Syndicate results 2021 #41 2623 Beazley Furlonge

The Lloyd’s syndicates have now published their results for 2021 and, in some cases, added detail and an outlook for 2022. Some have stuck to the bare bones. 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.

Active Underwriter   AP Cox

With a capacity of £2,348.4m in 2021 (2020, £1,932.4m) Syndicate 2623 is the largest of the various syndicates managed by Beazley Furlonge (the others being Syndicates 623, 5623, 6107, 3623 and 3622).

The result for syndicate 2623 for the year ended December 31st 2021 was a profit of $275.5m (2020: loss $109.4m).

The 2019 year of account declared a return on capacity of 5.7%. This was despite it having being adversely impacted by some large claims attributable to the Covid-19 pandemic and natural catastrophes such as Hurricanes Laura, Sally, Delta and Zeta, Storm Dorian and Typhoons Faxai and Hagibis.

The 2020 year of account was currently forecasting a breakeven return on capacity, having been adversely affected by claims experience related to the Covid-19 global pandemic, particularly in the contingency book.

The 2021 year of account, which was still in its early stages of development, had already been impacted by natural catastrophe losses that included Hurricane Ida and Storm Uri, civil unrest in South Africa and a range of ransomware attacks on clients systems.

Loss activity during 2019 and 2020 had a continued positive effect on the rating environment with rates increasing by 19.5% in 2021 across the portfolio (2020: 15%). Most lines of business saw increases in rates compared to 2020, with Marine increasing by 8%, Property increasing by 9%, Reinsurance rates increasing by 12%, Specialty lines increasing by 12% and Cyber & Executive risk increasing by 52%. Rates on renewals in our Political, Accident & Contingency division also increased by 6%.

The combined ratio has improved in 2021 to 91% (2020: 110%) driven by a reduction in the claims ratio.

After the spike in claims seen in 2020 due to the Covid-19 pandemic, 2021 delivered a claims environment which was more in line with the syndicate’s long-term average. The claims ratio improved to 57% in 2021 (2020:75%).

There remained a small amount of exposure to the ongoing pandemic in 2022 and beyond, where cover was bought well in advance, the Syndicate noted that these were discrete policies and were taken account of within all guidance. A combination of the above resulted in a decrease in syndicate net claims in 2021 to $1,365.8m (2020:$1,555.7m)

During 2021 the syndicate released prior year reserves of $150.8m (2020: $75.1m). The syndicate’s Marine, Property and Specialty lines divisions all produced large releases on the 2019 underwriting year while Cyber & Executive Risk produced a net release of $20.2m, despite an increase in ransomware claims activity on the 2020 underwriting year.

The syndicate took action in the Property division to remediate selected areas of the account, including, in March 2021, the entering into a 90% Loss Portfolio Transfer (LPT) of the divisions Engineering classes, contributing to the release of $40.8m in the division.

Recent rapid growth in syndicate financial assets continued in 2021 and the value of investments, cash and cash equivalents increased to $3,982.1m by year end (2020: $3,310.3m). An investment return of $65.8m, or 1.8% (2020: $100.3m, 3.2%) was generated on these assets during the year.

Outlook

The Syndicate noted that the claims environment in 2020 was particularly challenging, but the 2020 year of account was currently forecasting a breakeven return on capacity.

In 2021, despite natural catastrophe events such as Hurricane Ida and Storm Uri, civil unrest in South Africa and the continuation of ransomware attacks, the syndicate produced a low-90’s combined ratio.

Looking ahead to 2022, the Syndicate anticipated building on the strong rate increases of 14% achieved over the past year.

“The recent tragic invasion of Ukraine which has sparked war in Eastern Europe is an ongoing reminder of the complexities the syndicate faces when navigating risk. However with the challenges of 2020 now firmly in the rear view mirror and exceptionally strong premium growth on the 2021 underwriting year, the syndicate is positioned well to deliver positive future results”, the Syndicate concluded.

KPIs

$m 2021 2020
GPW 3,465.4 2,687.5
Outward reins (786.1) (460.3)
NEP 2,399.5 2,076.8
Gross claims paid (1,384.1) (1,400.6)
Net claims (1,365.8) (1,555.7)
Tec account balance 272.0 (107.2)
P/L for financial year 275.5 (109.4)

Segmental Analysis

2021 $m GPW GPE GCI Net claims Tech Result CR
Marine 350.5 326.0 (110.0) (95.5) 88.0 88.0%
Total 3465.4 3062.0 (2011.2) (1365.8) 206.2 91%
2020 $m GPW GPE GCI Net claims Tech Result CR
Marine 321.3 310.4 (145.0) (151.0) 32.0 89%
Total 2687.5 2482.4 (2019.5) (1,555.7) (207.5) 110%

Active underwriter’s emoluments The aggregate amount of remuneration paid to and for the benefit of the active underwriter which was recharged to syndicate 2623 was $2.2m (2020: $0.5m).

https://assets.lloyds.com/media/88be7101-e3f7-4268-b251-5badcbddcece/SRA2623a.pdf