Lloyd’s market reports drop in gross claims paid in ‘relatively benign period’ of natural catastrophes

Lloyd’s of London released Thursday the pro forma financial results of the Lloyd’s market for the first six months of 2014, reporting an “unusually high incidence of aviation losses,” a 13% year-over-year drop in gross claims paid and a 1.3-point deterioration in its combined ratio.

The Society of Lloyd’s reported earned premiums for the market, net of reinsurance, were £9.916 billion in the first half of 2014, up 2.7% from £9.651 billion during the same period in 2013.

As of Thursday the British Pound was trading at $1.81.

Gross written premiums were £14.864 billion for the six months ending June 30, down 4.1% from £15.494 billion during the first half of 2013.

The interim pro forma financial statements include the interim results of the Lloyd’s syndicates, the members’ funds at Lloyd’s (FAL) and the Society of Lloyd’s group interim financial statements. The group interim financial statements include those of the Society of Lloyd’s “and all its subsidiary undertakings, the Lloyd’s Central Fund and the Society’s interest in associates.”

As of Dec. 31, 2013, there were 91 active syndicates and 56 managing agents in the Lloyd’s market.

The combined ratio for the market increased by 1.3 points, from 86.9% in the first half of 2013 to 88.2% in the first half of 2014.

Lloyd’s reported £5.659 billion in claims paid in the first half of 2014, down 13% from £6.536 billion in the same period last year. Claims incurred, net of reinsurance, were £4.679 billion in the first half of 2014, down 3.5% from £4.853 in the first half of 2013.

“The first half of this year has been a relatively benign period for major catastrophes,” wrote Lloyd’s chairman John Nelson and CEO Inga Beale in a statement. “The most notable claims have arisen from the unusually high incidence of aviation losses, which have been sudden and tragic.”

Nelson and Beale noted that the “global aviation hull war market accounts for” about US$65 million of premiums per year, “yet already in 2014, claims could exceed” US$600 million for the insurance industry.

The result before taxes was £1.667 billion in the first half of this year, up 21% from £1.379 billion in the first half of 2013.

“Pricing continues to be under pressure from the additional capital which has entered the industry as a result of the long period of low interest rates,” Nelson and Beale stated.

When it released its 2013 annual report in March, the Society of Lloyd’s had reported that 43% of its market business was from Canada and the United States. Within Canada and the U.S. in 2013, 34% of the Lloyd’s market’s business was in property, 27% was in reinsurance, 20% was in casualty, 9% was in energy, 7% was in marine, 2% was in aviation and 1% was in motor.