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Atrium, Hiscox and Liberty syndicates outperform in marine and aviation

Bigger was better for Lloyd's MAT business as most of the leading syndicates had a good year while their smaller rivals suffered

It was a traumatic year for marine and aviation business at Lloyd’s in 2018 as the market’s Decile 10 initiative put some of the smaller writers under extreme pressure.

Nevertheless, the marine market cut its overall underwriting deficit, thanks to a stronger result from the larger syndicates, although rating improvement later in the year was not enough to prevent the aviation sector from delivering a deeper loss.

Analysis of syndicate annual reports shows the 10 largest writers of marine, aviation and transport (MAT) business made their size and market position count, recording a significant outperformance compared with the rest of the market.

Table 1, drawn from information provided in individual syndicate annual reports, shows the MAT insurance underwriting of all syndicates, except those writing less than £1m ($1.29m) in premium and special-purpose syndicates with a 6000 number. Premium and underwriting results are given for the two most recent years and the fifth column (MAT as a % of total) shows how important MAT business was to each syndicate’s overall account last year. So, for the largest writer of this class, Axa XL/Catlin 2003, MAT represented 17.1% of the syndicate’s overall book.

Syndicates marked with an asterisk report in dollars and we have converted their figures into sterling at the exchange rates shown at the foot of the table.

As these figures conform to statutory reporting conventions, they do not necessarily tally with syndicates’ own internal division and grouping of business.

The difference in performance across all syndicates is stark. The top 10 writers made an aggregate profit of 2.4% of gross premiums compared with a loss of 5.6% for all 64 syndicates shown. Premiums inched up just 0.8% overall while the top 10 recorded growth of 8.8%.



Lürssen loss hits market

Leading the performance chart among the 20 largest writers was Atrium 609, which recorded a profit of £11.1m or 15.2% of gross premiums of £72.8m. The syndicate said it wrote more marine business in reaction to other syndicates withdrawing from the class.

The strong result included a positive reinsurance balance of £3.5m and came despite a significant loss from the fire that hit the Lürssen shipyard in Bremen in September, destroying the Project Sassi super-yacht, under construction at the time. The fire was a major loss for many syndicates last year.

Lürssen also hit the syndicate’s reinsurance book and added three points to the syndicate’s combined ratio.

The syndicate writes a broad account and made an overall underwriting profit of £28.7m or 5.7% of gross premiums.

The largest MAT writer, Axa XL Catlin 2003, saw its underwriting result slip to a loss of $19.4m from a profit of $32.2m, despite favourable reserve development of $20m. The balance on outwards reinsurance showed a deficit of $73.4m, up from $70.4m.

Munich Re 457, previously known as the Watkins syndicate, was for many years the largest writer of marine business at Lloyd’s. The syndicate now has a wider brief within the group – most recently adding marine reinsurance, trade credit and property underwriting capability – but remains one of the major players in marine business. Direct MAT accounted for slightly less than 47% of the syndicate’s gross premiums last year, down from about 49%.

In line with its drive to write a broader account, the syndicate is making use of links with affiliated distribution companies such as Groves, John & Westrup, helping them restructure their underwriting strategy. Such companies accounted for about 29% of the syndicate’s estimated earned premium.

Once again, the syndicate’s MAT book recorded a good underwriting result, equating to 10.3% of gross premiums, although down from 11.1%. Premiums were up 17.7% to £243.8m.

Hiscox group hailed an outstanding performance in its marine and energy operations, helped by a generally low incidence of loss, although it did suffer an individual hull loss of $13m. In its cargo account, Hiscox has been refocusing to reduce overall exposure and to take a leading position on more of the business written.

Hiscox 33 reported an underwriting profit for MAT of $23.2m from gross premiums of $179.9m, up from a profit of $3.1m on premium of $148.5m.

MS Amlin 2001 had a better year for marine and aviation. On its internal classification, the division cut its combined ratio to 87% from 130% because of much reduced catastrophic losses. Underlying experience was better as well and prior accident years improved.

The division’s premiums were steady at £436m, with prior-period premium increases largely offset by lower writing than expected in the current year due to targeted re-underwriting of the portfolio.

Beazley said its marine division started to benefit from an improved rating environment, allowing premium income to increase 6% to $284.8m. Rates increased 3%. The combined ratio was four points lower at 94%. The group expanded its presence in the US during the year by writing marine business through the Houston office.

Tim Turner, head of marine at Beazley, said hull, cargo and aviation lines all showed material rate increases last year and the Lürssen shipyard loss should ensure hull rates continue to increase.

Marine and aviation war risks and satellite business made good contributions to the division’s profitability, Turner added, although the war risk book has shrunk. Aviation rates are rising after a prolonged period of reductions due to market withdrawals, he said.

For 2019, Beazley plans to increase its hull and machinery book.



Tokio Marine Kiln 510’s figures are for the marine and special risks division, of which 44% relates to the MAT class, plus the aviation account. The syndicate eased back on competitive lines such as marine hull and cargo.

The syndicate’s marine and special risks division posted a combined ratio of 101.5% while aviation was more profitable at 88.6%. Ratios for both accounts showed an improvement on the previous year comparables.

Navigators 1221 was the worst performer of the top 20 writers of MAT business, recording an underwriting loss equivalent to 39.7% of premium income as the syndicate’s marine account was hit by several large market losses. The syndicate cut back significantly in hull business, and to a lesser extent cargo and transport.

MAT underwriting at Antares 1274 recorded a deeper underwriting loss of $39.4m, increased from $6.5m, as the account was hit heavily by the Lürssen shipyard fire and also had exposure through its cargo account to the warehouse fire in West Virginia that hit Macy’s in November.

The syndicate achieved rate rises for hull business of 3.2%, although that was lower than the forecast of 6.8%. Nevertheless hull premiums increased 12%. The syndicate is targeting hull, liability and war, while it has reduced its exposure to yachts.

Cargo pricing was up 4.7%, Antares said, and premiums grew 8%.The syndicate’s plan to expand its specie book has been hampered by the role of broker facilities.Aviation rates increased at last in 2018, Antares reported, rising 4.3% but the syndicate reduced its premium by 4%.

Decile 10 thins market

Several syndicates scaled back their marine underwriting or pulled out of the market completely during 2018.

Charles Taylor/Standard 1884 entered run-off last year after what it called a “protracted challenge to obtaining approval for the proposed 2019 business plan and consequent withdrawal of support by the major capital provider”. The MAT book recorded an underwriting loss of £27.6m on gross premiums of £38.2m for 2018.

CNA Hardy 382 stopped writing marine hull (as well as property treaty and construction). The syndicate’s MAT account posted a loss of £8.9m.

Aspen 4711 pulled out of several lines last year, including all aviation, marine hull and cargo.

Channel 2015 has decided to withdraw from marine underwriting for 2019. The syndicate made losses of £3.5m on its marine book and £4.3m for aviation business last year.

In its annual report, Lloyd’s disclosed an underwriting loss of £343m for marine business, reflected in the combined ratio of 116.0%. Those figures represented an improvement on 2017’s deficit of £469m and combined ratio of 122.4% but last year was the third in a row Lloyd’s marine market has produced an underwriting loss.

More encouragingly, Lloyd’s reported on a generally positive pricing environment, particularly in the final quarter and for the three main classes of hull, cargo and yachts. Gross premium climbed 3.9% to £2.6m.

Reserve movement has been modestly unfavourable for the past two years, with marine business requiring strengthening of 0.4% in 2018 and 0.6% in 2017. Some large losses, such as the Tianjin port explosion in 2015, have led to reserve releases. Set against this, syndicates have received late notification of claims and some syndicates have revised their reserving methodology, resulting in the need to bolster reserves.

Aviation had a poor year overall at Lloyd’s turning in an underwriting loss of £49m, increased from £11m, and a combined ratio of 112.0%, up from 102.2%. Accident-year underwriting last year was even worse, at a combined ratio of 119.8%.

The market’s performance was affected by an increased frequency and cost of attritional claims, particularly for airline and general aviation segments, and to a lesser extent space business. Major loss experience was fairly benign although 2019 has not started well with the Ethiopian Airlines crash and the grounding of Boeing 737 Max aircraft.

Lloyd’s aviation premiums dropped 20.1% to £549m last year but Lloyd’s reported prices improved as the year progressed due to consolidation and market withdrawals.

In addition to primary marine and aviation business, Lloyd’s writes these lines in reinsurance form. What the market calls its specialty reinsurance account reported a combined ratio of 101.9% from gross premiums of £2.09bn last year. Premiums were marine reinsurance £1.09bn, aviation £361m, energy £624m and life £14m.

Marine excess-of-loss writers had a generally good year, suffering less damage than might have been expected from Hurricane Michael and Typhoon Jebi. But they were hit by the Lürssen shipyard loss. 

Rating movement was positive at the start of the year, before weakening due to the high level of capacity available. 





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