Syndicate estimates as at 31 March 2019
Lloyd’s has today released forecast results for all syndicates that trade with third party capacity for the 2017 and 2018 years of accounts. These are based on quarter 1 data (to 31 March 2019) and therefore represent the ninth quarter of development for the 2017 year of account and the fifth quarter for the 2018 account.
The full schedule of estimated results can be found here.
The 2017 account is forecast to be a loss for many syndicates across the market, due to the record level of catastrophe losses experienced in the year, as well as the competitive market conditions that prevailed at the time.
Argenta clients have on average seen a small overall improvement in their forecast result during the quarter. However seven supported syndicates show a deterioration in the previous quarter, with the most significant movements being a higher forecast loss for Blenheim Syndicate 5886, up from a midpoint loss of 20.5% of capacity to 25%, and deteriorations of 5% of capacity for both Hiscox SPA 6104 and Beazley SPA 6107.
Ten supported syndicates show an improvement in the forecast during the quarter, the most significant being Chaucer’s nuclear Syndicate 1176. Some of the improvements are simply a reduction in the forecast loss, specifically TMK 308, 510 and 557, Cincinnati Global (formerly Beaufort) 318 and MAP 2791.
At this stage the forecasts do not usually include movement from closed years of account, which is factored in the final months of the year of account. This element contributed over 4% of capacity to the recently closed 2016 year of account. While a significant release from old years will not bring the account into overall profit, we expect that it will further mitigate the result when the 2017 account is closed at the end of this year. We would also expect that the investment return could be better than currently indicated. However, bond markets, where the syndicates hold the vast majority of their investable assets, remain volatile.
Also released today are the first formal forecasts for the 2018 year of account. Underwriters are traditionally cautious about forecasts made at an early stage of the account’s development. Under Lloyd’s accounting rules, insurance policies that incept in 2018 are assigned to the 2018 year of account, therefore much of the business is still on risk. If there is another year of heightened catastrophe losses, these could undermine the results. However, managing agents do build in substantial catastrophe loads to their forecasts at this stage and an average or better year for major losses should see these initial forecasts improve.
Many managing agents have issued a forecast in a broad range. For example, Hiscox Syndicate 33 has a range of ten percentage points on capacity between best and worst forecasts, which is equivalent to £160m. Of the 37 syndicates that have made forecasts for the 2018 year of account (not all of which are supported by Argenta), 19 show a profit at the upper end of their range while only four have a profit at the lower end.
Quarter 2 forecasts, based on data at 30 June 2019, will be published on 14 August.