Syndicate forecasts as at 31 March 2022

Lloyd’s has released forecast results for the 2020 and 2021 years of account for all syndicates supported by third party capital, together with an aggregate position for those syndicates with an aligned capital base. The forecasts are available here.

2020 year of account

The 2020 account has continued a slow but steady improvement. The year remains marginal on current forecasts, although we would anticipate further improvement in the remaining months of this year before closure at the end of 2022. As a reminder, the 2019 account closed 3.5 percentage points on capacity better than the midpoint this time last year. We explore a couple of caveats to this below. The year of account bears around 30% of the total cost of Covid-19 related claims against syndicates. The 2020 calendar year was very active from a catastrophe loss perspective; the World Metrological Organisation, which gives names to Atlantic and Pacific storms, ran out of names for Atlantic storms, with the final few storms named after the Greek alphabet.  The words phishing and  ransomware became well known in insurance circles as insurers were required to compensate businesses where an employee clicked on a fake link, while derecho (a series of electric storms in a line) also entered the insurance lexicon.

2021 year of account

The forecast for the 2021 account at 31 March 2022 is the first formal forecast for the year. While the world was coming to terms with covid and any number of other impacts, there are few direct exposures to the market arising out of covid attaching to the 2021 underwriting year. However, there were natural catastrophes in both the US and in Europe including winter weather in Texas, Hurricane Ida hitting Louisiana and a leaving a trail of destruction all the way to New England, while Western Europe suffered extensive floods in July. Although the blocking of the Suez canal in March 2021 caused some fears of a major marine event, actual losses to the market are small. Underwriters are typically cautious when releasing a forecast at an early stage of the year’s development. Some reinsurance business remains on risk until the mid-year renewals, while open market and binding authority business can remain on risk when into the second half of the second year of development (i.e. in 2022 for the 2021 year of account). We think that the forecasts at this stage are underwhelming and expect that this year will improve over time to a meaningful overall profit.

Market messages for 2023 business plans

Lloyd’s held a presentation to the market on Wednesday 17 May ahead of the start of business planning for the 2023 underwriting year. The key message is that Lloyd’s is in good shape, with a healthy combined ratio, and more encouraging signs emerging in the open years. There is plenty of volatility, from both economic, political and climate perspectives, but that should not distract the market from delivering sustainable growth and profit. Challenges for the market include the increasing levels of catastrophe loss, with the market’s aggregate planned catastrophe loss ratio being too small for five consecutive years, while the downward pressure on overall expense ratios in recent years must continue. Lloyd’s expects the market to grow into 2023, stating that there is room for growth but no room for complacency.

The full presentation is available here via an embedded youtube video.