A number of Lloyd's syndicates are running out of capacity as rates rise by up to 400% on certain lines of business.
Following poor underwriting results over the last few years, insurers and intermediaries have called for premium income to increase. But rates are now rising so rapidly, syndicates are struggling to balance their books.
The marine sector has been struck particularly hard, with the energy book being faced with premiums rising by 100%. Hull cover has increased by 25% and well control is up by 400%.
According to Lloyd's, average premium transactions this year have risen by 42% across the board, resulting in a 0.8% decrease in the number of risks placed.
Syndicates are being forced to increase capacity to cope with the rise. If all pre-emption is approved by Lloyd's, capacity for next year will hit an all-time high of £13bn, compared to an £11bn peak in 1991.
Lloyd's spokesman Adrian Beeby said: “We have been talking about hardening rates for a long time and this shows an increase.”
Last month, Wellington Underwriting placed 11.4 million shares on the stock market to raise approximately £15.6m to help fund syndicate 2020.
One marine underwriter said some syndicates were being forced to write smaller lines of business and described the rises over the past month as “ridiculously massive”. He said forecasted results were “so poor” they were contributing to the desire to push premium income up.
The shortage comes following revelations that a handful of syndicates were already overwriting their capacity limits a few months ago. Lloyd's regulatory division then issued a warning in May that there would be shortfalls if claims arose.
Underwriter for Markel syndicate 702, Andreas Loucaides, said: “A lot of people were saying we needed more capacity a year ago. There has now been a hardening of rates and, with the collapse of Independent Insurance, Lloyd's has had to absorb its business.”
Director of marine and special risks at Kiln, Charles Franks, said: “With the levels of rises being seen in the marine market, it is possible that towards the end of the year some syndicates may have difficulties with the level of premium income written.”