23 March 2016 Insurance

Profits at Lloyd’s plummet in “undeniably tougher” market

Profits at Lloyd’s of London, the world’s specialist market for insurance and reinsurance, dropped significantly last year hit by both poorer underwriting and investment returns in a market its chairman described as “undeniably tougher than seen for many years”.

The corporation's profits fell to £2.1 billion for 2015 compared with £3 billion in 2014. Its combined ratio also increased to 90 percent, compared with 88.4 percent in the previous year.

Lloyd’s’ underwriting result was down to £2 billion compared with £2.3 billion a year earlier and its investment return more than halved to £0.4 billion in 2015, compared with £1 billion in 2014.

The firm’s return on capital was also down to 9.1 percent last year, compared to 14.1 percent in the previous year.

It was not all doom and gloom for the market, however. Lloyd’s did see its gross written premiums increase last year to £26.7 billion compared with £25.3 billion in 2014.

Lloyd’s said the results demonstrate its financial strength and sound market-wide performance in spite of a turbulent macro-economic backdrop and some of the most challenging market conditions the industry has seen for many years.

Lloyd’s said its ratings of A (excellent) by AM Best, AA- (very strong) by Fitch and A+ (strong) by Standard & Poor’s reflects its robust position and said its competitive position on a global scale is driven by solid underwriting performance and diversity of global markets and product.

It also stressed that the approval of its internal model, a crucial step in securing the ability to operate within the new Solvency II regulatory regime, was also a major achievement for the market.

John Nelson, chairman, Lloyd’s, said: “Each year brings a unique set of challenges, requiring determination, innovative thinking and solutions. This year has been no different. In a market undeniably tougher than seen for many years, we have had to demonstrate our ability to adapt and take action.

“In these conditions, these results are creditable and a tribute to the continued skill and professionalism of the Lloyd’s market underwriting community.”

Inga Beale, chief executive, Lloyd’s, added: “Lloyd’s is pursuing its strategy to deliver risk solutions to a fast moving world. Business looks to the Lloyd’s market to underwrite policies too complex for others to handle.

“Protection from cyber-attacks, terrorism and climate change are needed now more than ever.”

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