Lloyd’s reinsurance lines in 2022: results & commentary

Reinsurance lines at  Lloyd’s increased gross written premium by 7.2% to £15.4 billion in 2022, segment results of the market’s annual report indicated. An underwriting profit of £636 million was up 3-0% year on year.

Following are highlights from the Lloyd’s segment report on reinsurance lines, including edited management commentary.

Property - GWP of £7.75 billion was up 4.9% y/y. Combined ratio of 95.6%, down 3.3 percentage points (pps) y/y, included 4.9 pps of favourable PYD. Underwriting profit of £247 million compared to £54 million profit in the prior year.

Highlights: Weather related disasters continued to dominate in 2022. Experience on prior years has been favourable overall with reductions in ultimate claims on some historical catastrophe events partially offset by deteriorations on 2021 catastrophe events. In addition to this, property reinsurance losses arising from COVID-19 have deteriorated, driven in general by litigation developments.

Outlook: January 2023 presented "one of the hardest and most dislocated reinsurance markets in years." Property reinsurance was among the most impacted lines of business. These trends are likely to present both an opportunity for writers of property reinsurance as price increases accelerate, while also creating cost and capacity challenges for their own retrocession programmes. It is widely expected that these trends are likely to persist for the foreseeable future.

Casualty - GWP of £4.82 billion was up 8.5% y/y. Combined ratio of 91.3%, down 5.7 pps y/y, included 2.9 pps of favourable PYD. Underwriting profit of £322 million compared to £99 million profit in the prior year.

Highlights: Over the course of 2022, casualty reinsurance maintained the trend of price strengthening as reinsurers managed inflation and an uncertain global economic outlook. The market continued to experience tightening policy coverage and positive price momentum was particularly pronounced in distressed and high exposure accounts across most lines of business. Capacity availability continued to return for better performing portfolios, but not to the detriment of underwriting discipline.

Outlook: The market continues to closely monitor social and economic inflation as well as the rise in interest rates to ensure adequate and robust pricing and reserving. While new capacity has come to the market during 2022, the expectation is that positive pricing momentum will continue and the availability of capacity for loss impacted accounts will remain constrained. Maintaining pricing parity with claims inflation will remain a key theme.

Specialty - GWP of £ 2.80 billion was up 11.5% y/y. Combined ratio of 96.7%, up a hefty 15.6 pps from an exceptional prior year, included 0.3 pps of unfavourable PYD. Underwriting profit of £67 million compared to £336 million profit in the prior year.

Highlights: Within the sector, GWP included marine, aviation and transport £2,115m (2021: £1,782m), energy £684m (2021: £655m), life £3m (2021: £75m). Marine reinsurance, which has historically included composite programmes for a broad variety of coverages such as political violence, strikes, riots, war and civil commotion. 2022 performance was negatively impacted by the conflict in Ukraine.

Outlook: Lloyd's sees substantial rate increases coming into nearly all programmes with increased retentions and reduced aggregate limits following the Ukraine conflict. Policy wordings have seen restructuring of composite programmes to include more specific cover, as well as tightening of wordings and event definitions on both the marine and aviation lines. There are still some key portfolios yet to renew and these trends are expected to continue for 2023 renewals.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.