Syndicate results 2020 #20 Syndicate 2987, Brit

The Lloyd’s syndicates have now published their results and, in some cases, added detail and an outlook for 2021. As in the past three years, IMN is summarizing the results from all syndicates that have a marine interest which have provided some information on the marine side.

Active Underwriter Jonathan Sullivan

Managing agent Brit Syndicates Limited (BSL) is a wholly-owned subsidiary of Brit Insurance Holdings Ltd, which in turn is a subsidiary of Brit Ltd.

KPI $m 2020 2019
Gross premiums written 2,333.4 2,262.4
Net premiums written 1.427.5 1,395.1
Net earned premiums 1,406.8 1,371.8
Underwriting result (196.1) 33.5
Technical account investment income 51.7 28.0
Technical result for the financial year (144.1) 61.5
Non-technical account for the financial year 3.5 29.0
Result for the Financial Year (140.9) 90.5
Combined ratio 113.9% 97.5%

GPW for 2020 reached $2,333.4m, up 3.1% year on year (2019: $2,262.4m).

Global Specialty Direct business increased by 2.7% to $1,771.1m, from $1,724.7m the previous year. Global Specialty Reinsurance increased by 4.6% to $562.3m from $537.7m in 2019.

Growth arose in core Direct classes (Specialty (including Marine), Property, and Cyber) and Reinsurance classes (Property Treaty).

This reflected a combination of continued positive rating movements building on that of 2019 and 2018, capitalizing on market opportunities as they arose, and targeted growth within business initiatives such as Scion, (a US MGA owned by the Brit Group, launched in 2019).

The estimated risk-adjusted rate increase on renewed business was 10.6%. Positive rate movements were achieved across all classes, with the exception of Terrorism, with the largest increases achieved in Property D&F, Marine Cargo and Excess Casualty.

Reinsurance expenditure in 2020 was $905.9m, or 38.8% of GWP. The 2019 numbers were $867.3m, equal to 38.3% of GWP.

A whole account quota share cession to Brit Syndicate 2988 was introduced in 2020. However, this increased cession was largely offset by changes to other parts of the programme.

The retention rate for the period was 76.1%, compared with 78.0% in 2019. The reduction in 2020 reflected continued action taken to improve the Syndicate’s performance by discontinuing underperforming business lines.

The Syndicate reported an underwriting loss of $196.1m, down from a gain of $33.5m the previous year, and a combined ratio of 113.9%, up from 97.5% in 2019. Major losses were a significant factor in the Syndicate’s result for the 2020 financial year.

Major losses $m 2020 2019
Nashville Tornadoes 10.8
US Civil Unrest 9.1
Hurricane Laura 47.5
Hurricane Sally 20.4
Hurricane Zeta 11.5
Hurricane Dorian 19.0
Typhoon Faxai 8.5
Typhoon Hagibis 17.0
Total before COVID-19 related losses 99.3 44.5
COVID-19 related losses 215.0
Total 314.3 44.5

2020 saw an elevated frequency of named US windstorms. The Syndicate picked up losses from several of those events, with the material ones being classified as major losses. Coupled with losses from the Nashville Tornadoes and US Civil Unrest earlier in the year, these events contributed 7.0% to the combined ratio.

The syndicate said that the financial impact of Covid-19 on Brit had been significant, with a loss estimate of $215.0m being reported within Major Losses in the period. Covid-19 had predominantly impacted the Contingency (Event Cancellation) and Casualty Treaty books (Medical Expenses and PA). Losses from the pandemic in 2020 added 15.3% to the combined ratio.

The result also include $49.8m of prior year reserve releases, which improved the combined ratio by 3.5% (2019: 2.9%).

Brit said that the underlying claims performance in 2020 showed improvement, with a reduction in the attritional loss ratio to 48.8% (2019: 51.4%). This reflected favourable underlying claims experience across the Direct portfolio (principally Programmes and Facilities, Property and Specialty) and the effect of strong compound rate increases, combined with a change in mix as the Syndicate targeted growth on high-performing segments, while taking remedial action on more marginal business.

Syndicate outlook

Brit said that significant uncertainty still surrounded Covid-19 and the timeframes over which vaccination programmes would allow lockdowns to be eased. There were also the potential consequences of the measures taken by governments driving yields down to record lows and the likely impact on the economy, with recessionary risks heightened.

The frequency of major events and the magnitude of the resulting claims continued to rise, with 2020’s experience following on from those of 2017 and 2018, the most costly back-to-back years on record.

Political and economic uncertainty and challenges continued, said Brit, noting that 2020 saw continued volatility in financial markets and experienced weakening growth, recession fears, falling yields, heightened tension around international trade and loose monetary policy. “These trends show no signs of abating as we go into 2021 and the resulting outlook for the investment market continues to be challenging”, said Brit.

Against this challenging backdrop there were a number of indicators to give cause for optimism, including rate increases, the withdrawal of capacity in the market from certain classes and the Syndicate’s improving attritional claims ratio.

Syndicate 2987’s GWP is planned to grow by 12.5% in 2021.

Sector result

2020 $m Gross premiums written Gross premiums earned Gross claims incurred Gross operating expenses Reinsurance balance Total
Direct MAT 147.8 141.9 (97.6) (44.0) 8.0 8.3
Total Direct 1,368.2 1,341.6 (1,078.1) (404.1) (17.9) (158.5)
Reinsurance 965.2 982.9 (630.4) (327.6) (62.5) (37.6)
Total 2,333.4 2,324.5 (1,708.5) (731.7) (80.4) (196.1)
2019 $m Gross premiums written Gross premiums earned Gross claims incurred Gross operating expenses Reinsurance balance Total
Direct MAT 128.3 158.5 (107.7) (45.2) (1.6) 4.0
Total Direct 1,277.2 1,283.8 (712.3) (387.2) (170.4) 13.9
Reinsurance 985.2 922.6 (556.2) (318.8) (28.0) 19.6
Grand Total 2,262.4 2,206.4 (1,268.5) (706.0) (198.4) 33.5

Emoluments

All staff in the UK are employed by the Group services company, Brit Group Services Limited, and the full staff cost disclosures are included in the notes to those accounts. Amounts are recharged to the Syndicate as part of the fixed fee charged by the Managing Agent.

No remuneration of the Directors of Brit Syndicates Limited has been charged to the Syndicate for the 2020 and 2019 calendar years. The active underwriter received the following remuneration charged to the Syndicate and included within the fixed fee charged by the Managing Agent:

Aggregate Remuneration $m 2020 0.9 2019 0.8

https://www.lloyds.com/about-lloyds/investor-relations/financial-performance/syndicate-reports-and-accounts/2006-2987