Insurance DataLab gets behind the numbers of Lloyd’s largest managing agents exclusively for Insurance Times – the stats show that coronavirus-driven losses are still sucker punching businesses
The five biggest Lloyd’s managing agents all fell to an underwriting loss in 2020 as claims surged in the wake of the Covid-19 pandemic.
Analysis of the most recent Lloyd’s syndicate accounts by new data insight and consultancy service Insurance DataLab, published exclusively by Insurance Times, revealed that the five leading managing agents reported underwriting losses totalling almost £840m for 2020. This is up from just £97.4m a year earlier.
Indeed, over the 12 months to the end of December 2020, none of the managing agents in Insurance DataLab’s analysis managed to achieve an underwriting profit.
The biggest losses were reported by Catlin – despite being just the fifth largest managing agent, with gross written premiums (GWP) of £1.1bn.
The managing agent reported underwriting losses of £324.6m – this is more than three times the £96.4m underwriting loss the firm reported a year earlier and worse than the £150m underwriting loss it recorded for 2018.
This means that Catlin was the only managing agent in this analysis to report an underwriting loss in each of the last three years.
In 2020, Catlin’s losses were driven by unclassified business, which racked up losses of £344.2m - this pulled the managing agent into overall loss-making territory for the year.
Catlin fared better in other business lines, however, with the managing agent reporting a £52.2m underwriting profit for its property book, up from losses of £47m and £176m in 2019 and 2018 respectively, making it Catlin’s most profitable line of business.
While claims have continued to dog the managing agent – gross claims rose by almost £600m over the last year – Catlin has been successful in reducing its operating expenses.
The company reported operating expenses of £414.2m for 2020, down from £564.1m in 2019 and £652.5m in 2018, making three consecutive years of falling expense costs.
This has, however, coincided with a shrinking of Catlin’s overall book of business, with premiums falling from £1.8bn in 2018 to £1.1bn in 2020.
Beazley’s claims creep
At the other end of the scale, Beazley was the largest managing agent in Lloyd’s thanks to a GWP of £2.4bn - almost £1bn ahead of second-placed Hiscox and more than a fifth higher than the £2bn GWP Beazley reported for 2019.
Despite such a large increase in premiums, the managing agent’s operating expenses only grew by a little over 9%, making it the most cost-effective managing agent in Insurance DataLab’s analysis.
Beazley’s operating expenses equated to 27.2% of its overall GWP, compared to 38.6% for Catlin, which reported the highest expense ratio.
This was not, however, enough to prevent Beazley from falling to an underwriting loss of almost £185m.
The managing agent reported gross claims across all lines of business of £1.8bn, up from £1.1bn in 2019 – a 64% increase. This represents the highest increase in claims across all five managing agents analysed in this research.
The majority of Beazley’s claims came from its third party liability book - this business line accounted for almost 27% of all claims reported by the managing agent in 2020, equalling £489.1m.
It was the agent’s pecuniary loss book, however, that saw the biggest increase in gross claims, with claims against this line growing by more than £365m to reach £419.7m - the second highest level of claims across the whole of Beazley’s book of business.
This rise in pecuniary loss claims follows a similar trend across the whole of the Lloyd’s market, with separate Insurance DataLab analysis finding that aggregate gross claims grew by more than 300% for pecuniary loss business in 2020, fuelling a market underwriting loss of £656.5m.
Insurance DataLab carried out an analysis of Lloyd’s syndicate accounts for all direct non-life syndicates still writing new premiums through the Lloyd’s market.
Aggregate underwriting performance figures have been calculated from the accounts for each managing agent’s individual syndicates. Syndicates in run-off have been excluded from this analysis.
Hiscox’s cyber re-focus
The second largest managing agent at Lloyd’s in 2020 was Hiscox, with GWP of £1.4bn – this is slightly down on the £1.5bn of premium Hiscox reported for 2019.
While premiums may have fallen over the year, the managing agent’s operating expenses have grown slightly to £403m for 2020, up from £397.8m in 2019. This was, however, still lower than the £415m of operating expenses the managing agent recorded for 2018.
Hiscox’s syndicates also experienced an increase in claims over last year, with gross claims growing to just over £1.2bn in 2020. This compares to gross claims of £1bn for 2019, which itself was a significant increase on the £748.6m of gross claims received in 2018.
These increases were primarily driven by Hiscox’s pecuniary loss book, with gross claims more than quadrupling to £347.1m versus £73.9m in 2019.
This means that the managing agent recorded an underwriting loss of £207.8m for 2020, compared to a loss of £31.9m for 2019 and a £104.9m underwriting profit for 2018.
Across the whole group, which includes non-Lloyd’s business underwritten by the insurer, Hiscox has paid out more than £5.2m in Covid-19-related business interruption (BI) claims after specialist broker NDML secured settlements for 72 claimants.
This equates to an average of almost £73k per claimant, with more claims still to be finalised between NDML and Hiscox. The broker’s clients, which include British nightclubs and other live event businesses, will receive 100% of their settlement with no administration or legal fees deducted.
The group has also been struggling with cyber insurance claims, with Hiscox group chief underwriting officer Joanne Musselle saying during the insurer’s H1 financial results webcast that ransomware attacks had increased significantly since 2019.
Musselle said that, similarly to the rest of the insurance industry, Hiscox has noticed an increase in the “frequency and severity” of ransomware attacks across a number of its markets, particularly in the US.
“We saw early signs of this emerging trend three years ago and have been undertaking portfolio action since 2019,” she said.
In 2019, Hiscox updated its cyber risk appetite by revising cyber products across the group and setting minimum underwriting standards. A year later, it reduced its line sizes and primary lines, as well as excluded the highest risk industries for ransomware.
This year, it has re-priced its cyber portfolio as rates continue to gather momentum, while also looking at ongoing changes to cyber product re-design. Musselle added that the cyber, product retail and space lines have “hardened significantly in recent months”.
TMK sees property claims costs surge
With just under £1.4bn of GWP for 2020, Tokio Marine Kiln (TMK) was the third largest managing agent at Lloyd’s last year. This represents modest premium growth for TMK, with 2020’s figures up 1.8% on the £1.4bn reported for 2019.
This compares to the £1.3bn of GWP the managing agent reported for 2018.
TMK was hit by rising claims over the last 12 months - gross claims incurred rose by 42.5% to £933m for 2020, up from £654.8m in 2019 and £762m for 2018.
The most recent increase in claims cost was driven by a surge in the cost of claims in the managing agent’s property business.
Gross claims for TMK’s property book rose by more than £200m over the course of 2020. The managing agent reported gross property claims incurred of £540.6m across both of its syndicates, compared to £339.7m a year earlier.
This rise in claims across the managing agent’s business was partially offset by a drop in TMK’s expenses, with reported operating expenses falling 1% to £497.4m for 2020, down from £502.6m in 2019.
This was, however, still higher than the £489.6m operating expenses reported for 2018.
The result of this is that TMK reported an underwriting loss of £88.3m for 2020, down from an £86.6m underwriting profit for 2019 and a £30m underwriting loss for 2018.
QBE Underwriting marks lowest loss
The final managing agent in Insurance DataLab’s analysis is QBE Underwriting, with GWP of £1.2bn securing its spot as the fourth biggest group of Lloyd’s syndicates.
This latest premium figure means that QBE Underwriting has grown its GWP by more than a fifth over the last 12 months, with the managing agent reporting GWP of £987.2m for 2019 and £1.1bn for 2018.
While QBE Underwriting failed to make an underwriting profit for 2020, its £32.5m loss was the smallest of all five managing agents included in this analysis. The figure represents a drop from the £53.5m underwriting profit reported for 2019, as well as 2018’s £15.6m underwriting profit.
This worsening of the underwriting result was caused by a big drop in the reinsurance balance for 2020, with the managing agent receiving a net figure of just £10.2m from reinsurers, compared to £151.1m in 2019 and £93.1m in 2018.
QBE Underwriting’s worst underwriting result of 2020 came from its third party liability book, with the managing agent reporting an underwriting loss of £24.9m, compared to a £17.7m underwriting profit a year earlier.
About Insurance DataLab
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