Syndicate forecasts as at 31 March 2018
Lloyd’s has today released the complete schedule of syndicate forecasts as at 31 March 2018. This includes updated forecasts for the 2016 account after 27 months and an initial forecast for the 2017 account after 15 months.
The 2016 account has improved marginally. Although it continues to be forecast as an aggregate loss for the market, we expect the majority of our clients to be in a very small overall surplus. Four syndicates have deteriorated their forecasts, with the largest being for Catlin 6111, which has moved to a loss of 1.2% of capacity at midpoint, from a forecast profit of just under 2% of capacity three months ago.
There are a number of small improvements of less than 1% of capacity, but seven syndicates have posted increases of more than 1% of capacity, including Atrium Syndicate 609 and Hiscox Syndicate 33, both syndicates where Argenta clients have large shares.
Although some of the cost of the three hurricanes that struck the southern states of the USA and the Caribbean islands last autumn will be allocated to business on the 2016 account, the largest part of these losses falls on the 2017 year of account.
For the 2017 account, only five syndicates are currently forecasting a profit at midpoint, with the best result again projected by Nuclear Syndicate 1176. QBE Syndicate 386 and ERS Motor Syndicate 218 are both in business areas that do not expect to bear losses arising out of US hurricanes. Of those that do, just Argenta 2121 and Coverys 1991 are currently forecast to make a profit in this difficult year. Generally speaking, syndicates with a large exposure to US catastrophe business, either on a reinsurance basis or through direct business, are forecasting a loss for the year. For cornerstone Syndicates Hiscox 33 and Tokio Marine Kiln 510, these are approximately 10% of capacity, with the associated reinsurance operations expected to make larger losses. The midpoint forecast of Hiscox SPA 6104 is currently a loss of 40% of capacity and of TMK 557, 34% of capacity.
The forecasts for 2017 are at an early stage of the development of the account. Underwriters used to prefer to wait until the end of the 18th month before making a formal estimate of the outcome, and there is much business that remains on risk. We are also aware that some parts of the account have been showing worse than normal attritional loss ratios (by this we mean the everyday losses outside of the major catastrophes) and we will be assessing this when we have the full data set. Typically, the absence of catastrophes in the second twelve months of the account allows the managing agent to release catastrophe reserves and for the result to improve, although in 2016 we saw the opposite, with actual catastrophe experience worse than budgets held by syndicates, which meant that the forecast were reduced late last year.
Although some individual syndicate forecasts are disappointing at this stage, it is nonetheless encouraging that the early forecast for the 2017 account in loss is smaller in quantum than the profit that was generated on the recently closed 2015 underwriting year.
We will be receiving the underlying data from syndicates in the next few days and will provide our usual in-house expectation for all the open years in due course alongside an analysis of the trends and current trading conditions.
The full schedule of forecasts can be found here.