Syndicate forecasts at Q1
Yesterday, Lloyd’s released updated estimates for all third party syndicates. The forecasts relate to the 2018 and 2019 years of account and show an overall deterioration in the books, partly driven by the impact of the Covid-19 crisis. The full detail behind the headline numbers will be released in June, so currently we can only see the movements in the forecasts rather than all the elements within the figures. A full schedule can be found here.
The development of the 2018 year of account is, modestly, negative - but that is not a surprise given the impact of Covid-19. 2018 has seen:
- 15 syndicates report no change in their forecasts
- 6 syndicates report an improved midpoint
- 16 syndicates report a worse midpoint
Syndicates have indicated that about 10% of their Covid-19 losses will impact the 2018 year of account and the overall portfolio of advised syndicates has deteriorated by about 0.5% to a loss of 4.2%. It is now becoming clear that 2018 saw the bottom of the soft market and trading conditions have, broadly, been improving from then. In the next few weeks Argenta will update our forecasts to accompany these Managing Agent estimates as there is still 3 quarters of development to factor in to the final result as well as the impact of any reserve releases.
The 2019 estimates are the first view of the Managing Agents’ forecasts. The Argenta portfolio of advised syndicates have a best and worst case which straddle break-even and so there are grounds to be optimistic about profits depending on portfolio mix and the 2020 hurricane season. At Q1 2020, there is still a lot of development for the 2019 account although the initial midpoint of estimates shows a loss of 0.6% of capacity. Based on our research, up to 60% and maybe more than 2/3rds of a syndicate’s Covid-19 loss will fall into the 2019 account and when we get the supporting data in June a full syndicate-by-syndicate analysis will be possible.
What these estimates do not include is a view on the current very buoyant trading conditions. The first estimates for 2020 year of account will be released after the first quarter of 2021. Nevertheless there is a growing feeling that we are entering ‘hard market’ territory and the Council of Insurance Agents and Brokers (CIAB) today announced that US insurance pricing was +9.3% in Q1, adding further evidence to the attractive market conditions.
Note: Lloyd’s has reported the forecast for Hiscox Syndicate 33’s 2019 year of account in a range between a loss of 7.5% of capacity and breakeven. Hiscox had previously advised a forecast in a range between a loss of 7.5% and a profit of 2.5%. We have checked with Hiscox who confirmed that its forecast is the correct one and this is the one shown in our table.