The specialist Lloyd’s insurance and reinsurance marketplace has reported its best quality result for some time, with an overall profit of £2.3 billion and a combined ratio of 93.5%, against a backdrop of heightened catastrophe activity.
In 2021, the market’s profit improved substantially from the £900 million loss reported in 2020, as the combined ratio strengthened by almost 17 percentage points from the 110.3% seen in the prior year.
Underwriting profit of £1.7 billion in 2021 marks a significant improvement from the underwriting loss of £2.7 billion announced by Lloyd’s in 2020.
During the year, the marketplace paid out a huge £19.9 billion of gross claims, and has also paid £2.9 billion to customers impacted by the COVID-19 pandemic, which represents 86% of claims notified to date.
Lloyd’s says that major claims for the market were almost £3 billion in 2021 compared with just under £6 billion in 2020, and came from Hurricane Ida and Winter Storm Uri in the U.S., and the European floods.
The lower major loss impact reflects the lesser impact from the COVID-19 pandemic in 2021 when compared with the previous year, and also the fact 2021 saw a decrease in the frequency of catastrophe loss activity.
Overall, Lloyd’s attributes the “material turnaround in performance” to its keen focus on underwriting profitability, and also the use of favourable trading conditions to generate premium growth.
In fact, gross written premiums increased by approximately £3.7 billion, year-on-year, to $39.2 billion in 2021.
As Lloyd’s continues to focus on achieving sustainable, profitable performance, its efforts led to a further 3% reduction in the attritional loss ratio to 48.9%, with a 1.7% improvement in the expense ratio to 35.5%.
Additionally, the market’s capital and solvency position remains very strong and continues to expand, with an increase in net resources to £36.6 billion.
On the asset side of the balance sheet, Lloyd’s has reported net investment income of £900 million and a return of 1.2%, compared with income of £2.3 billion and a 2.9% return in 2020.
John Neal, Chief Executive Officer (CEO), Lloyd’s, commented: “As we announce these results today, our thoughts are first and foremost with the people of Ukraine. In a world buffeted by increasingly complex and connected risks – from the pandemic to a geopolitical conflict – the Lloyd’s market is standing by its customers and supporting their recovery when things go wrong.
“Against this backdrop, I’m pleased to see the market return to profitability following the decisive action taken in recent years to improve performance. The market’s underwriting discipline will enable sustainable profitability in the years to come, coupled with a balance sheet that can support our ambition to grow profitably.”
Looking forward, Lloyd’s says that it expects the war in Ukraine to be a major loss for the industry in 2022; noting that business underwritten by the market in Ukraine, Russia, and Belarus currently represents less than 1% of its global footprint.
