A swath of natural catastrophes and the Russia-Ukraine war made 2022 a tough year for some managing agents at Lloyd's of London.
Blenheim Underwriting Ltd. reported the year's highest combined ratio of 106%, stemming from its sole syndicate, Syndicate 5886, though this was an improvement on the 109% it reported in 2021. A combined ratio above 100% denotes an underwriting loss.
Catastrophes, including Hurricane Ian and the Russia-Ukraine war, added 37.4 percentage points to the ratio, which, while lower than the 38.4 point catastrophe contribution to the 2021 ratio, was "more than expected," Peter Scales, director at Blenheim Underwriting, said in an email to S&P Global Market Intelligence. Scales said 2022 and 2021 were "very heavy catastrophe years" that would "comfortably be in the top five highest years for catastrophe losses."
Natural and man-made catastrophes also led to Lancashire Holdings Ltd.'s Lloyd's managing agent, Lancashire Syndicates Ltd., reporting the second-highest combined ratio of the year of 104.1%. Syndicate 2010's combined ratio jumped to 114.7% in 2022 from 106.3% in 2021. This was partly offset by a profitable 87.2% at Syndicate 3010, although this was also a deterioration from the 71.4% reported in 2021.
Brighter future
While 2022 was a challenge, both Blenheim and Lancashire predict better times ahead. Several years of heavy losses have resulted in rising prices and tightening terms and conditions in many lines of the specialty and reinsurance business for which Lloyd's insurers are best known.
Blenheim's Syndicate 5886 has not made an underwriting profit since it started writing in 2017. The company expects it to make a bottom-line profit in 2021 and 2022 under Lloyd's three-year accounting system, Scales said. "Given how radically most of our trading lines have positively moved in 2023, it bodes well going forward," he added.
Lancashire's Syndicate 2010 boosted its underwriting capacity to £400 million for 2023 from £345 million a year ago, and Syndicate 3010 has increased its capacity to £375 million from £250 million. Syndicate 2010's accounts said that in 2023, "we expect the market conditions to offer us considerable opportunity."
Other managing agents, however, were comfortably in underwriting profit — with a little help from run-off specialist Enstar Group Ltd. — in what was a better year overall for Lloyd's from an underwriting perspective.
Probitas Managing Agency Ltd. reported the best underwriting performance of 2022 as Syndicate 1492 reported a combined ratio of 71.8%, down from 78.4% in 2021. The underwriting results were helped by a loss portfolio transfer of its 2018 and prior years of account to Enstar Syndicate 2008. Without the transaction, the 2022 combined ratio would have been 79.2%.
Probitas' exposure to the Russia-Ukraine war is "not material," according to its accounts, as it has minimal live exposure in the territories and does not cover war or aviation risks. The company also writes very little business in the US — a big source of natural catastrophe claims.
Change in fortunes
The year 2022 marked a big turnaround in underwriting performance for Aspen Insurance Holdings Ltd.'s Lloyd's operation Aspen Managing Agency Ltd. and its sole syndicate, 4711. Having reported a combined ratio of 117.4% in 2021, the highest that year at managing agent level, Aspen Managing Agency produced the second-lowest ratio of 75.4% for 2022 in the sample.
As with Probitas, Syndicate 4711's underwriting result benefited from a loss portfolio transfer transaction with a subsidiary of Enstar, this time for the 2019 and prior accident years. And after boosting reserves by $41 million in 2021 because of uncertainty around its financial and professional lines business, the syndicate was able to release $28 million in 2022 because of reducing uncertainty in that business. The company also saw another big increase in premium following a further transfer of business from sister company Aspen Insurance UK Ltd., making Aspen Managing Agency the second-fastest growing managing agency in 2022.
While acknowledging that it benefited partly from the loss portfolio transfer and reserve releases, Aspen said in an emailed statement that portfolio management and the discipline of its underwriting teams had been a key driver of the improvement. "Our results in 2022 reflect our efforts on refocusing and reshaping the business, as well as Aspen's decision to make Syndicate 4711 its core platform in the UK," the company said.
Overall, the individual managing agent performances are in keeping with the trend of growth and improving underwriting performance at Lloyd's as a whole. In 2022, only four managing agents reported combined ratios above 100%, and only two managing agents — AXA XL Underwriting Agencies Ltd. and Sirius International Managing Agency Ltd. — reduced gross written premium in 2022.
