RBC Capital Markets analysts have forecasted a positive and profitable coming year for Lloyd’s of London players, despite market conditions worsening in 2016.
The analysts examined the key full-year 2016 issues facing Lloyd’s re/insurers, and said that firms will utilise reinsurance capacity to limit their net exposure and grow their gross written premiums.
Specialty for Beazley and Hiscox’s retail business and the Invest classes for Novae, are main areas forecasted for growth.
RBC analysts said on a gross written premium basis; “Novae will have the strongest growth in 2017…but we expect that much of this will either be passed on to reinsurers or via the Securis special purpose syndicate meaning that increases in retained exposure would be limited.
“Although we expect Hiscox’s growth to be far lower in 2017 than in 2016, this reflects management’s desire to substantially reduce their London market exposure in 2017.”
Lloyd’s underwriting performance worsened last year despite losses not exceeding the normal levels of recent trends, and RBC said this meant a lack of premium to allow for stronger margins of underwriting.
But the analysts explained that overall, Lloyd’s levels of underwriting in 2016 are expected to be only slightly lower than those of 2015.
Lloyd’s January 2017 renewals saw a price decline in reinsurance, but “based on disclosure from Guy Carpenter, price declines continued but at a far slower rate than in previous years.”
In keeping with the forecasts of other industry experts, RBC analysts commented that 2017 was still too early to see a price led market turn.
The equity analysts said the long-awaited pricing recovery could come in 2018, if large losses continue to be combined with more price reductions.
Despite a backdrop of falling pricing and lower returns, for the most part, the analyst report reflects positively on the well-established Lloyd’s market players, saying overall 2016 will have been a relatively good year for claims, and this profitability will likely continue into the coming year.