A £1bn ($1.3bn) loss reported by the Lloyd’s of London insurance market for 2018 could lead to a further depletion of marine capacity at the historic insurance market.
Marine has been identified by managers as one of the poorest performing sectors at Lloyd’s.
Although the £1bn loss figure for 2018 is half the £2bn that the market reported in 2017, chief executive John Neal insisted there would be no let up in the profit drive that saw 11 syndicates forced to significantly reduce marine capacity or even totally withdraw from the market last year.
Following the announcement of the results, Lloyd's director of performance management Jon Hancock said he wants to see syndicates continue to deliver on their performance plan. “2018 was about Lloyd’s setting up for success and this year it’s about maintaining that progress,” he said.
'Sustainable performance'
“That means that everyone has to deliver those plans for sustainable performance and aim to deliver the profitable growth.”
However, insurance brokers have questioned whether a poorly performing marine hull and machinery market can deliver on improving profits in the Lloyd’s system, despite anecdotal accounts that yacht premiums have increased by as much as 70% because of the Lloyd’s reforms.
The negative view of marine comes despite comments from Neal, who told the recent Marine Insurance London conference that “there is no reason why marine can’t return to the forefront of what we do at Lloyd's”.
But brokers point to a worsening casualty performance emerging this year, which will hit marine underwriting performance hard and add up to mounting losses.
On top of that there has been an increase in Lloyd’s syndicates seeking to improve marine profitability by switching marine business lines out of the costly Lloyd’s market and into the company market.
Liberty Syndicate switched some of its marine capacity out of Lloyd's at the end of last year. A spokesperson confirmed the move.
He told TradeWinds: “In 2018, we reviewed our marine book and due to a range of factors we decided that from 2019 we would write all marine hull business on company paper. Marine war, liability and cargo continue to be written on both our Lloyd’s and company platforms.”
Taking it in-house
Norway’s Skuld has also announced it is moving its Lloyd’s business into its company platform in 2019 and will be writing hull business on its own paper from now on.
Brit Insurance also moved its yacht cover, a major pillar of the Lloyd’s marine business, over to the company market.
Aspen’s Lloyd’s syndicate also sold its hull and machinery book to Helvetia Insurance Group, which now runs the business in the company market.
A hot topic of conversation at the Marine Insurance London conference was weather the Scandinavian model of providing cover outside Lloyd’s — with claims, legal and loss-prevention services kept in-house — could provide the future marine insurance model.
The move out of Lloyd’s to the company market has meant that the number of marine-cover providers has not changed and pressure on hull rates continues.
However, there were other more positive indications in the Lloyd’s results. Premiums increased to £35.5bn in 2018 from £33.2bn in 2017, and the Lloyd’s market’s combined ratio improved to 104% from 114%.
