Syndicate results 2021 #60 Syndicate 6134 Argenta SPA

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.

Today concludes the reports on Lloyd’s Syndicate results for 2021 for Syndicates with a marine interest.

Ian M Maguire – Active Underwriter Syndicates 2121 and 6134 (resigned May 7th 2021). During 2021 the active underwriter of Syndicate 6134 changed with the appointment of Ian Burford on July 1st 2021.

Syndicate 6134 was established during 2018 as a Special Purpose Arrangement to underwrite quota share reinsurances of business underwritten by Syndicate 2121 as the host syndicate.

ASML is the Lloyd’s managing agency subsidiary of Argenta Holdings Ltd, which is wholly owned by Hannover Rück SE, whose immediate parent undertaking is Talanx AG. ASML is the managing agency for two syndicates trading at Lloyd’s, namely Syndicate 2121 and the associated Special Purpose Arrangement Syndicate 6134.

Hannover Re Group is the sole capital provider to Syndicate 6134.

The portfolio can be broken down into eight main classes: financial lines, casualty treaty, property, terrorism, cyber, warranty and indemnity, marine and political risks. The syndicate has the benefit of the host syndicate’s reinsurance programme for the applicable financial lines, casualty treaty, property, cyber, marine and warranty and indemnity classes.

For the 2019 year of account, the stamp capacity was £34.5m, increasing to £145m in 2020. This decreased to £82m for 2021 as the allocation of business for the new financial lines and casualty treaty accounts was rebalanced between Syndicate 6134 and the host syndicate. For 2022 the stamp capacity rose to £97m as a response to the current favourable trading conditions.

The largest proportion of business for Syndicate 6134 sits in the casualty sector and consists of financial institutions and professional indemnity type risks, with a relatively modest book of casualty treaty business

The syndicate also takes a share of an established direct and facultative property book from the host syndicate, built around a number of long-standing relationships with managing general agents, supplemented with an open market book of predominantly small commercial and homeowners’ business. This account also includes property business written through Argenta’s service company operating out of offices in Singapore and Sydney, Argenta Underwriting Asia Pte Ltd.

Syndicate 6134 also participates in a book of cyber business, underwritten in the host syndicate predominantly through participation on Lloyd’s approved consortia; London Market binding authorities; and a quota share reinsurance placement of a long-established writer of the class.

The Syndicate noted that Cyber was “often talked about in trade journals with comment on some of the higher-profile losses and at the moment underwriting conditions are extremely favourable in this class with rates increasing dramatically”.

The reinsurance arrangement with Syndicate 6134 provides for the host Syndicate 2121 to receive overriding commissions based on premium income, which vary depending on the class of business. The political risk account also carries a profit commission in line with previous years.

The Board of ASML has decided that it is now appropriate to close the 2018 year of account (with a loss of 20.8% of capacity) that was kept open as at 31 December 2020, the 2019 remains open as at 31 December 2021. This year of account is also affected by Covid-19 and the associated business interruption claims. The Syndicate noted that there were “still a number of ongoing legal issues to be sorted before finality is reached and this year is particularly exposed to the decisions of the High Court in Australia”. At the time of writing, whilst a positive ruling had been received on the first appeal of their Test Case 2, this might still be subject to a further appeal. Other rulings were still awaited. “As a result we are unable to determine our ultimate liability to claimants in respect of BI claims in Australia with a reasonable degree of confidence. It is therefore a huge disappointment to announce that the board of ASML has decided that the correct course of action at the current time will be to keep the 2019 year of account open with a current result forecast loss range of (25%) to (45%)”.

For the 2020 year of account the impact of Covid-19 continued. During the past 12 months the 2020 year of account continued to perform in line with the Syndicate’s reserving expectations, although the midpoint of the forecast result was “disappointingly” some way off its initial SBF expectations, with a current result forecast range of 7.5% to (7.5%). A significant element of 2020 business would remain on risk throughout a large part of 2022 and beyond. It was hoped that this would continue to show a favourable development over the months ahead.

At the time of writing the report (now some three months ago) the performance of the 2021 year was lagging behind the original SBF, mainly due to an “extraordinary run” of natural peril events. A material proportion of 2021 business remained on risk “so there is still plenty of opportunity for those risks to develop more favourably over the upcoming months”, the Syndicate said.

The Syndicate said that, from a general market perspective, Lloyd’s was continuing to apply “a firm hand” to the poorer performing classes and syndicates, materially restricting growth where they deemed it necessary to maintain market discipline, and mandating portfolio changes to improve the overall Lloyd’s result.

With the majority of the syndicate’s remedial work done during 2019 and 2020, notwithstanding the challenges faced during 2021, “we are now beginning to see the positive impact of the recent re-underwriting on those affected classes”, the Syndicate said.

Overall market conditions were described by the Syndicate as “good in most areas”. The syndicate continued to take advantage of the improving market conditions and there was evidence of further strengthening over the January 2022 renewal season. “RARC movements for 2021 exceeded our forecast in the plan and for 2022 we are predicting further increases again across most product lines”, the syndicate said, while noting that momentum was beginning to slow “as we enjoy the benefits of at least three years of compound RARC increases for most of our classes”. The RARC estimate for 2022 was 6% across the whole syndicate.

The plan for the 2022 year of account is to increase gross written premium income to £120.9m. The area with the largest planned growth is the casualty pillar that started writing in 2020.

With effect from the 2022 year of account, the Syndicate decided to exit the Lloyd’s China platform. “After much deliberation we reached the conclusion that we could no longer see a long-term strategic benefit of being part of the platform. We will therefore be managing an orderly run-off for our remaining exposures derived from the territory”, the Syndicate said.

KPIs

£m 2021 2020
Gross premiums written 133.4 143.8
Net premiums earned 145.2m 99.4m
Profit/(Loss) for the year 6.7 (12.2m)
Claims ratio (net) 56% 72%
Combined ratio 96% 112%

The largest natural perils loss incurred by the syndicate during 2021 was from Hurricane Ida.

“Whilst the effects of COVID-19 are still being felt in this year of account, during 2021 we began to see some stability and we therefore felt more confident about the ultimate outcome for this year. This changed during the last quarter of the year, however, as we became aware of a new court case, CG Restaurants & Bars v RSA that, along with Stonegate v MS Amlin, is expected to challenge the basis upon which claims have been paid to date”, the Syndicate said.

Segmental analysis

2021 £000s GPW GPE GCI Op Exps Reins Bal Total
Marine 10,851 9,519 (6,321) (3,697) (499)
Total 133,425 145,181 (81,985) (56,741) 6,455
2020 £000s GPW GPE GCI Op Exps Reins Bal Total
Marine 7,909 7,265 (4,886) (2,938) (559)
Total 143,846 99,362 (71,977) (39,575) (12,190)

An overall improvement of £3.3m on prior-year provisions was experienced during the year. This was due to improvements of £3.6m on property reinsurance and £0.2m on marine reinsurance, partially offset by a deterioration of £0.5 million on casualty reinsurance.

(2020: An overall deterioration of £0.1m on prior years’ provisions was experienced during the year. This is due to deteriorations of £0.4m on casualty reinsurance and £0.2m on marine reinsurance partially offset by an improvement of £0.5m on property reinsurance.)

£000s 2021 2020
Active underwriter emoluments 8 11

https://assets.lloyds.com/media/5119595b-734e-4500-b144-c8c7dd183482/SRA6134a.pdf

That concludes the reports on Lloyd’s Syndicate results for 2021 for Syndicates with a marine interest.