Two of Lloyd's of London's eight business lines recorded underwriting losses in 2024 as the market's overall underwriting profitability declined.
Lloyd's 90-plus syndicates collectively posted a combined ratio of 106.2% in the specialty reinsurance line for the year, nearly 23 percentage points worse than the 83.5% reported in 2023. The specialty line mainly comprises marine, energy and motor reinsurance.
The direct marine, aviation and transport business line also shifted from black to red with a combined ratio of 104.3%, a 5.2-point increase from 2023's 99.1%. The other lines of business Lloyd offers are property reinsurance, casualty reinsurance, property insurance, casualty insurance, motor insurance and energy insurance.
Overall, six lines of business reported worse underwriting performances in 2024 than they did a year earlier. That was a marked change from the trend a year ago, when all eight Lloyd's business lines reported combined ratios below the 100% break-even point, and six of its eight business lines had improved combined ratios.
Heavier loss year
Overall, Lloyd's reported a combined ratio of 86.9% for 2024, up from 84.0% in 2023, due to a greater large loss burden. Large losses added 7.8 percentage points to the combined ratio in 2024, compared with 3.5 percentage points in 2023 and a 10-year average of 10.6 points. All other components of the combined ratio improved or were static.
The largest payouts from an overall major claims bill of £3.2 billion were the £1.2 billion for Hurricane Milton, the £900 million for Hurricane Helene and the £400 million for the container ship Dali's collision with the Francis Scott Key Bridge in Baltimore, according to an earnings presentation. Lloyd's also increased its reserves for losses from the Russia-Ukraine war by £556 million, taking the total to £2.4 billion. About 60% of that sum is for aviation losses, said CFO Burkhard Keese.
The sharp deterioration in the specialty reinsurance combined ratio was caused in part by "continued material loss activity," including the Baltimore Bridge collision, which pushed the business line's accident year combined ratio, which excludes prior-year reserve movements, to 98.1% from 77.9% a year earlier, according to the Lloyd's 2024 annual report. In addition, reserve strengthening added 8 percentage points to the combined ratio, compared with 5.6 points in 2023. That was driven by a deterioration of aviation losses related to the war in Ukraine.
These trends also affected the results of the direct marine, aviation and transport insurance business. Aviation-driven reserve strengthening added 11.4 points to the combined ratio, up from 10.9 points in 2023.
Other lines that saw large increases in their combined ratio, though they still posted underwriting profits, were energy, with a 9.9-point increase to 94.3%, and casualty reinsurance, with a 7.8-point increase to 97.8%.
Two business lines managed to record underwriting performance in 2024. Motor insurance, the smallest of the eight business lines by gross written premium, showed a 6.5-point improvement to 89.2%. The combined ratio in the primary casualty business line improved by 2.8 percentage points. Direct casualty insurance is the second largest of the Lloyd's business lines, representing about 24% of 2024 gross written premium.
For some of the other large business lines at Lloyd's, the combined ratios only worsened slightly and underwriting profitability remained high. In direct property insurance, the market's biggest line, the combined ratio increased 1.6 percentage points to 81.6%. In property reinsurance, which accounts for almost 18% of Lloyd's gross written premium, the combined ratio increased 2.4 points to 75.2%. Both property lines recorded higher levels of natural catastrophe losses than in 2023.
Underlying improvements
Although underwriting profitability was lower than in 2023, key elements of the combined ratio continued to improve.
The attritional loss ratio, which excludes expenses, large losses and the effects of prior-year reserve movements, fell to 47.1% in 2024 from 48.3% in 2023, maintaining its run of year-over-year improvement. The attritional loss ratio is the area most directly under underwriters' control, Lloyd's CEO John Neal said on the earnings call, and is "now consistently below 50%."
The underlying combined ratio, which excludes large losses and which Lloyd's considers a key measure, was 79.1% in 2024, down from 80.5% in 2023. An underlying combined ratio of 80%, Keese said, allows Lloyd's to absorb losses of up to £8 billion, net of reinsurance, before it reports an underwriting loss.
One element of the combined ratio where Lloyd's may have to wait for further improvement is the expense ratio, which remained static at 34%. Keese called the lack of movement a "small disappointment."
There is scope to reduce the expense ratio further after Lloyd's implements its digitization and modernization program, known as Blueprint Two, Neal said. However, the switch to phase one of the program, which had already been delayed from the initial target of October 2024, has been reportedly pushed back until 2026.
