Underwriting profits surge for top Lloyd’s MAT writers

Marine, aviation and transport (MAT) underwriters at Lloyd’s enjoyed a strong overall performance in 2023, supported by increased profitability of the largest syndicates, according to Insurance Day’s analysis.

The analysis of syndicate annual reports shows the 10 largest writers of 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 where MAT premium is less than 1% of the total premium written and special-purpose syndicates with a 6000 number.

Premium and underwriting results are given for the two most recent years, as well as the importance of MAT business to each syndicate’s overall account (MAT as a % of total). So, for the largest writer of this class, Munich Re Syndicate, MAT business represented 31.5% of the syndicate’s overall book in 2023.

The 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. Lastly, as these figures conform to statutory reporting conventions, they do not necessarily tally with syndicates’ own internal divisions and grouping of business.

The difference in performance across all syndicates is stark. The top 10 writers made an aggregate profit of 10.1% of gross MAT premiums written in 2023, up from 9.6% in 2022 (see table 2). This compared with an aggregate underwriting profit of 6.8% of MAT premiums in 2023 for all 59 syndicates analysed, compared with 6.6% in the previous year.

The top 10 writers booked MAT premiums of £2.26bn ($2.86bn) in 2023, an increase of 12.9% on the previous year. This growth was marginally ahead of the 59 syndicates analysed, which booked MAT premiums to £4.88bn, representing a 12.7% year-on-year increase.

Challenging conditions

The improved MAT profitability came despite challenging operating conditions in 2023, including significant inflationary pressures and geopolitical tensions. The war in Ukraine, the conflict in Gaza as well as disruption to global supply chains arising from escalating tensions in the Middle East affected MAT writers.

The market’s financial performance for 2023 was also significantly affected by increased reserves for syndicates’ indirect Russia/Ukraine losses, including those related to western leased aircraft in Russia.

Against this backdrop, marine writers benefitted from compounding price increases, wording tightening and portfolio re-underwriting in marine, Lloyd’s said in its 2023 annual report. However, price increases slowed in 2023, Lloyd’s added, and premium growth was driven predominantly by inflationary factors and exposure.

Lloyd’s marine business encompasses a wide variety of sub-lines including cargo, hull, marine war, marine liabilities, and specie and fine art. Cargo represents the largest class in this line.

Meanwhile, aviation pricing “fell short of expectations” in most areas, Lloyd’s said, with the exception of aviation war, with prices increases in response to the conflicts in Ukraine and the Middle East.

Three biggest writers

The strong performance of the top 10 MAT syndicates was driven by the results of the three largest writers, which increased underwriting profits significantly year-on-year.

Munich Re Syndicate 457 was the largest MAT syndicate, booking £382.1m of gross premiums in 2023, although this was down slightly year-on-year. The underwriting result for the class of business increased sharply, more than tripling to £58.9m, which represented 15.4% of premiums written.

Beazley syndicate 2623 – the third largest writer – was the most profitable MAT syndicate, reporting an underwriting profit of £91.9m last year. This represented a profit 34.7% of the £264.9m of MAT premiums written in 2023. MAT premiums written by the syndicate edged up slightly to £264.9m.

QBE syndicate 2999 returned its MAT account to profit in 2023, with an underwriting result of £58.3m, representing 20.7% of premiums written. The syndicate’s MAT premiums written climbed nearly 25% to £281.8m on the back of “strong rate increases and organic growth across a number of opportunities”, it stated. The syndicate was the second largest MAT writer last year.

Tokio Marine Kiln syndicate 510 and Axis Managing Agency 1686 posted the strongest MAT growth in 2023, with both reporting premiums increased year on year by 35%.

Syndicate 510’s MAT premiums increased from £135.7m to £183.3m in 2023. However, the syndicate booked an underwriting loss of £39.1m for the year, owing to losses in its aviation business, which the syndicate attributed to “provisions for potential exposures arising from the Ukraine war, in addition to losses arising from the Sudan conflict and adverse developments on the closed years within the aviation excess liability account”.

Axis syndicate 1686 booked MAT premiums of £172.2m in 2023, up from £127.3m in 2022. The syndicate’s MAT underwriting declined 14% to £12.4m. The syndicate did not provide commentary on the segment.

Looking ahead, the MAT segment continues to face a range of challenges, not least geopolitical with the continuing war in Ukraine and the Red Sea crisis.

As a result, marine writes will need to “balance” growth and servicing clients’ needs while managing exposures arising from conflict in the Red Sea, Lloyd’s said. The conflict is likely to continue to place upward pressure on marine war premiums.

In contrast, premium rates for forthcoming marine hull could be the most favourable for shipowners for the past few years, brokers have suggested, as insurers fight it out for market share amid an influx of new capacity, including from MGAs.

Increased capacity is also putting pressure on cargo insurance rates.