As reported on Friday, The Insurance Insider’s annual stamp capacity survey found that capacity has grown by 6 percent on the previous year, equivalent to £2bn more stamp than in 2019.
Stamp capacity is the amount of sterling business a syndicate is authorised to write in a year of account. For the purposes of this survey, stamp capacity is calculated as gross of reinsurance and net of brokerage.
The measure is not a perfect indicator of the amount of business that syndicates intend to write, with carriers choosing to maintain different amounts of headroom at different points in the cycle. However, it remains a useful proxy for the business the Lloyd’s market expects to write in a given year.
The Insurance Insider took a deeper dive into the survey results and identified five key findings, as outlined below. For the full survey results by syndicate, please click here.
Some 62 percent of syndicates were allowed to grow their stamp for the coming year, compared with 29 percent last year when Lloyd’s PMD was pushing through the first, and more unforgiving, iteration of its performance drive.
Meanwhile, just 6 percent of syndicates were made to de-empt their capacity for 2020, compared with 35 percent last year.
The figures demonstrate a greater willingness by the PMD to permit growth in its second year of business planning since the market turnaround actions were initiated. It also reflects an improved rating environment for Lloyd’s. However, many syndicates still feel the PMD could have been more generous in its permission of additional exposure growth as the market firms.
2. Growth at top-quartile syndicates was more than double any other quartile
Syndicates in the best-performing market quartile by 2018 combined ratio grew 16 percent on average, underlining the PMD’s messaging that good performance would be rewarded with growth.
In contrast, the second, third and fourth quartiles were permitted stamp uplift of 8 percent, 7 percent and 5 percent respectively.
The growth at the top quartile will have been weighted towards the “light touch” cohort, which as a result of its good track record is granted automatic business planning permission. As previously reported, these 15 syndicates are expected to grow planned premium by 14 percent compared to 3 percent for the rest of the market. The light-touch syndicates include Munich Re, Hiscox, Aegis London and MAP.
3. MS Amlin £250mn contraction marks biggest de-emption of the year
The largest de-emption of the year was recorded by MS Amlin, which reduced its stamp by £250mn – or 13.5 percent – year on year to £1.6bn.
The de-emption comes after news that MS Amlin would exit nine business lines as part of remediation efforts. CEO Simon Beale and CUO James Illingworth will also stand down as parent MS&AD seeks to turn around the performance at the syndicate, which has not made a full-year underwriting profit since 2015.
A number of the biggest risers in this year’s stamp capacity survey are as the result of syndicate mergers because of M&A, but three syndicates recorded 50 percent pre-emptions or more without any business additions.
Beazley Syndicate 3623, which focuses on personal accident and sports business, recorded the largest pre-emption, raising stamp by 59 percent to £100mn. Brit’s Names-backed Syndicate 2988 also had a 52 percent increase, while Lancashire Syndicate 3010 – which focuses on classes including aviation, energy, cargo and terrorism – has lifted its stamp by 50 percent.
Both Hamilton and Canopius recorded large pre-emption increases due to their acquisitions of Pembroke and AmTrust at Lloyd’s respectively. Hamilton will merge the former Syndicate 3334 into the Pembroke flagship syndicate while AmTrust Syndicate 1861 will be folded into Syndicate 4444.
4. Large pre-emptions lead Beazley to manage £2.7bn of market capacity
Double-digit pre-emptions have led Beazley to become the largest managing agent by managed capacity in the Lloyd’s market, with £2.65bn of capacity across its six syndicates.
Beazley also now runs the largest syndicate in the market – Syndicate 2623 – after a 19 percent increase in stamp to £1.93bn for 2020. It is believed to be one of the 15 light-touch syndicates.
All Beazley syndicates bar life syndicate 3622 booked double-digit rises in stamp for 2020.
There have been some changes to the managing agent leadership board rankings this year. Canopius, with its acquisition of AmTrust at Lloyd’s, has leapfrogged to joint-fourth-largest by capacity from 10th. It is now level with MS Amlin, which fell from third place last year after its large de-emption.
Hiscox remains the second-largest managing agent in the market, but has now breached the £2bn threshold, with £2.2bn of managed capacity for 2020.
5. Some £400mn of capacity exits from four closed syndicates
The four syndicates which opted to close and enter run-off during the year collectively held £403mn of stamp capacity, which has now left the market.
Skuld 1897, Vibe 5678, Pioneer 1980 and Acappella 2014 all took the decision to close during the course of 2019.
In total, seven syndicates will leave the market, with the other three – Hamilton 3334, China Re 2088 and AmTrust 1861 – disappearing as a result of M&A activity in Lloyd’s. For each of these three, the stamp will be rolled into the main syndicate for their respective new parent companies.
There are currently three known new entries for 2020 – including AIG Syndicate 2019, which will leverage Lloyd’s syndication for parent AIG to grow its high-net-worth book. It will ultimately be permitted to write $1bn of business, but sources have previously said it will write $500mn in its first year.
Victor Syndicate 2288, which was converted from Icat Syndicate 6123, will provide additional capacity to the MGU for international expansion.
In addition, next year the Munich Re Innovation Syndicate will become the first to enter the market via the Lloyd’s syndicate-in-a-box (SIAB) initiative. More SIABs are expected for 2020, with CEO John Neal previously saying Lloyd’s had received applications from around 40 for next year. However, at the time of writing, no further SIABs had been announced.
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