Lloyd’s has said one of the centrepieces of its drive to address the underperformance of the market will be a focus on improving the results of the syndicates that have consistently posted the worst results.
Sources said that a letter went out to just over 20 syndicates last month threatening them with closure if they don’t put in place strong plans to reach or return to profitability.
On 24 May, Lloyd’s held a presentation to the market’s C-suite on the syndicates’ underperformance in recent years and stressed that the current trends were unsustainable.
The Corporation’s management said it looking to take measures against underperforming syndicates in order to narrow the performance gap.
Performance management director Jon Hancock told the market that syndicates that have been unprofitable in each of the past three years must submit a short-term plan to turn to profitability. The Corporation said that failure to agree on a credible plan would result in the syndicate closing.
The identities of the syndicates that have been issued with letters by Lloyd’s owing to their under-performance over a multi-year period are not known.
However, the results of all of the syndicates are a matter of public record.
Analysis by The Insurance Insider using S&P data showed that there were 16 syndicates which reported an underwriting loss in each of the past three years, excluding syndicates in run-off and special purpose syndicates.
The syndicates listed reported a combined ratio of over 100 percent for the years 2015, 2016 and 2017, according to data from S&P Global.
The syndicates have a strong bias towards less mature syndicates, with the majority formed since 2010 – lending some force to the market’s complaints about the Corporation’s willingness to accept new entrants during a period of over-capacity and falling rates.
Both Probitas and the Standard Syndicate were launched in 2015. New syndicates typically lose money in their first year – placing them in a slightly different category to the other businesses with three years of losses.
The group of syndicates represents around 10 percent of Lloyd’s capacity. The biggest syndicate is 1686 Axis, with £454mn of stamp capacity in 2017. Most of the syndicates’ stamp capacities were in the £2-300mn range last year.
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