Lloyd’s of London is back with its highest profit in six years, reporting a £2.3bn ($3bn) surplus in 2021, compared with a £900m loss a year earlier.
The return to profitability comes on the back of a 10.9% increase in premiums in the year and 16 consecutive quarters of rising rates at London’s historic insurance market.
Marine, aviation and transport income increased to £1.8bn from £1.5bn in 2020. Lloyd’s said its marine business lines had “seen considerable improvement in market conditions in 2021”.
The “marine rating environment remains positive going into 2022”, but it expects premium increases to slow this year.
Lloyd’s also expects a 10% growth in its marine exposure this year, which includes hull and machinery, cargo, marine liability and war risk cover.
The rate improvements have been driven by a focus on profitability at Lloyd’s, in which syndicates were asked to scale down unprofitable business lines.
The loss-making marine insurance sector was one of the hardest hit, and many syndicates withdrew from the market.
Lloyd’s chief executive John Neal said: “I’m pleased to see the market return to profitability following the decisive action taken in recent years to improve performance.
“The market’s underwriting discipline will enable sustainable profitability in the years to come, coupled with a balance sheet that can support our ambition to grow profitably.”
In its earnings statement, Lloyd’s said the conflict in Ukraine will become a major claim in the market in 2022 and will be spread mainly over marine, aviation and trade credit lines of insurance cover.
But it pointed out that Russian, Belarusian and Ukrainian business accounts for less than 1% of its global cover.
“Direct and indirect claims are expected to fall within manageable tolerances and will not create solvency challenges,” Lloyd’s said.
However, one big claim could come from vessels trapped in the Black Sea and the Sea of Azov.
Under war risk insurance the vessels will be declared a constructive total loss, entitling owners to claim the full value of the hull if they are trapped in the region for six months or a year, depending on the terms of cover.