Lloyd’s determination to close down underperforming classes of business or even syndicates has been highlighted today with the news that the loss-making Lloyd’s insurer Advent Capital Holdings is likely to go into run-off following a strategic review.
Advent has confirmed that it is in talks with fellow Fairfax Holdings-owned Lloyd’s insurer Brit Insurance about transferring some of its business to the managing agent of the Syndicate 2987 while putting the remaining parts into run-off.
Last month, re-Insurance.com revealed that Lloyd’s performance management director Jon Hancock had told Lloyd’s insurers that he would close down under-performing syndicates if they did not detail a credible plan about a return to profitable underwriting.
Hancock’s get-tough approach - part of a plan called “Closing the Performance Gap” - comes after Lloyd’s reported its worst financial results since 2001, fuelled by last year’s heavy cat losses and also attritional loss ratios in number of classes, including marine.
In a statement today, Advent said it is now working with Brit “to consider which parts of the portfolio can be transferred, as well as building plans to run off the remainder of the business”.
Brit CEO Matthew Wilson commented: “We are working closely with the management team of Advent to design what we believe will be an optimum portfolio for our business and look forward to welcoming Advent team members to Brit. These are challenging times, nonetheless with our clear strategy for the future we will collectively continue to build upon our track record of outperformance.”
Advent’s Syndicate 780 reported a $20.4mn loss for 2017 as its combined ratio swelled to 126.1 percent.
The performance marked a significant deterioration from 2016 when it reported a 12.4mn profit on an almost break even 100.4 percent combined ratio.
The syndicate blamed last year’s poor result on “one of the costliest years for catastrophe claims on record” as it broke out a $31.2mn pre-tax bill for Hurricanes Harvey, Irma and Marie and another $3.2mn for the wildfires in California.
But even without those catastrophes, Advent would have posted a 107.7 percent combined ratio to generate a $18.3mn underwriting loss.
Nevertheless, Advent said it had seen an improvement in market conditions since the losses pointing to a 19 percent rise in property D&F pricing and a 5 percent rate hike for casualty reinsurance.
Last year, Advent wrote $271.2mn through its Lloyd’s syndicate, an increase of 5.2 percent on 2016.
Hancock stated “We have been and will continue to work with Advent to ensure the best outcome for all. We welcome the collaboration with and support of the wider Fairfax Group in showing leadership in exploring ways to enhance their group’s Lloyd’s business performance and thereby contribute to improving overall market performance.”