Helios Underwriting, the Lloyd’s of London investment and underwriting vehicle, reported an almost fourfold increase in profits over 2019 due to hardening market conditions.
The group recorded profit before impairment for the year of £2.43 million, compared with £608,000 in 2018.
“We are now part way through a broad-based turn in the market, with rates rising steeply across many lines of business,” Helios noted.
In addition to more favourable market conditions, the Helios attributed the improvement to its strategy of building a fund of capacity on the better syndicates at Lloyd’s by acquiring LLV’s and by taking up pre-emption capacity offered by its supported syndicates.
Over the past two years, Helios has seen premium rates on renewal business rise cumulatively by more than 10% for half of its book.
Rate changes for the three months ended 31 March 2020 were also encouraging, with an average rate increase of 8%.
This strong momentum is expected to continue and should result in an improved underwriting performance in 2020, with further improvement forecast for 2021.
But the group is also wary of the financial market turbulence and economic uncertainty that has been brought by the COVID-19 pandemic.
“The full impact of this on the insurance industry, including the Lloyd’s market, is uncertain,” Helios said. “The initial assessment by supported syndicates has identified those lines of business most likely to be impacted, however the full extent of the losses and the impact upon pricing will become clearer as the year progresses.”
During 2019, key developments for Helios included building its portfolio of capacity to £70 million by acquiring four new subsidiaries in 2019 and a further one LLV. Additionally, the value of its capacity fund was increased by 28% to £26.4 million.
The group also expanded its use of quota share reinsurance to reduce the risk from underwriting and to assist in the financing of the underwriting capital of the portfolio.
Helios will seek to reinsure a significant proportion of the capacity at the start of the underwriting year to mitigate the open-year underwriting exposures, with XL Group and Everest Re remaining at the core of its reinsurance panel.
