Published by Cherry Chan on
Key Financial Highlights:
Commendable as these results may be, they should be viewed from the perspective of a relatively benign year. The Lloyd’s market endured minimal exposure to typhoon Haiyan in the Philippines and the severe flooding and windstorms in the UK and the rest of Europe. Major claims for the year totalled £873 million, net of reinsurance and including reinstatements payable and receivable, compared with £1,816 million in 2012.
These results were, however, accompanied by a year of historically low investment returns. The continued low interest rates have restricted returns on investment portfolios and therefore increased the importance of underwriting profitability. Despite the recent strengthening of the UK and US economies, with promising outlooks for GDP growth, the recovery of the global economy as a whole is less encouraging. Interest rates are not expected to rise in the short-term and therefore this is an obstacle that is predicted to persist in 2014.
The insurance market has also attracted significant levels of capital due to the low interest rates. High inflows of capital, accompanied by a relatively low claims experience, has increased competitive pressure on rates. Competition particularly intensified in the reinsurance sector, as relatively attractive returns compared with other sectors attracted an inflow of capital.
Chairman of Lloyd’s of London, John Nelson, identified the following four focus areas for Lloyd’s to strive towards in 2014:
Lloyd’s classes of business that enjoyed an improvement in the combined ratio are Reinsurance, Property and Marine. Gross written premiums increased for the Property, Casualty, Marine and Motor lines. The 5.6% increase in overall net earned premium was mostly attributable to the direct property class. Look out for further detail on the lines of business written within Lloyd’s in our following blog.
Partner of the General Insurance team, Cherry Chan, said:
“We are delighted to hear that Lloyd’s had a terrific year in 2013 and achieved higher profitability than 2012 after a particular bad year in 2011 (loss of £526m).
Lloyd's had a very good year due to little exposure to the typhoon in the Phillippines or the severe flooding and windstorms in the UK and the rest of Europe. Given the relatively low claims experience, in particular the catastrophe claims, and with additional capital continuing to flow into the market, we expect the rates will continue to be competitive in 2014."
Over the coming weeks, we shall go through different sections of the annual report and give you an overview of what happened at Lloyd’s in 2013.