Syndicate forecasts as at 31 March 2017
Lloyd’s has today published syndicate forecasts for the 2015 year of account at 27 months and 2016 after 15 months.
Although there are a number of material adverse movements on the 2015 account, the general trend continues to be up for the majority of Argenta clients’ portfolios.
As the US dollar rate of exchange barely changed between 31 December 2016 and 31 March 2017, the majority of these movements relate to improvements in the underwriting result rather than foreign exchange movements. Argenta’s clients’ forecast results are just under 2 percentage points better than the market average for the 2015 account and slightly more than 1 percentage point better than market average for the 2016 account.
Most notable amongst the improvements is an increase in the forecast profit for Beazley Syndicate 623, which has more than doubled its forecast profit at midpoint to a revised range of +8% to +18%. There are also encouraging improvements for Canopius Syndicate 958, again more than doubling forecast profit at midpoint and Nuclear Syndicate 1176. All of the catastrophe specialists, TMK 557, MAP 6103, Hiscox 6104 and Beazley 6107 are forecasting good profits as the 2015 year was free of major catastrophic loss.
At the opposite end of the spectrum there is a 9 percentage point deterioration for Catlin SPA 6111. We have asked for an explanation of this move. Liability specialist Asta 2525 (David Dale) has deteriorated from midpoint breakeven to a midpoint loss of 7.5% of capacity. The forecast had improved by the same amount in December.
The forecasts for both the 2015 and 2016 accounts of ERS Motor Syndicate 218 are disappointing. The syndicate was hit by the change in the discount rate used to settle the most serious bodily injury claims by UK courts, but there is also deterioration caused by claims inflation, both as the costs of parts increases in consequence of the fall in the value of the pound and also as repair costs escalate as cars become increasingly sophisticated. We are preparing a briefing note on UK motor generally and the prospects for Syndicate 218 in particular. We will be sending this to clients shortly.
We also reviewing Standard Syndicate 1884 and will send more information to clients in due course. Although we have anticipated that the 2016 account would be loss making, we are disappointed at the size of the forecast loss for this syndicate.
Overall the 2016 account is forecast to make a small profit for our clients, with the average midpoint at 1.5% of capacity. These are the first formal forecasts for the 2016 account and managing agents are cautious at this stage. Much business remains on risk. The nature of the account has changed in recent years; the increasing involvement of non-traditional players in the reinsurance market has reduced the proportion of reinsurance business underwritten and many syndicates have increased their delegated authority and longer tail business, thus extending the reporting tail of the business.
We will review these forecasts in more detail in our next edition of the Quarterly Review. The most recent edition can be found here