Syndicate results 2021 #7 S A Meacock 727 published Thursday April 21st

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   M J Meacock

The Syndicate reported that its 2019 Account closed with a profit of 6.3% of capacity after standard personal expenses. The pure year loss ratio (after 36 months) was tracking a little better than the 2018 year of account at the same stage, “especially bearing in mind 60% of our claims arising out of the pandemic fall into the 2019 year”, the active underwriter said.

The investment return declined to what was termed a still respectable £3.2m. However, 2019 benefitted from a strong release from the reserve for previous years. This release reflected the fact that only 3.8% of the fund set aside a year earlier for future claims was utilized during the year. At December 31st 2021 exchange rates Syndicate 727 wrote £54m of net income for the year, a 6% increase on the previous year, reflecting the Syndicate’s view that the market was beginning to turn.

The Open 2020 Account  was a busy one for natural catastrophes. Hurricanes Sally and Laura hit the southern states of the US, the unique winter storm Uri (early 2021 but impacting 2020) taking out the Texan electricity grid, and the Midwest Derecho event all had an impact.

“Having the remainder of our Covid loss falling to this year and with the severely depressed returns available from our investments, the 2020 Account is verging on ‘difficult’. However, while our pure year loss ratios are not as good as the 2019 Account, it is noteworthy that they are comparable with 2018 at the same stage, and it is encouraging that 2018 continues to run off in a satisfactory fashion”, Meacock said.

Rating momentum and market conditions continued to move in favour of the syndicate throughout the year. “We therefore wrote more premium income across all classes of business, currently estimated at £68m, with consequently better balance. We remain hopeful of a modest profit”.

For the 2021 YOA, as Meacock said 12 months’ earlier, “we came into 2021 with some optimism and with the aim of achieving some more growth without in any way compromising our underwriting standards”.

He said that it was too early to comment on the loss ratios, but that he was pleased with what had been accomplished. Rates were observed to have strengthened further through the year and the quality of the account had improved further still, building on the momentum of the previous two years.

Disruption in the marketplace continued, particularly within the binding authority world of ‘excess and surplus’ lines in North America, which delivered a healthy flow of new business, much of it professional indemnity and motor business with no exposure to real estate.

The Active Underwriter noted that the absence of the debilitating effect of hungry new Lloyd’s start-ups enabled 727 to achieve better signings and at better terms. “Through the course of the year we became increasingly upbeat about our prospects and we hope to have underwritten close to £75m in premium income – a level not dissimilar to our previous peak of 10 years earlier”, said Meacock.

The major difference between then and now was the proportion of property catastrophe-related excess-of-loss business on the books, down in a decade from 31% to 11%.

From a claims point of view 2021 was not benign, the Syndicate said. Hurricane Ida was now estimated at costing the industry approximately $35bn. 2021 was estimated as the second-most expensive year on record (following after 2017) with approximately $120bn of insured loss emanating from natural disasters. Meacock queried whether the catastrophe models were taking this into account, noting that “those Louisiana carriers now in liquidation, who purchased their reinsurance capacity to a limit based on the modelled output, probably do not think so”.

For the 2022 Account Meacock said that much hinged on the speed at which the effects of global warming were felt and how severe they became.

While premium rates continued to grow in almost all classes, the syndicate was only cautiously increasing what had previously been seen as its major focus – property exposures.

Meacock also noted that “another major determinant of our fortunes will as ever be the expense level associated with operating within the Lloyd’s market. The underwriter with the higher expense ratio has a real hurdle to overcome when it comes to winning business, and yet Lloyd’s as a place to do the business is becoming increasingly more expensive.”

Segmental figures

2021 YOA GPW GCI GOE Reins Bal Total  
MAT 3,676 2,909 (1,507) (1,188) 213
Total 92,024 88,537 (48,685) (33,692) 976 7,136
2020 YOA GPW GCI GOE Reins Bal Total  
MAT 11,068 10,133 (6,098) (3,444) 590
Total 95,271 87,962 (66,127) (28,702) (152) (7,018)
2019 YOA GPW GCI GOE Reins Bal Total  
MAT 2,012 (1,184) (657) 171  
Total 287,724 (257,133) (27,831) (788) 1,971  
Active underwriter emoluments 2021 2020
  £197,000 £197,000