ALIRT recently updated its Lloyd’s Composite, which aggregates results for the leading 50 syndicates at Lloyd’s of London, representing 92% of the market’s total gross premium written in 2023. ALIRT issues annual analytics on individual syndicates of which there was a total 97 in 2023 (excluding special purpose syndicates and a handful of life insurance-oriented units). The following overview reflects results for ALIRT’s Composite as well as those for the Lloyd’s market as a whole, based on the organization’s annual report issued in late March.
2023 was a phenomenal year for the Lloyd’s market, as reflected by a 22-point spike in the Composite’s Total ALIRT Score, from 47 to 69.
In its decade + experience tracking this important global reinsurance/specialty market, ALIRT has not seen such a dramatic one-year advance. Normally, scores for the Lloyd’s Composite trace a wavelike movement of deterioration and improvement typical of the property & casualty (P&C) sector given its well-documented pricing cycles. For instance, the 18-point drop in the Lloyd’s Composite Score between 2013-2017 was occasioned by poor underwriting results in part on continued soft pricing conditions. This poor performance anticipated the “Decile 10” program of 2018 through which Lloyd’s sought to improve or remove the worst-performing 10% of its overall book of business.
The 2023 result is, however, a clear outlier and reflects a number of stars aligning for this London-based market. These include, principally:
- A generational hard market for property reinsurance pricing combined with a year of relatively light “major” catastrophe losses in Lloyd’s target regions (the U.S. foremost),
- Substantial underwriting gains attendant upon the now 6-year hard market cycle for primary insurance lines (personal, commercial, and specialty),
- A capital market recovery, with equity markets substantially higher and a much stronger interest rate environment.
Simply put, the combination of very strong pricing, appreciably lower major losses, and improved attritional (non-catastrophe) loss experience produced excellent underwriting results. This, combined with an £8.4 billion positive swing in investment income, resulted in an outsized return on earned premium (ROP) of almost 30% versus a 20 year average ROP return of 10%. Simply astounding.
For a copy of the full overview, please email me at david.paul@alirtresearch.com
