The impacts of the Lloyd’s Performance Board restrictions are being felt in the upstream energy sector, with Lloyd & Partners noting a fading buyers’ market environment driven by a decline in reinsurance capacity.
Lloyd & Partners’ April 2019 quarterly energy market newsletter highlights a shift from the buyers’ market landscape as the improvement efforts of the Lloyd’s of London marketplace drive change.
Specifically, Lloyd and Partners notes the exit of Standard Club and Skuld from the Lloyd’s market, stating that this shows the “creeping effect” of the measures put in place by the Lloyd’s Performance Board.
In light of this, the publication warns that the previous buyers’ market conditions in the sector is changing for the worse, as the reinsurance capacity underpinning some primary insurers underwriting is fading and becoming less diversified.
Marine insurer Skuld announced that it is to cease underwriting business from its Lloyd’s Syndicate 1897 from 1 July 2019, in an effort to improve profitability.
Another factor worth highlighting is the business plan limits the Lloyd’s Performance Board has imposed on the medium to smaller sized syndicates in respect to the premium income they may underwrite. Lloyd and Partners advise that this will likely result in tightening later in 2019 as these syndicates are constrained by said limits to accept new income.
Overall, and despite reports of a benign purchasing environment in the opening quarter of the year, cracks are starting to appear in the upstream energy sector.
“Insurers have chased 5% rate rises but these initial offers were often amicably bargained down to plus 2.5%. In a limited number of examples “as befores” have been achieved but usually due to some extenuating circumstance. However, on pure “like for like” renewals, with incumbents we still see no ability to gain any reductions,” explains Lloyd & Partners.
While capacity remains plentiful it is becoming more cautious and, at the same time, attrition has increased after a very positive loss experience for the 2018 year of account.
“Luck played no small part in the good profitability seen in the last two years,” says Lloyd & Partners, a trading name of Lloyd’s broker JLT Specialty Limited.
