London:
Lloyd’s today announced a loss of £0.9bn (pre-tax) for 2020, driven by £3.4bn net incurred COVID-19 losses, which contributed 13.3% to the market’s combined ratio of 110.3%.
Throughout 2020, Lloyd’s provided significant support to its customers around the world impacted by the COVID-19 pandemic, with customer pay outs forecast to reach £6.2bn on a gross basis.
COVID-19 claims added 13.3% to the market’s combined ratio of 110.3%.
Excluding COVID-19 claims, the market’s combined ratio has shown substantial improvement at 97.0%, down from 102.1% in 2019.
Over the last three years, Lloyd’s sustained performance improvement measures contributed to an improved underwriting result of £1.9bn and a 7.5% improvement in the combined ratio, excluding COVID-19, to 97.0% (2018: 104.5%).
2020 saw premium rate increases of 10.8% with positive rate momentum continuing in the first quarter of 2021
Excluding COVID-19 losses, the market delivered an underwriting profit of £0.8bn, demonstrating a significant improvement in Lloyd’s underlying performance. This is supported by 7.8 percentage point improvement of the underlying combined ratio (attritional loss ratio, expense ratio and prior year releases) which has dropped to 87.3%.
Lloyd's gross written premiums of £35.5bn represent a 1.2% reduction over the same period in 2019. Exceptional market conditions driven by an acceleration in positive rate momentum throughout 2020 saw the market achieve average risk adjusted rate increases on renewal business of 10.8%.
This was offset by a 12.0% reduction in GWP due to the remediation of underperforming business in 2020, reflecting the market’s continued focus on the quality of the business it renews and underwrites.
John Neal, Lloyd’s CEO, said: “Following an extremely challenging year marked by a global health crisis of a scale never seen before, Lloyd’s continued to support its customers with pay outs expected to total £6.2bn in COVID19 claims. The year was also marked by a high frequency of natural catastrophe claims and the UK's formal exit from the EU, driving further losses and uncertainty.
“Against this unprecedented backdrop we have made good progress across our performance, digitalisation, and culture transformation plans. Our disciplined underwriting approach and determination to become the world's most advanced insurance marketplace have set us up for real success this year alongside the continued positive rate momentum that will see the market supporting growth for the first time in four years.”
The 2020 expense ratio saw a 1.5% improvement dropping to 37.2% (2019: 38.7%), and this remains a key area of focus, with the Future at Lloyd’s Blueprint Two solutions and delivery programme central to tackling total acquisition costs and administration expenses.
In 2020, the market’s net resources increased by 10.8% to £33.9bn as at 30 December 2020 (2019: £30.6bn), reinforcing the exceptional strength of Lloyd’s balance sheet with a central solvency ratio of 209% (December 2019: 238%). Lloyd’s maintains strong capital and solvency positions, with net resources increasing to £33.9bn in 2020 and a central and market wide solvency ratios of 209% and 147% respectively.–
Lloyd's sees big loss from Suez Canal blockage
The blockage of the Suez Canal for nearly a week will result in a “large loss” for Lloyd’s of London, its chairman said on Wednesday, as the insurance market recorded a £900 million ($1.2 billion) pretax loss in 2020 due to the COVID-19 pandemic.
The Canal is working to clear the backlog after the refloating this week of a stranded giant container ship. The blockage threw global supply chains into disarray.
Bruce Carnegie-Brown told Reuters it was too early to estimate the exact loss, but “it’s clearly going to be a large loss, not just for the vessel but for all of the other vessels that were trapped and unable to get through.”
He added this could mean a loss for Lloyd’s of around $100 million or more.
Liability insurance claims for ships and cargo affected by the delay are expected to fall initially to the container ship Ever Given’s liability insurer, the UK P&I Club. But the insurer will also use reinsurance, some of it in the Lloyd’s market, industry sources say.
Mr. Carnegie-Brown said Lloyd’s may be on the hook for around 5%-10% of the total reinsurance claims.