With last year’s slew of catastrophes, it’s no surprise that 2017 emerged as among the costliest years for major claims. Naturally, given London market insurers’ exposure to significant catastrophe losses, the majority of them were hit by underwriting losses – except for two firms.
“The majority of London market insurers reported underwriting losses in 2017, driven by their exposure to the major catastrophe events,” said Fitch Ratings in its London Market Insurance Dashboard – 2017 Results report. “The exceptions to this were Beazley and Hiscox, whose combined ratios were just below 100%, due to a greater proportion of non-catastrophe-exposed specialty lines of business, offsetting catastrophe losses.”
Meanwhile, according to the credit rating agency, the sector outlook for London market insurance remains negative this year. Fitch expects the high cost of doing business – attributed to high acquisition and administration costs – to keep pressuring underwriting results.
It added that risk-adjusted rates at January renewals improved only slightly, despite the losses. In fact, rates remain “well below” historical highs.
As for capitalisation in the London market, Fitch cited sustained strength.
“Lancashire experienced erosion in shareholders’ equity of 8.3%, driven by the significant catastrophe losses incurred,” noted the credit rating agency. “A number of syndicates at Lloyd’s also experienced some capital depletion. However, all were able to fully recapitalise during the ‘coming into line’ process in December 2017 and hence Lloyd’s reported stable solvency coverage ratios at December 31, 2017, compared to the prior year.”