Last week saw Lloyd’s release its first half results.

John Neal – Lloyd's

While Covid-19 losses of £2.4bn pushed the market to a £438mn loss for the first half of 2020, a significantly improved underlying performance saw the market’s combined ratio excluding pandemic impacts shave off more than seven percentage points to 91.7 percent.

Despite the pandemic, Lloyd’s delivered a 7.1 improvement in its attritional loss ratio – dropping to 52.6 percent in H1 – which was largely attributed to the remedial work which the Corporation has undertaken over the past three years.

Rate improvements also played their part in the underlying improvement of the market, with an average risk adjusted rate increase of 8.7 percent across lines of business in the first half of the year.

Chief executive John Neal said Lloyd’s planning assumptions assumed sustained price increases will continue through 2021, however he said that these may be at a slightly lower level to those achieved in the first half of 2020.

“For the first time we think we will grow the market above rate increases,” he said. “For existing business, we are still talking about single digit growth rather than double-digit, but there will also be growth opportunities that sit outside that.”


Neal said business plans for 2021 needed to be “logical, realistic and achievable”, and said it was vital the market adopts a continued performance management approach to be sustainably profitable in the long-term.

The market’s expense ratio also improved in the first half of the year, falling to 37.7 percent from 38.1 percent in the first half of 2019.

“Our overarching objective through the Future at Lloyd’s digitisation is to reduce the cost of doing business at Lloyd’s,” Neal said.

“But that will not improve the margin – the objective of doing that is to reduce the cost of the product. You will see acquisition costs come down over a 3 to 5-year period, but don’t expect to see margins increase.”

Burkhard Keese, Lloyd’s CFO, said the market had now seen 11 consecutive quarters of rate increases. “We may be seeing the best underwriting conditions for decades,” he said. 


Underwriting loss  

Reinsurance, casualty and property all reported an underwriting loss in the first half of the year.

Lloyd’s property underwriters produced the largest loss – just over £1bn – compared to the profit of £82mn the market segment eked out in the same period last year.

Property gross written premiums totalled £5.10bn, with net incurred claims of £2.89bn.

Reinsurance underwriting losses also grew year-on year from £9mn to a loss of £256mn.

Casualty produced an underwriting loss of £386mn for the first half of the year, compared with a loss of £105mn in the first half of 2019. 

Casualty generated gross written premiums of £4.40bn, with net incurred claims of £2.36bn. 

Lloyd’s energy segment was once again profitable with an underwriting gain of £62mn, on the back of gross written premiums of £761mn.

This represented a modest decline from the £806mn gross written premiums written in the first half of 2019, as well as a £21mn drop in underwriting profitability. 

Lloyd’s marine, aviation and transport (MAT) and motor segments both returned to the black in the first half of the year. 

Lloyd’s segment performance H1 2019 vs H1 2020-3

While these segments included lines of business which were likely to benefit from lower attritional frequency due to Covid-19, Neal said there was not evidence of a material trend.

“It is a genuine improvement in underlying performance,” he said.

Overall, the Lloyd’s market delivered a H1 underwriting loss of £1.55bn.


In addition to its H1 Covid-19 bill of £2.4bn, Lloyd’s said it expects to incur an additional £600mn of Covid-19 claims in the second half of the year, with its overall cost of £3bn sitting at the mid-point of its previously announced £2.5bn to £3bn range.

Lloyd’s gross claims related to the pandemic are expected to total around £5bn, with approximately £2bn to be passed to reinsurers. Neal said the market typically recovers 40 percent of its gross losses through its reinsurance arrangements.

Lloyd’s Covid-19 H1 lossesby geography and class

Lloyd’s said the £3bn claims bill had been funded through two successful capital collections.

Event cancellation was the most significant driver of losses, representing 41 percent of Lloyd’s claims bill. Property classes accounted for 25 percent, with casualty classes representing 18 percent of the total.

Geographically, North America represents 58 percent of Lloyd’s Covid-19 bill, with the UK accounting for 16 percent.

“While our overall result was heavily impacted by Covid-19 losses, our underlying result has vastly improved,” Neal said.

2021 business planning