Nat cat claims drive £1bn market loss at Lloyd's of London in 2018 results

A volatile investment environment and a costly year for natural catastrophes drove an aggregated loss of £1 billion in 2018 at Lloyd's of London – but its results were still a significant improvement on 2017 when it lost double this amount.

The market reported that it paid £19.7 billion in claims (gross of reinsurance) in 2018. It paid out net claims of £16.4 billion in 2018, a small improvement on the £18.3 billion it paid out in 2017.

A number of large natural catastrophe events occurred last year, including hurricanes Florence and Michael, Typhoon Jebi in Japan, as well as the Californian wildfires. These disasters costed the Lloyd’s market £2.9 billion, which it said was significantly higher than the long-term average of £1.9 billion.

It made a net investment return of £0.5 billion in 2018, a big decrease on the £1.8 billion it made a year earlier.

Lloyd's recorded a combined ratio of 104.5 percent in 2018, an improvement from 114 percent in 2017.

The market posted gross written premiums of £35.5 billion, compared with £33.6 billion in the previous year.

Lloyd's said that despite these substantial claims, it managed to strengthen its financial position. Its total assets grew by 9 percent to reach £118 billion, and its net resources increased by 2 percent to £28.2 billion. Lloyd’s central assets also grew by 8 percent to reach £3.2 billion.

Lloyd's stressed that a rigorous business planning process for 2019 removed almost £3 billion of poorly performing business from the market in the previous year and remediation plans were implemented across all review classes of business. Four new syndicates started trading at Lloyd's in 2018.

“The market’s aggregated 2018 results report a combined ratio of 104.5 percent, and a £1bn loss. This performance is not of the standard that we would expect of a market that has both the heritage and quality of Lloyd’s," said chief executive John Neal.

"We have implemented stronger performance management measures which will remain an enduring feature of how we go about our business. We expect these actions to deliver progressive performance improvement across the market beginning in 2019 and in the years to come."

Neal added: “Over the last six months we have asked hundreds of stakeholders to tell us how we should evolve Lloyd’s to build a collective vision for the future. We have today released a preview of this vision in advance of a full prospectus to be published on 1 May that discusses the future of insurance at Lloyd’s.

“We are determined to show decisive leadership across three fronts: to address the performance gap; to secure Lloyd’s future success; and, following our announcement yesterday, to tackle all forms of inappropriate behaviour with robust actions to create a more inclusive working environment.”

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