Syndicate Forecasts as at 30 September 2017
Lloyd’s has today released forecasts for the 2015 and 2016 accounts of all syndicates that trade with third party capital.
The forecasts are set at 30 September 2017 and use rates of exchange prevailing at that time, principally US$1.34:£1, Can$1.68:£1 and Eur1.13:£1.
The 2015 account continues to improve, with a number of syndicates increasing their forecast. The overall upward movement is nonetheless small and a few syndicates have reduced their forecast profit or increased their forecast loss. The most significant deterioration is for Canopius Syndicate 958 where there is still uncertainty caused by the change in the discount rate used by UK courts to settle the most serious bodily injury claims. The assumptions used in the initial reserving around life expectancy of accident victims continue to be a challenge.
The 2016 account has deteriorated and is now breakeven on average for most of our clients. Under inception date allocation, where risks that incept at any time in 2016 are assigned to the 2016 underwriting year even if the bulk of the exposure falls to the next calendar year, some syndicates have been impacted by the series of natural catastrophes that started with Hurricane Harvey and (currently) concludes with the wildfires in parts of Northern California. At a market level, Lloyd’s expects total claims of $4.8 billion from Hurricanes Harvey, Irma and Maria. We expect that approximately 20% of the total cost will fall to the 2016 year of account and the balance to the 2017 year of account.
Reinsurance for natural catastrophe business tends to attach in the first half of the year. This means that almost none of the cost of the hurricane losses will be borne by the 2016 year of account of the reinsurance specialists and explains why we are seeing improvements that range from 0.28 percentage points for Tokio Marine Kiln Syndicate 557 up to a 10 point improvement for Hiscox 6104. Elsewhere, large syndicates with strong records of improving forecasts such as Hiscox 33, Tokio Marine Kiln 510 and Canopius 4444, show adverse movements of 2.5, 2.1 and 3.2 points respectively. A number of the more specialist syndicates are reporting larger adverse movements; these include Apollo 1969 where a midpoint loss of 5% has worsened to a midpoint of 12.5% due to exposure to 2017’s catastrophe toll and Beaufort 318 with a 5.8 point deterioration to a midpoint loss of almost 15% of capacity. Argenta has no involvement in the two largest movers in 2016, Asta Syndicate 6123 and Chaucer 6129, but is involved in the Tokio Marine Kiln Life Syndicate 308 which has recently announced that it will cease underwriting new and renewal business and has moved from a marginal profit at 30 June to a mid-point loss of 12% of capacity at 30 September.
We will provide further analysis of the forecasts and quantify our expectations for the 2017 year of account, which will bear the largest share of the third quarter catastrophe losses, in the next edition of our Quarterly Review.