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 Underwriters S A Willmont and C Jarvis
Key Perfomance Indicators
| KPIs £m | 2020 | 2019 |
| Gross premiums written | 1,009.6 | 1,363.8 |
| Earned premiums, net of reinsurance | 872.5 | 995.7 |
| Investment return | 23.5 | 41.1 |
| Profit / (Loss) for the year | (78.1) | 5.5 |
| Gross claims ratio | 78.6% | 53.2% |
| Net claims ratio | 69.6% | 58.5% |
| Expenses ratio | 42.7% | 44.1% |
| Combined Ratio | 112.3% | 102.6% |
| Investment return | 2.1% | 3.8% |
The syndicate noted that 2020 was marked by a series of exceptional events that tested the financial and operational resilience of businesses across the world. The most significant of these was the Covid-19 global pandemic, but there had also been continued global trade tensions, a divisive US presidential election campaign, civil unrest, and a record-breaking Atlantic hurricane season.
Despite the resulting economic impact, financial market performance was surprisingly positive.
The syndicated noted that interest rates looked likely to remain low, while for the UK there was the additional uncertainty resulting from the country’s departure from the EU.
In general insurance markets, the syndicate said that hard market conditions were persisting and had accelerated post Covid-19, with double-digit rate increases being seen across the majority of Property and Casualty classes.
This had led to an influx of capital to the sector, particularly for London and Bermuda focused businesses.
Significant losses relating to Covid-19 had been felt across multiple classes, including contingency, trade credit and liability lines. Other lines were experiencing significant reductions in premium income.
During 2020 integration activities with the business formerly managed by AmTrust at Lloyd’s were materially completed. All of the business in the 2021 year of account will be written through Syndicate 4444, following the decision to merge the syndicates.
Syndicate 4444 recorded a loss of £78.1m during financial year 2020, down from a gain of £5.5m in 2019. The combined ratio rose to 112.3%, from 102.6% in 2019. Canopius said that the result reflected “the enormous financial impact of both the Covid-19 pandemic and a record breaking hurricane season in terms of frequency, producing the largest number of named storms ever”.
The Syndicate said that more positive underwriting conditions emerged in many sectors during 2020 as rates hardened, and underwriting discipline was maintained (with the Syndicate scaling back in poorly performing non-core lines).
There was a marked change in business mix for the 2020 year of account as the Syndicate wrote on a split-stamp basis with Syndicate 1861 following the Canopius Group’s merger of its Lloyd’s business with that of AmTrust at Lloyd’s in 2019.
As a result of this combination, the optimization of the overall portfolio and the effects of the pandemic, GWP reduced to £1,009.6m for 2020, from £1,363.8m in 2019. Claims in respect of the Covid-19 pandemic came to £84.9m on a net basis, adding 9.8pp to the net loss ratio. The payments were primarily as a result of business interruption in the UK Property and Treaty Property classes, as well as the recessionary impacts of the pandemic following the sharp decline in economic activity (Casualty, Political Risk and Treaty classes) and an increase in medical expenses and travel related claims (Accident and Health).
Catastrophe experience in the year was far heavier than it was in 2019. No single loss would be considered market changing on its own, there was a marked increase in the frequency of events. The largest loss experienced was hurricane Laura (£27.2m). Additionally, the syndicate was exposed to Hurricanes Zeta and Sally as well as to a number of smaller US weather events, including the Midwest USA Derecho storm and several instances of tornadoes and hail storms.
Non catastrophe related claims performance improved during 2020, with notable improvements in Credit and Political Crisis, Casualty and Marine.
Where development had been adverse this has been due to single large losses in business units such as Reinsurance and Energy, or because of adverse development on business written outside of the current underwriting year, as had been the case in the Syndicate’s delegated underwriting portfolio.
Total operating expenses for 2020 declined to £372.8m, from £439.0m in 2019.
This was due to a combination of lower earned premium driving lower acquisition costs, alongside close management of overheads and synergies resulting from the combination of operations with syndicate 1861, which were managed together under CMA’s control for the first full year in 2020. The syndicate’s management expected the expense ratio benefits to emerge more fully in 2021.
Underwriting levels were expected to increase due to Covid-19 restrictions being lifted, improving market conditions were anticipated, while in the 2021 year of account business formerly written through syndicate 1861 would be written by syndicate 4444.
The investment portfolio generated £23.5m in 2020, down from £41.1m the previous year.
The 2018 year of account closed with a reported loss of £54.8m. The 2019 year of account is forecast to make a loss of 0.6% of managed capacity and the 2020 year of account is forecast to make a loss of 1.1% of managed capacity.
Both the 2019 and 2020 years of account include material estimates for Covid-19 losses (£41.2m and £34.8m respectively).
During 2020 the reinsurance protection had been particularly valuable as the combination of increased natural catastrophe events and pandemic losses has driven the gross loss ratio to 78.6%, which reduced to 69.6% after reinsurance.
d with a strong team ethic.
Outlook
Syndicate 4444’s allocated capacity for the 2021 year of account has increased to £1,700m (2020: £1,048m) following the decision to merge with Syndicate 1861.
Sector
| 2020 £000s | Gross written premiums | Gross premiums earned | Gross claims incurred | Net operating expenses | Reinsurance Balance | Total |
| Direct Marine & Energy | 83,702 | 91,377 | (78,552) | (26,149) | (1,336) | (14,660) |
| Marine, Aviation & Transport | 64,468 | 66,306 | (44,348) | (21,648) | (2,104) | (1,794) |
| Direct Total | 721,488 | 760,830 | (620,945) | (288,046) | 66,090 | (82,071) |
| Reinsurance inwards | 288,103 | 311,970 | (222,690) | (84,731) | (29,743) | (25,194) |
| Grand Total | 1,009,591 | 1,072,800 | (843,635) | (372,777) | 36,347 | (107,265) |
| 2019 £000s | Gross written premiums | Gross premiums earned | Gross claims incurred | Net operating expenses | Reinsurance Balance | Total |
| Direct Marine & Energy | 93,337 | 76,709 | (51,577) | (24,701) | (6,395) | (5,964) |
| Marine, aviation and transport | 70,819 | 78,190 | (33,514) | (28,100) | (4,570) | 12,006 |
| Total Direct | 909,193 | 781,687 | (398,560) | (329,035) | (77,632) | (23,540) |
| Reinsurance inwards | 454,618 | 378,367 | (218,421) | (109,985) | (51,940) | (1,979) |
| Grand Total | 1,363,811 | 1,160,054 | (616,981) | (439,020) | (129,572) | (25,519) |
Emoluments
The Active Underwriters received the following remuneration charged as a syndicate expense:
| Emoluments £’000 | 2020 | 2019 |
| 1,228 | 447 |
Pension contributions amounting to £46.0k were charged to Syndicate 4444 on behalf of the active underwriters in 2020. (2019: £7.0k).