following a swathe of market exits, the outgoing-CEO of Lloyd’s Inga Beale fired a warning shot to marine underwriters yesterday, cautioning insurers to adapt to the “new normal” of low prices and increased loss ratios.
Beale’s wake up call to marine underwriters comes at an uncertain time for the market with a number of significant carriers pulling back from marine lines.
And just before Christmas Sirius put its cargo, treaty and yacht books of business at Lloyd’s into run off.
While the size of these books ranges significantly, the wave of departures is unlikely to affect pricing as overcapacity in the market prevails.
Yesterday’s warning from Beale is the latest reproach from Lloyd’s to marine market, after this publication revealed that the Corporation was cracking down on various marine classes and threatening to shut down syndicates that consistently fail to turn a profit.
Hull, cargo and yacht have all come under the microscope as the Corporation narroes in on serial offenders.
The marine market has been plagued by major losses, over capacity and competitive pricing, the environment, issues that were compounded by last year’s catastrophes.
As a result, in 2017 syndicates writing marine business posted an eye-watering underwriting loss of £469mn ($637.7mn), making up nearly a quarter of the Corporation’s £2bn pre-tax loss for the year.
Homing in on cargo at yesterday’s (5 June) Marine Insurance London conference, Beale highlighted that losses have increased at a faster rate than cargo insurance premiums, with 2016 the fifth year in a row that cargo claims payments exceeded premium income.
Lloyd’s data seen by this publication show that between 2011 and 2017 only 35 percent of syndicates writing cargo turned a profit.
Of the £7.1bn of premium written in the cargo market during the six-year period, £5.2bn of this was unprofitable.
The was not much different for the yacht market.
Last year skyrocketing claims dealt Lloyd’s yacht underwriters a hefty blow as incurred claims soared to an exceptional 221.4 percent of premium written in the fourth quarter.
According to data seen by re-Insurance.com, the yacht market had already incurred losses of 79.7 percent of the overall premium for the relatively-benign second quarter, before the sector was rocked by the trio of hurricanes that pounded parts of the US and the Caribbean in Q3.
As a result, incurred claims swelled to 152.8 percent of premiums written in the third quarter before deteriorating further in the final three months of the year.
As part of its review of the hull market, 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.
With the market no longer able to expect catastrophes to drive up pricing for marine risks and Lloyd’s clamping down, it is unlikely the recent wave of departures will be the last.
But with carriers shrinking their marine books and redundancies being made, where these swathes of displaced teams will end up is one re-Insurance.com will be keeping watch on…