Active Underwriter – J D Spence
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.
Lancashire Syndicates Limited (LSL) was formerly Cathedral Underwriting Ltd and is the managing agent for Syndicate 3010.
The main lines of business are marine cargo, energy, aviation all risks including deductible and hull war, terrorism, power utility, marine hull, and accident and health.
| KPIs $000s | 2018 account | 2019 account | 2020 account | 31 December 2020 | 31 December 2019 |
| Gross premiums written | (1,606) | 14,181 | 156,890 | 169,465 | 128,866 |
| Gross premiums earned | 5,239 | 74,835 | 60,639 | 140,713 | 104,738 |
| Net premiums earned | 5,387 | 52,820 | 35,071 | 93,278 | 72,169 |
| Profit for the financial year | 863 | 15,061 | (6,632) | 9,292 | 7,201 |
| Loss ratio (%) | 29.9 | 42.5 | 59.7 | 48.3 | 47.2 |
| Expense ratio (%) | 46.4 | 25.8 | 59.1 | 39.5 | 43.0 |
| Combined ratio(%)* | 76.3 | 68.3 | 118.8 | 87.8 | 90.2 |
The combined ratio excludes managing agent’s profit commission and is the basis used throughout these accounts.
GWP for the calendar year increased by 31.5% to $169.5m, from $128.9m in 2019. Premium income was increased across existing divisions via a combination of new business and increased pricing on renewal business.
“It was a very different year to that we were expecting, with Covid-19 significantly changing working practices. The whole team need to be commended on the way we switched to working from home. To be able to continue our growth in this environment was a fantastic achievement”, the syndicate said.
Lancashire noted that the rating environment had continued to improve, with several classes now seeing the third consecutive year of positive rate movements.
Reinsurance premiums ceded in 2020 increased by 44.1% to $57.1m, up from $39.7m the previous year. The increased programme spend reflected the continued growth of some classes where LSL purchases quota share reinsurance, as well as increased income in most areas.
The underwriting result was impacted by the WEC Power loss and the Hammerfest energy loss. The Syndicate was only lightly affected by Covid-19 in terms of losses. Losses from major natural catastrophes had little impact.
Outlook
The syndicate said that its underwriters were now able to set pricing at levels that were now adequate, and they were able to amend terms and conditions to eradicate wider coverages that were generated in the previous soft market, noting that “the demise of many lineslips has allowed our underwriters to underwrite risks selectively”.
Increased income at the Syndicate meant that the expense ratio was reducing, benefiting from economies of scale.
For 2021 the syndicate planned to increase income through organic growth of the Cargo, Aviation and Power classes. LSL anticipated that the continuation of improved rating conditions would further contribute to this growth. It noted that the Energy and Terrorism accounts were both showing early signs of improvement.
The Syndicate capacity for the 2021 year of account is increased by £25m to £175m.
2018 YOA underwriting result
The 2018 year of account closed on December 31st 2020 with a profit of $3.0m, equating to a profit of 2.3% of capacity. All classes made positive contributions to the underwriting balance, with the year of account benefiting from relatively benign catastrophe experience, together with favourable development on prior years.
2019 Account year
The latest forecast for the 2019 year of account was issued in the Syndicate’s Q4 QMA submission on February 16th 2021, with the range narrowed at 12.5% to 5% of stamp capacity. The Syndicate’s exposure to the large losses incurred during 2019 was modest. The net impact of these losses to the 2019 year of account had been offset by favourable attritional experience.
2020 Account year
For 2020 the Syndicate’s capacity was increased to £150m. Although it was still too early to produce a 2020 forecast range due to a large amount of unexpired exposure, the events of 2020 would remain critical to how the year of account developed, the Syndicate said.
Syndicate 3010’s investment portfolio achieved a return of $0.5m in 2020, down from $1.1m the year before.
Sector
| 2020 $000s | Gross premiums written | Gross premiums earned | Gross claims incurred | Net operating expenses | Reinsurance balance | Total excluding investment return | Net technical provisions |
| Direct MAT | 58,254 | 48,350 | (19,285) | (15,415) | (8,569) | 5,081 | 42,321 |
| Direct Total | 83,605 | 67,438 | (29,549) | (21,435) | (11,154) | 5,300 | 60,215 |
| Reinsurance acceptances | 85,860 | 73,275 | (29,400) | (18,147) | (22,343) | 3,385 | 63,543 |
| Grand Total | 169,465 | 140,713 | (58,949) | (39,582) | (33,497) | 8,685 | 123,758 |
| 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 |
The Active Underwriter, the highest-paid director, received aggregate remuneration of $427,000 in 2020 (2019: $412,000)