Lloyd’s has instructed its managing agents to provide quarterly reports and an “action plan” on the underwriting performance of seven under-performing classes of business as part of a wider initiative to improve the market’s poor results, re-Insurance.com can reveal.
The seven classes - which are worth £6.4bn in annual gross premium revenues to the market - are marine hull; cargo; power; yacht; international professional indemnity; and overseas motor.
The final one is international D&F property, which is broken down into open market and binder.
In total, 83 syndicates write at least one of these classes and, in the aggregate, these classes under-performed by £1.7bn in actual results against the ones forecast in 2017.
The latest crackdown comes as part of a a wider phase II review ordered by performance management director Jon Hancock in response to the market’s worst aggregate result since 2001, the year of the 9/11 attacks.
Exasperated by last year’s heavy cat losses, Lloyd’s fell to a market-wide loss of £2bn in 2017, the equivalent to a 114 percent combined ratio.
In March, re-Insurance.com revealed that Lloyd’s had begun phase I of its 2017 review by scrutinising syndicates’ cat aggregates and exposure to one-in-two hundred year maximum loss.
Phase II was unveiled to senior managing agency executives in a presentation on the 24 May where they were asked to report back on the seven under-performing classes by last Friday (1 June).
The latest move highlights Lloyd’s concerns about the creeping loss ratios of attritional (non-cat) business, which together with the market’s high expenses and cat losses, combined to deliver a £3.4bn underwriting loss last year before investment returns.
In fact, only one Lloyd’s class of business - energy - came in with a combined ratio of under 100 percent in 2017.
While Lloyd’s doesn’t break down its class results by region, the global property segment booked a loss of £1.76bn and posted a combined ratio of 127.6 percent for the year.
Marine lines at Lloyd’s – including cargo and hull – made up £469mn on the overall loss for 2017. The class as a whole posted a combined ratio of 122.4 percent.
Lloyd’s posted a loss of £188mn for its global motor book - which is predominantly made up of risks in the US and UK - with a combined ratio of 122.3 percent.
The casualty book – which incorporates professional indemnity – posted a combined ratio of 103.1 percent and a loss of £189mn.
The chart shows that the yacht class combined ratio was over 170 percent in 2017 while international property open market business was around 150 percent.
Managing the process on behalf of the Lloyd’s performance management department - which is led by former RSA executive Jon Hancock - is Caroline Dunn, who is responsible for classes of business analysis.
In her May market presentation, Dunn said she expects an action plan for all the seven classes, a quarterly review of progress and interviewing and a focus on whether to continue with the class for 2019 business planning.
Re-Insurance.com analysis of Lloyd’s 2017 results found that of the 103 syndicates trading last year, 18 posted a combined ratio in excess of 150 percent, with a total of 82 reporting an overall loss for 2017.