The FINANCIAL — Conditions over the course of the year were extremely challenging with continued downwards pressure on pricing whilst traditional and alternative capital remained attracted to the insurance industry.
The level of Lloyd’s major claims, £2.1bn, was the fifth highest since the turn of the century and above the long-term average. This was due primarily to Hurricane Matthew and the Fort McMurray Wildfire in Canada.
The lower underwriting result in 2016 was offset by significantly improved investment returns, driven by a downward yield shift in the bond markets, and foreign exchange gains, principally caused by sterling depreciation.
In addition, syndicates writing motor reinsurance and direct motor and UK liability business have been impacted by the recent announcement to change the discount rate to negative 0.75% (the Ogden tables) applying to lump sum liability claims, according to Lloyd’s.
Lloyd’s has continued to enjoy progress across its major global markets: securing its position as the leading provider in excess and surplus lines in the United States; transferring over half its managing agents to the Shanghai and Beijing platforms; and being granted final approval to open an onshore office for reinsurance in Mumbai.
It was also confirmed that following the United Kingdom’s decision to leave the European Union, a subsidiary office will be opened in Brussels with the intention that it will be operational for the January 1st renewal season in 2019.
Chief Executive Inga Beale said the figures underlined the need for the Corporation, the body that oversees the market, to deliver real value for money; to focus on underwriting oversight and reduce its cost base.
Commenting on the results, she said:
“This has been a year of challenge for the insurance sector with premiums once more under continued downward pressure. It is vital that the Corporation does everything it can to support the market and make the platform attractive, whilst demonstrating value for money.
“Our collective focus must be on providing customers with the products they want, embracing innovation and modernisation. The market has shown how well it reacts to the demands of its customers in a rapidly changing risk environment with the considerable increase in cyber coverage throughout 2016 a perfect case in point. It is critical throughout 2017 we continue to demonstrate that Lloyd’s is the home for creativity and expertise.”
Lloyd’s Chairman, John Nelson, said:
“The results confirm that we must have an unrelenting focus on underwriting discipline through 2017. The challenge for all of us is to reduce the cost of conducting business because within the market this is impacting on already thin underwriting margins.
“This is my final set of annual results as Lloyd’s Chairman, and in the years since we launched our long term strategy Vision 2025, our global reputation and brand has significantly strengthened; we have substantially improved our global market access; our modernisation programme has real momentum; our increased financial strength and overall financial performance is a tribute to the underwriting skills in the Lloyd’s market. All of this puts Lloyd’s in a strong position both to take advantage of the long-term opportunities available to us globally in the specialist insurance market and to face the many challenges we have.”