 2020 | 2019 | 2018 | 2017 | 2016 |
| Gross premiums written | 1059.1 | 985.7 | 950.5 | 921.1 | 970.7 |
| Net premiums written | 830.8 | 791.7 | 749.9 | 721.6 | 795.0 |
| Net earned premiums | 809.7 | 769.8 | 746.6 | 742.1 | 774.4 |
| Net claims incurred | (602.7) | (432.1) | (518.8) | (505.7) | (430.9) |
| Net acquisition costs | (186.2) | (181.9) | (178.4) | (182.7) | (188.9) |
| Underwriting result before administrative expenses | 20.8 | 155.8 | 49.4 | 53.7 | 154.6 |
| Administrative expenses | (101.9) | (114.5) | (134.6) | (136.9) | (138.3) |
| Investment return | 34.5 | 51.5 | 17.7 | 18.4 | 18.2 |
| Foreign exchange gains/(losses) | 1.2 | (0.4) | 3.8 | (3.3) | 14.6 |
| Profit/(loss) for the financial year | (42.3) | 89.4 | (63.7) | (68.1) | 49.1 |
| Key performance indicators | 2020 | 2019 | 2018 | 2017 | 2016 |
| Claims ratio (%) | 74.4 | 56.1 | 69.5 | 68.1 | 55.6 |
| Expense ratio (%) | 35.6 | 38.5 | 41.9 | 43.1 | 42.3 |
| Combined ratio (%) | 110.0 | 94.6 | 111.4 | 111.2 | 97.9 |
Gross premiums written by class of business ($m)
| 2020 | 2019 | 2018 | 2017 | 2016 | |
| Marine | 229.9 | 226.6 | 218.5 | 226.8 | 246.0 |
| Political Risk | 102.3 | 102.5 | 99.4 | 82.3 | 78.6 |
| Political Violence and War | 135.9 | 124.8 | 106.4 | 113.2 | 113.0 |
| Property | 321.0 | 289.0 | 295.6 | 256.2 | 276.9 |
| Specialty | 177.5 | 149.0 | 152.7 | 148.4 | 156.4 |
| Treaty | 92.5 | 93.8 | 77.9 | 94.2 | 99.8 |
| Total gross premiums written | 1059.1 | 985.7 | 950.5 | 921.1 | 970.7 |
The economic fallout from COVID-19 was estimated to have reduced premiums by $48.0m. Just over half of this had fallen on the Contingency class due to the absence of event cancellation business.
Political Risk was also been affected by the global economic downturn and reduction in investment.
The syndicate has decided to limit Financial Lines liability business “to protect against recession-driven claims”.
Reinsurance premiums for the calendar year were $228.3m (2019: $194.0m), an increase of $34.3m, or 17.7%.
The deterioration of the net claims ratio was driven by Covid-19 losses of $194.3m, which arose primarily from event cancellation claims in the Contingency class. The syndicate said that it had reviewed its exposure to event cancellation in a ground-up review of policies to assess coverage and to determine best-estimate probable maximum losses. Recognition of loss estimates at the reporting date were based on actual cancellations and notifications.
Talbot noted that the syndicate was exposed to other claims arising from the Covid-19 pandemic in relation to the Contingency class of business. There was uncertainty about the extent to which such claims would be asserted, the extent to which policies would respond to them, and the net quantum of covered claims after reinsurance.
The syndicate said that it did not consider such uncertainties to be unusual for a carrier at this stage of development.
Other notable large losses included Hurricanes Laura ($28.9m) and Sally ($18.2m).
| 2020 $m | Gross premiums written | Gross premiums earned | Gross claims incurred | Gross operating expenses | Reinsurance balance | Total |
| Direct Marine | 41.1 | 41.6 | (7.0) | (17.0) | (7.3) | 10.3 |
| Energy – marine | 35.3 | 37.8 | (3.3) | (11.0) | (11.0) | 12.5 |
| Total direct | 574.8 | 572.6 | (471.4) | (181.2) | (4.0) | (84.0) |
| Reinsurance business | 484.3 | 460.0 | (306.1) | (128.9) | (22.1) | 2.9 |
| Total | 1,059.1 | 1,032.6 | (777.5) | (310.1) | (26.1) | (81.1) |
| 2019 $m | Gross premiums written | Gross premiums earned | Gross claims incurred | Gross operating expenses | Reinsurance balance | Total |
| Direct Marine | 48.3 | 49.9 | (42.8) | (21.7) | (1.1) | (15.7) |
| Energy – marine | 37.5 | 37.3 | (16.0) | (11.0) | 0.3 | 10.6 |
| Total direct | 568.4 | 563.0 | (313.1) | (195.1) | (43.5) | 11.3 |
| Reinsurance business | 417.3 | 414.5 | (276.6) | (123.2) | 15.3 | 30.0 |
| Total | 985.7 | 977.5 | (589.7) | (318.3) | (28.2) | 41.3 |
Looking forward, the Syndicate anticipated that prices would continue to firm during 2021. However, the market would continue to be challenging due to the combined effects of competition and overcapacity within the market.
The syndicate capacity for the 2021 year of account is £760m, up from £650m in 2020.
At December 31st 2020 the closing 2018 year of account had a surplus of $84.9m, which will be paid to the members as part of the Lloyd’s distribution process in the second quarter of the year.
Emoluments
The syndicate has no direct employees. The staff and key management personnel who provide services to the syndicate are employed by various group companies. As These group companies charge management fees to the syndicate for providing services. Staff costs are not separately identified.
The estimated aggregate emoluments for the active underwriter were $500,000 in 2020, down from an estimated $600,000 in 2019.