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Lloyd’s market is back to black

The Lloyd’s market made a strong return to profitability in 2021 with an overall profit of £2.3 billion and a combined ratio of 93.5 per cent.

Calling the announcement “the best quality result reported for six years”, Lloyd’s said the results followed a £0.9 billion loss and a combined ratio of 110.3 per cent in 2020 (97 per cent excluding Covid-19).

Lloyd’s, a leading marketplace for commercial, corporate and specialty risk solutions, said the material turnaround in performance has been driven by the market’s keen focus on underwriting profitability, as well as leveraging favourable trading conditions to achieve premium growth.

Premium rates increased 10.9 per cent, continuing the trend of 16 consecutive quarters of positive rate movement.

Lloyd’s said it continued to provide significant support to its customers around the world, paying £19.9 billion of gross claims in 2021.

It has also paid £2.9 billion to customers impacted by Covid-19 (86 per cent of claims notified to date).

Against a year of heightened natural catastrophe activity, the combined ratio improved by 16.8 per cent, which Lloyd’s said is testament to its continued focus on achieving sustainable, profitable performance.

The drive to improve performance has resulted in a further 3 per cent reduction in attritional loss ratio to 48.9 per cent (2020: 51.9 per cent), with the expense ratio of 35.5 per cent (2020: 37.2 per cent) showing a 1.7 percentage point improvement.

Lloyd’s said its focus on sustainable performance and investment in digitalisation through its Blueprint Two programme is designed to continue to drive down expenses.

It said the capital and solvency position at Lloyd’s is very strong and continues to build.

Net resources increased by £2.6 billion to £36.6 billion, underlining the exceptional strength and resilience of Lloyd’s balance sheet with central solvency and market solvency ratios of 388 per cent and 177 per cent, respectively (2020: 209 per cent and 147 per cent).

The quality of Lloyd’s balance sheet, protection offered to customers and opportunities for market growth were further reinforced by the announcement in 2021 of a landmark £650-million five-year protection for its Central Fund, the market said.

Lloyd’s said it believes that the conflict in Ukraine will be a major claim to the market in 2022 and is in close dialogue with market partners to understand exposures.

Business underwritten by the Lloyd’s market in Ukraine, Russia and Belarus currently represents less than 1 per cent of Lloyd’s global footprint.

It said direct and indirect claims are expected to fall within manageable tolerances and will not create solvency challenges.

Lloyd’s said it continues to work in lockstep with governments and regulators around the world to support and implement a complex series of sanctions on the Russian state.

John Neal, CEO of Lloyd’s, said: “As we announce these results today, our thoughts are first and foremost with the people of Ukraine.

“In a world buffeted by increasingly complex and connected risks — from the pandemic to a geopolitical conflict — the Lloyd’s market is standing by its customers and supporting their recovery when things go wrong.

“Against this backdrop, I’m pleased to see the market return to profitability following the decisive action taken in recent years to improve performance.

“The market’s underwriting discipline will enable sustainable profitability in the years to come, coupled with a balance sheet that can support our ambition to grow profitably.”

The key figures reported in Lloyd’s 2021 full-year results are:

• Gross written premiums of £39.2 billion (2020: £35.5 billion)

• Profit before tax of £2.3 billion (2020: £0.9 billion loss)

• Underwriting profit of £1.7 billion (2020: loss of £2.7 billion)

• Combined ratio of 93.5 per cent (2020: 110.3 per cent, 97 per cent excluding Covid-19)

• Underlying combined ratio of 82.3 per cent (2020: 87.3 per cent)

• Attritional loss ratio of 48.9 per cent (2020: 51.9 per cent)

• Net investment income of £0.9 billion, 1.2 per cent return (2020: £2.3 billion, 2.9 per cent return)

• Net resources of £36.6 billion (2020: £33.9 billion)

• Central solvency ratio of 388 per cent (2020: 209 per cent).

John Neal, CEO of Lloyd’s (Photograph by David Fox)

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Published March 25, 2022 at 7:27 am (Updated March 25, 2022 at 7:27 am)

Lloyd’s market is back to black

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