Lloyd’s Dips To £1.8bn Loss On Investments, Reserves £1.1bn Ukraine War

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The specialist Lloyd’s insurance and reinsurance marketplace has reported an overall loss of £1.8 billion for the first half of 2022, but despite reserving £1.1 billion for claims related to the war in Ukraine, the underwriting performance improved.

The net loss reported today compares with profit of £1.4 billion a year earlier, and is attributable to a net investment loss of £3.1 billion, compared with income of £600 million in H1 2021, as a result of unrealised mark-to-market losses.

However, Lloyd’s does expect to start benefiting from higher interest rates in 2023, leading to an improved investment result.

Lloyd’s notes that it’s been a challenging year with natural catastrophes, Russia’s invasion of Ukraine, inflation, and other geopolitical factors.

So far, the Lloyd’s market has reserved £1.1 billion net of reinsurance for customers impacted by the war in Ukraine.

“Lloyd’s continues to work with governments and regulators around the world to deliver sanctions against Russia, while implementing the landmark facility announced by our market in July to insure ships recovering grain from Ukraine’s ports,” says Lloyd’s.

But in spite of the large reserve for the ongoing conflict and also the impact of natural catastrophes in the period, Lloyd’s has reported a stronger underwriting result.

Underwriting profit for H1 2022 increased to £1.2 billion from £960 million in H1 2021, as the combined ratio improved by 0.8 per cent to 91.4 per cent , which is the market’s strongest combined ratio since 2015.

On an underlying basis, the combined ratio strengthened from 85.4 per cent in H1 2021 to 81.5 per cent in H1 2022.

During the first half of this year, the attritional loss ratio improved to 48.9% and the expense ratio improved to 35.4 per cent .

In terms of growth, the marketplace has reported that gross written premium spiked by 17.4 per cent , year-on-year, to £24 billion in H1 2022, as net earned premium rose by 14.4% to £14.1 billion.

Further, prices increased by 7.7 per cent which Lloyd’s says marks five consecutive years of positive rate movement.

John Neal, Chief Executive Officer (CEO) at Lloyd’s, commented: “With political and economic uncertainty looming large over society, it’s more important than ever that insurers are ready to support. Lloyd’s results today point to both the sustainable performance of our market and the resilience of our capital position, enabling us to continue supporting customers through whatever lies ahead.

“Rising interest rates, while prompting an unrealised investment loss on paper at the half year, will be good news for insurers in the long term as returns on assets strengthen in 2023 and beyond. Meanwhile, with the conflict in Ukraine continuing to inflict devastating consequences, we’ve taken proactive steps to protect our customers from the fallout while ensuring we can support them – and continue driving sustainable performance – through the uncertain times ahead.”

Finally, Lloyd’s capital and solvency positions remain strong with net resources standing at £36.5 billion. The central solvency and market solvency ratios stand at 395% and 179 per cent, respectively.