Premiums down 1.3%, combined ratio up 1.3 points in 2014 for Lloyd’s market

The Lloyd’s market had a result for the financial year before tax of £3.161 billion, down 1.4% from £3.205 billion in 2013, while the gross amount of claims paid dropped 8.1%, from £13.086 billion in 2013 to £12.028 billion in 2014, Lloyd’s of London said Wednesday in its annual report for the market.

The Lloyd’s market had gross written premiums in 2014 of £25.283 billion, down 1.3% from £25.615 billion in 2013. The British pound closed at $1.86 Wednesday.

“While we are seeing strengthening levels of economic growth in the US and in the UK, in continental Europe the picture is subdued,” chairman John Nelson wrote in the annual report. “Insurance penetration in the developing markets remains low; volumes are growing at lower rates than previously but are still higher than the developed economies.”

Nearly half (44%) of gross written premiums were from the United States and Canada.

“North America remains the largest market for Lloyd’s and we saw growth again here in 2014,” stated chief executive Inga Beale (pictured right) in the annual report.

The financial results include both the members underwriting through syndicates, and the Society of Lloyd’s.

The combined ratio was up 1.3 points, from 86.8% in 2013 to 88.1% last year.

“The largest insured natural catastrophe was Hurricane Odile, which swept across the Baja California peninsula in Mexico in September, impacting a number of mainly property-related treaty and facultative accounts,” Lloyd’s said in the annual report. “Other natural catastrophe events included the severe hail and tornado losses in Nebraska in June and the snowstorms in Japan in February and December.”

In 2013, the most costly event for the Lloyd’s market had been the floods in southern Alberta.

In 2014, direct insurance, results were:

•Property, gross written premiums of £6.281 billion and a combined ratio of 87.4%;

•Casualty, gross written premiums of £4.963 billion and a combined ratio of 97.9%;

•Marine, gross written premiums of £2.142 billion and a combined ratio of 95.2%;

•Energy, gross written premiums of £1.533 billion and a combined ratio of 82.7%;

•Motor, gross written premiums of £1.213 and a combined ratio of 106.4%; and

•Aviation, gross written premiums of £582 million and a combined ratio of 102.1%.

In 2014, the combined ratio for aviation deteriorated by 20.7 points, from 81.4% in 2013.

“There were an unusually high number of aviation disasters in 2014. This included the tragic loss of Malaysia Airlines MH17, Malaysia Airlines MH370, Air Algerie AH5017, TransAsia GE222 and, in the closing days of 2014, AirAsia QZ8501,” Lloyd’s said. “The fighting which raged at Tripoli Airport from 13 July 2014 also led to significant damage to aircraft and property. Lloyd’s continues to respond to these claims.”

Malaysian Airlines 370 disappeared March 8, 2014 on a flight from Kuala Lumpur to Beijing, while MH17 was shot down last July over Ukraine. Transasia GE222 crashed July 23 during approach to the airport in Magong, Taiwan while the next day, Air Algerie AH5017 – which originated in Ouagadougou, Burkina Faso with an intended destination of Algiers – crashed in Mali. AirAsia QZ8501 – which was enroute from Surabaya, Indonesia to Singapore – crashed Dec. 28.

Within energy, gross written premiums had dropped 8.1%, from £1.668 billion in 2013.

“Performance was driven by offshore energy which benefited from another year without a significant windstorm in the Gulf of Mexico and few notable risk losses,” Lloyd’s said. “The onshore energy sector remains overcapitalised and the pressure to compete for premium income and market share has intensified despite marginal performance. Energy liability is one of the few areas where capacity remains at a premium, due primarily to existing underwriters reducing individual commitments per risk to manage their aggregations.”

In reinsurance, the results for the Lloyd market were:

•Property, gross written premiums of £4.477 billion and a combined ratio of 76.5%;

•Casualty, gross written premiums of £1.781 billion and a combined ratio of 87.1%; and

•Specialty, gross written premiums of £2.239 billion and a combined ratio of 81.8%.

As of Dec. 31, 2014, the Lloyd’s market consisted of consisted of 94 active syndicates (up from 91 the previous year) managed by 59 managing agents, up from 56 the previous year.

One of the new syndicates in 2014 was Axis Capital of Pembroke, Bermuda, which Lloyd’s says has “a limited international operation that was attracted to Lloyd’s by the promise of market access, international licence network and capital efficiency.

The other two new syndicates in 2014 were Dale Underwriting Partners and Acappella, both based in London.

“In July 2014, legislation was passed granting Lloyd’s surplus lines eligibility in Kentucky, completing Lloyd’s footprint across all 50 US states,” Lloyd’s said in the annual report. “In response to demand from managing agents, the Corporation worked hard to establish a presence in Dubai during 2014. Nine Lloyd’s managing agents have so far signed up to participate on the platform, which opened in March 2015.”

‘This is a strong set of results for Lloyd’s, despite challenging market conditions’ – Lloyd’s CEO Inga Beale http://t.co/BqwRz6c8XB

— Lloyd’s of London (@LloydsofLondon) March 26, 2015

Lloyd’s of London profit holds steady http://t.co/ZKK3kwFZbr

— BBCWorldBiz (@BBCWorldBiz) March 26, 2015