Key findings:
• Lloyd’s operating performance has been strong over the past decade. The combined ratio and return on capital average 90.6% and 16.2% over this period, supported by relatively benign loss experience.
• Capital resources are currently at peak levels. Members’ assets supporting underwriting now exceed GBP22 billion and calls on the Central Fund have been limited to GBP11 million over the last five years.
• Profitable growth is very hard to achieve in the current operating environment. At constant exchange rates, gross premiums written rose by 1.1% to GBP26.7 billion in 2015, despite an average renewal rate reduction of 4.6%.
• Underwriting and investment results both weakened in 2015. Pre-tax profit fell by 30% to GBP2.1 billion and the return on capital dipped to 9.1%.
• Lloyd’s net expense ratio breached the 40% threshold for the first time in 2015. Efforts to streamline operations across the London market have gathered pace over the past year, as leading industry bodies cooperate to drive a five year modernisation plan.
• Access to international markets has been enhanced. A new platform has been established in Dubai and Lloyd’s expects to be underwriting Indian reinsurance business on an onshore basis in time for the April 2017 renewals.
• Interest in setting-up at Lloyd’s remains strong. For (re)insurers looking to develop an international or specialty franchise, the market offers an unrivalled combination of access to diversified business and capital flexibility.
• Recent industry consolidation has had a significant impact on Lloyd’s. Eight corporate transactions involving a Lloyd’s business were announced during 2015, affecting some 20% of market capacity.
• ‘Brexit’ is not expected to have a significant impact on the Lloyd’s franchise. Only around 4% of Lloyd’s total business is considered to be at risk from the potential loss of membership of the single European market
Read the report here
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