New analysis from ICMR shows that roughly half of the gross profit generated in the Lloyd’s market over the last two decades has been shared with reinsurers.
Cumulatively, Lloyd’s has written £448 billion of gross premium since 2000, with a long-term combined ratio of 98% and a cumulative net profit of £20 billion.
The ICMR also noted that the market has paid its reinsurers £107 billion and collected back over £87 billion in recoveries, meaning the market has shared approximately half its gross profit with its reinsurers.
“This is probably a fair reflection of the benefit reinsurers have delivered in reducing the market’s volatility and therefore capital requirements,” analysts explained.
Looking at other metrics, ICMR found that syndicate investment return was almost £15 billion, varying as a percentage of net earned premium between 9.3% and 1.5% over the 20-year period.
This compares with administrative expenses which were nearly twice that cumulatively at £29 billion, rising to a peak of 11.4% of net earned premium in 2015 before falling to 8.3% in 2019.
Net claims were the market’s largest cost and amounted to £200 billion, compared with net earned premium of £330 billion.
This means that of the £130 billion of net underwriting surplus, with only £20 billion of net profit achieved pre-tax, the market has sustained £110 billion in costs.
Acquisition costs amounted to the largest factor at nearly £97 billion, while brokerage as a percentage of gross premium also increased by 38% since 2000.
ICMR suggested that this increase “seems at odds with the supposed efficiency savings from all the broker consolidations seen in the market,” but noted that Lloyd’s new e-commerce initiatives may help reduce some operating costs further.