Lloyd’s has issued yet another warning to syndicates writing various marine classes that profitability must improve or they face being barred from operating in the segment, re-Insurance.com can reveal.

Hull, cargo and yacht have all come under the microscope as the Corporation tightens its grip on serial offenders in the market.

In a presentation seen by this publication, Lloyd’s identified that these three marine lines “needed to improve” and deemed their performance as “unsatisfactory” as it reviewed initial syndicate submissions to a market-wide questionnaire.

Syndicates making a loss writing these lines of business were again told last week that if they did not have an action plan to remediate the performance of portfolios they should close their books.

The Corporation warned that a failure to demonstrate that a “sustainable and profitable performance” can be achieved would result in Lloyd’s not allowing syndicates to write those classes in coming years.

This applies to both business written as standalone and as a sub-class. 

Lloyd’s said it expects those underwriting underperforming lines to reduce their risk appetite in 2019 business plans.

Lloyd’s has set a deadline of 30 September for syndicates to enter submissions outlining how they will implement turnaround plans.

The crackdown on marine classes is part of a wider focus on the Lloyd’s market performance, with John Hancock, the market’s performance management director, threatening to close down consistently unprofitable syndicates, as first revealed by re-Insurance.com.

Seven classes of business - including professional indemnity, overseas motor, and power as well as open market and binder D&F business – are being targeted as part of a wider initiative to improve the market’s poor 2017 result alongside the three marine classes.

Lloyd’s fell to a market-wide loss of £2bn in 2017, the equivalent to a 114 percent combined ratio, on the back of a stinging set of catastrophe losses from the second half of last year.

In the yacht market, only 5 percent of the premium written by syndicates turned a profit between 2011 and 2017, a 14 June Lloyd’s presentation seen by this publication reveals.

In the same period 57 of the 88 syndicates writing cargo were unprofitable.

In the hull book, the Corporation said there were “prudential concerns regarding performance, reputation and long-term sustainability” of the class.

While it noted that the performance of the hull book has been bolstered by the inclusion of war business in the class, 29 syndicates remained unprofitable over the past seven years.

However, Lloyd’s did note that the cargo and marine classes had demonstrated “some signs of positive rate movement” with cargo also witnessing a “tightening of terms”.

In the hull market, the Corporation said syndicates with close relationships with the client produced better results, with established portfolios demonstrating a “superior performance”.

Lloyd’s Syndicates Marine Class Profitability, 2011-17
 Hull Cargo Yacht 
  Unprofitable syndicates Profitable synidcates Unprofitable syndicates Profitable synidcates Unprofitable syndicates Profitable synidcates
Number 29 54 57 31 52 17
Premium total £1.9bn £5.8bn £5.2bn £1.9bn £1.25bn £66mn
Percentage of premium 24% 76% 74% 26% 95% 5%