Lloyd’s Expects ‘Major Claim’ From Russia-Ukraine War, Reports ‘Strong’ Profit in 2021

Lloyd’s, the world’s leading insurance and reinsurance marketplace, announced “a strong return to profitability” in its 2021 full year financial results, with an overall profit of £2.3 billion ($3.04 billion), compared to a loss of £900 million ($1.2 billion) in 2020.

It reported a combined ratio of 93.5%, compared with 110.3% in 2020. (Combined ratios below 100% indicate an underwriting profit).

Lloyd’s described its 2021 profit as “the best quality result reported for six years.”

Lloyd’s said it expects that the ongoing conflict in Ukraine will be a “major claim” to the market in 2022, despite the fact that business underwritten by the Lloyd’s market in Ukraine, Russia and Belarus currently represents less than 1% of Lloyd’s global footprint.

Much of this loss could come from Lloyd’s aviation insurance exposure and the leased aircraft that Russia has seized as a result of sanctions. Fitch Ratings recently noted that most aviation policies are underwritten through Lloyd’s, while 30%–40% of primary insurers’ exposure is ceded to reinsurers.

Global insurers and reinsurers could face claims as high as US$10 billion in a worst-case scenario, Fitch said, while Moody’s Investors Service estimates up to $11 billion in claims from the 500-plus planes that are financed or owned by non-Russian lessors and have been grounded in Russia.

According to a report from Bloomberg, Lloyds disputes the estimates from Moodys and Fitch. While the war in Ukraine will cause a major claim, “insurers’ liability was limited to around 10% to 15% of the asset value of jets stuck in Russia,” said the report, quoting Lloyd’s.

Lloyd’s said that direct and indirect claims as a result of the Russia-Ukraine are expected to fall within manageable tolerances and will not create solvency challenges.

The turnaround in performance for 2021 was driven by the market’s focus on underwriting profitability, as well as favorable trading conditions where premium rates increased by 10.9%, said Lloyd’s, noting that the 2021 rate increases marked 16 consecutive quarters of positive rate movement.

Lloyd’s paid almost £20 billion ($26.5 billion) in gross claims in 2021, including reported claims arising from the pandemic, and from elevated catastrophe exposures in the U.S. and Europe.

Lloyd’s also has paid £2.9 billion ($3.8 billion) to customers affected by COVID-19, or 86% of claims notified to date.

Gross written premiums during 2021 rose to £39.2 billion ($51.9 billion), compared to £35.5 billion ($47 billion) in 2020.

Lloyd’s said its capital and solvency position at Lloyd’s is “very strong and continues to build” with net resources increasing by £2.6 billion ($3.4 billion) to £36.6 billion ($48.4 billion) during 2021. Lloyd’s central solvency and market solvency ratios are 388% and 177%, respectively, compared with 209% and 147%, respectively, in 2020.

Source: Lloyd’s

Topics Profit Loss Excess Surplus Russia Lloyd's Ukraine