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Insider in Full: Lloyd’s 2021 results: All four market quartiles grew premiums in 2021

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Topics: Financial Results Rates Topical Trends

A broader segment of the Lloyd’s market was permitted to grow gross written premiums (GWP) in 2021 than in 2020, Insurance Insider analysis has shown, with expansion observed even amongst the poorest performers by prior-year combined ratio.

Our analysis examines 2021 top-line growth for Lloyd’s quartiles ranked by 2020 combined ratio, to gain a clearer picture of how performance at the time of business planning affected 2021 growth plans.

All four quartiles of the market grew their aggregate premiums year on year, marking the first time all four quartiles have been granted permission to expand since the introduction of Lloyd’s performance drive in 2017 for the 2018 underwriting year.

This also reflects the fact that the market brought in new syndicates and saw some takeovers in 2020, with these changes leading to more 2021 growth amongst lower-quartile underwriters.

The Corporation has continued to push ahead with its regime of differentiated oversight, and this has continued for 2021.

As expected, the top quartile showed the biggest increase in top line (+14.4%) for 2021, roughly in line with the prior year.

However, the top two quartiles of the market were permitted to grow in excess of Lloyd's 10.9% reported risk-adjusted rate increase for 2021, indicating that exposure growth was permitted for a larger swathe of the market.

In our 2020 analysis, we found that only the top quartile was able to grow in excess of rate.

Increases in 2021 premiums written by the second, third and fourth quartiles marked a reversal from the prior year, when all three groups contracted in size.

It is worth noting that the 6.0% contraction in the second quartile between 2019 and 2020 was heavily influenced by a significant scale-back at MS Amlin 2001, without which the quartile would have registered a small volume of growth as a whole.

Among syndicates in the top quartile by 2020 combined ratio, light-touch syndicate Ascot 1414 grew premiums the most in absolute terms: its 2021 GWP figure of £1.0bn was a £219mn increase on the prior year, driven by rate increases as well as the onboarding of new business lines and teams during 2021.

In the second quartile by 2020 combined ratio, Chaucer 1084 (+£113mn), Munich Re 457 (+£157mn) and Beazley 2623 (+£425mn) all recorded nine-figure increases in GWP in 2021.

Other significant expansions for the year include Canopius 4444, which grew 40% – or £400mn – for 2021 to £1.4bn. This marks a rebound in premium for the syndicate back to 2019 levels – in 2020, the business had dropped around £360mn of premium on the previous year as part of remedial efforts.

This increase at Canopius accounted for much of the overall increase among syndicates in the third quartile by 2020 combined ratio, although Brit 2987 (+£164mn) and Ariel Re 1910 (+£124mn) also contributed major growth.

Syndicate 1910’s premium increase was also among the biggest in proportionate terms, registering 49% top line growth year on year for 2021.

However, many of the largest percentage increases in GWP were observed in the fourth quartile by 2020 combined ratio – with many of these syndicates either nascent businesses in growth mode, or being repositioned.

Munich Re Innovation 1840, IQUW 1856 and Inigo 1301 all fell in this group, and all three syndicates more than doubled their annual written premiums between 2020 and 2021.

Syndicate 1856 was rebranded as IQUW after ERS acquired it at the end of 2020, and CEO Peter Bilsby laid out the group’s ambitious plans for continued growth in an interview with this publication in February.

Inigo, which finalised its acquisition of Syndicate 1301 from StarStone at the end of 2020, also intends to keep up a rapid pace of growth, with CEO Richard Watson aiming to double the syndicate’s premiums again in 2022.

But the fourth quartile by 2020 underwriting performance also included the syndicate that made the largest absolute cutback in 2021 – Axa XL 2003, which reduced GWP by £313mn between 2020-2021.

Syndicate 2003’s contraction in size was a consequence of undertaking extensive remedial work and coincided with a big improvement in underwriting performance year on year.

There were similar stories at Coverys 1975 and Markel 3000, with each syndicate recording both a significant proportionate decrease in premium and one of the biggest percentage-point improvements in combined ratio between 2020 and 2021.

Coverys, however, will place Syndicate 1975 into run-off at the end of the current underwriting year and transfer clients onto company market paper, as revealed by this publication in December.

To read our earlier quartiles analysis on Lloyd’s underwriting performance, click here.

 

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