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.
Syndicate 1200 principally writes accident and health, motor, third-party liability, marine, fire and peril insurance.
Active Underwriter – J Moffatt
Gross written premiums reduced from £561.4m in 2019 to £518.4m in 2020. The Syndicate made a loss of £53.9m, compared with a loss of £27.4m in 2019. The Combined Ratio increased to 116.0%, from 109.2% in the previous year.
Chairman Tony Latham said that total losses from Covid-19 amounted to £66.5m. These were largely within the Contingency account and mainly related to event cancellation cover. Covid-19 increased the Combined Ratio by 15.5pp.
Losses from Natural Catastrophes worsened the Combined Ratio by 11.2pp.
Latham noted that in his last two reports he had reported that Argo had implemented a wide range of remedial actions following an intensive review of underperforming lines of business. This review had been repeated at regular intervals, addressing either continuing underperformance or lack of anticipated improvement in rate and/or conditions. This led to the syndicate’s withdrawal from underwriting D&O business. Latham said that as a direct result of these actions, attritional and underlying losses were now in line with our expectations. The improvement represented a 17.5pp reduction in Loss Ratio, equivalent to a reduction of £74.8m in attritional claims load. There was a loss to capital providers from the 2018 and prior years of account of 3.4%, although this was an improvement on the previously forecasted loss of 6.5%.
Latham noted that, following the unsatisfactory results over recent years, there had been a significant reduction in Market capacity for a number of lines of business. This had enabled rates to continue to rise in a number of classes of business. He said that this momentum had continued through 2020, supported by the continuing effects of Covid-19 on the global economy.
Early signs suggested a continuing improvement in early 2021, Latham said, noting however that underwriters had noticed an increased capacity for certain lines of business. This had followed on from additional capital-raising by new and existing carriers.
The cost of acquiring business remained high across the market. “Driving this down is a matter of critical importance. In the event that market conditions do not allow the achievement of the right levels of profitability then further action will be taken”, Latham warned.
2018 Year Of Account – Closing Year
A loss for the 2018 closed year of account was recorded, with a return on capacity of minus 3.39% and a loss of £15.3m. “Following the events of 2017, we did see a correction in primary insurance pricing particularly in loss affected areas. However, in the absence of significant capacity reductions, in overall terms pricing did not return to levels commensurate with the risk borne by insurers”, the syndicate said.
The year 2018 was impacted by a series of catastrophe events – Hurricanes Florence and Michael and significant Wildfire events in California. These events were smaller in nature than those in 2017 and as a result were net retained by the Syndicate. The syndicate also saw a deterioration in attritional and large losses in a number of short tail lines. In Marine it experienced large losses in Onshore Energy, Hull and Asia and attritional development on one large coverholder in Marine Liability. All of this led to the syndicate either exiting the business or, in the case of Marine Liability, not renewing the relationship during 2019. In Property the syndicate saw attritional development in both our direct and binder books which led to further remediation activities.
2019 And 2020 Years Of Account – Open
During the Lloyd’s planning season for 2019, Lloyd’s focused heavily on poorly performing classes of business. This challenge from Lloyd’s led to a reduction in market capacity for certain lines of business.
The syndicate said that, following this action, it had experienced a change in market dynamics where there had been continued rate growth across nearly all lines of business. This had led to the ability to renegotiate the level of commissions, which had increased significantly in previous years.
There was an exit of lines and relationships where the syndicate could not see a profitable future (eg Hull, Onshore Energy, Singapore, China, Latin America). The syndicate also strengthened its initial expense loss ratio on certain lines of business following the deterioration it experienced in 2019 on prior years.
While there had been “much needed” rating momentum continuing throughout 2020 and into 2021, 2020 had been a year that was marked by the impact of Covid-19 and the global pandemic. Aside from the much wider social and economic effect this had on the business, the main impact had been seen through the Contingency book from event cancellation losses. The majority of these loss events fell to the 2019 year.
There was also unusually active North Atlantic Hurricane season. These events translated into a year characterised by frequency rather than severity of weather losses.
With effect from December 31st 2020, the Syndicate affected a Reinsurance To Close of the 2017 and prior years of account with Riverstone. As a result liabilities totalling £279.4m will transfer to Syndicate 3500. ” This is an important transaction for Syndicate 1200 which allows us to fully focus on the execution of our underwriting strategy.”
| KPIs £m | 2020 | 2019 |
| Gross written premium | 518.4 | 561.4 |
| (Loss) for the financial year | (53.9) | (27.4) |
| Combined ratio | 116.0% | 109.2% |
Sectors Pt 1 (Open years 2020 and 2019 are forecasts, 2018 is actual)
| Year of account | 2020% | 2019% | 2018% |
| Marine Cargo | 3.3 | 2.6 | 3.6 |
| Yachts & Hull | 0.5 | 3.1 | 4.3 |
| Offshore Energy | 6.2 | 6.1 | 6.0 |
| Marine Liability | 7.3 | 6.9 | 6.5 |
Outlook
Chairman Tony Latham said that the syndicate was positive around the outlook for 2021, following recent catastrophe losses, market wide underperformance and a more stringent Lloyd’s planning process and the impact of Covid-19. “We see favourable market dynamics in terms of our continued ability to increase rates across a number of classes, influence terms and conditions and to reduce acquisition costs further”, he said.
Sectors Pt 2
| 2020 £m | GPW | GPE | GCI | GOE | RB | Total |
| Marine | 22.7 | 24.3 | (14.8) | (8.7) | (0.8) | 0.0 |
| Energy – Marine | 13.8 | 15.1 | (9.9) | (4.3) | (1.5) | (0.6) |
| Total Direct | 367.4 | 390.1 | (330.6) | (122.8) | 2.2 | (61.1) |
| Reinsurance acceptances | 151.0 | 149.1 | (93.7) | (47.2) | (15.3) | (7.1) |
| Grand Total | 518.4 | 539.2 | (424.3) | (170.0) | (13.1) | (68.2) |
| 2019 £m | GPW | GPE | GCI | GOE | RB | Total |
| Marine | 28.4 | 34.7 | (26.8) | (11.8) | (1.0) | (4.9) |
| Energy – Marine | 13.7 | 13.8 | (9.3) | (4.1) | (1.5) | (1.1) |
| Total Direct | 412.0 | 431.9 | (277.7) | (122.5) | (39.4) | (7.7) |
| Reinsurance acceptances | 149.4 | 141.0 | (123.6) | (46.6) | (1.4) | (30.6) |
| Grand Total | 561.4 | 572.9 | (401.3) | (169.1) | (40.8) | (38.3) |
Emoluments
The aggregate remuneration paid to the applicable active underwriter, charged as a Syndicate expense was £300,000 in both 2020 and 2019.