Market Update – Lloyds

Lloyds of London Market Update, April 2023

In early March 2023, Lloyds of London (Lloyds) released their full 2022 results, announcing a profit of GBP 2.6Bn (2021: GBP 1.7Bn) for the year and a combined ratio of 91.9% (2021: 93.5%).

This confirms Lloyds have now categorically reversed years of previous loss-making periods and their second consecutive underwriting profit; increasing this metric by a significant 52% over the 2021 result.

This position is on the back of nineteen consecutive quarters of positive rate increases and many Covid-19 losses not materialising, causing better than expected insurer loss ratios, despite Ukraine-related losses having added around GBP 1.2Bn to the equation.

What continues to weigh on underlying profitability is the staggeringly horrendous investment result of GBP 3Bn which has completely eroded the markets underwriting gains.

Lloyds have indicated that their emphasis will change from substantial rating increases to a more sustained underwriting methodology, which will see minimal rating increases and greater premium stability coming from the London market.

Establishing clear, calculable, and concise Environmental, Social and Governance (ESG) credentials continues to drive participation for Australian businesses involved in fossil fuel industries with market capacity into Lloyds severely reduced or in some cases non-existent i.e., thermal coal.

Beneficially, Australia is seen as a market opportunity with a distinct trend now evident of Lloyds syndicates opening offices in Australia to capitalise on a strong regulatory framework and a contextually buoyant and resistant economy, backed by future facing natural resources.

With the likes of Canopius opening their doors in Australia last year, many others are to soon follow, including Probitas, Everest and Markel; increasing their access to brokers and clients and hopefully creating efficiency in deploying Lloyds capacity locally.