Lloyd’s of London slumped to a £2bn loss last year, its first in six years, as the insurance market was hit by a series of major hurricanes and earthquakes.
Hurricanes Harvey, Irma and Maria, along with an earthquake in Mexico, wildfires in California, monsoon flooding in Bangladesh and a mudslide in Colombia, cost the Lloyd’s market £4.5bn in claims, more than double the previous year when it paid out £2.1bn.
The hurricanes, which tore through the southern US and Caribbean last summer, hit Lloyd’s particularly hard because the US accounts for 44% of its business. It said it was its second costliest year for major claims behind 2011.
Bruce Carnegie-Brown, the Lloyd’s chairman, said: “To date, the market has paid more than 50% by value of the claims notified in relation to Harvey, Irma and Maria, and is in the process of paying the rest.”
He expects 2018 to be another challenging year, and added: “The market’s 2017 results are proof, if any were needed, that business as usual is not sustainable. As a result the market is embracing new ways of working.”
Last year’s 330 natural disasters are estimated to have caused a global economic loss of $353bn (£251bn), with Harvey, Irma and Maria accounting for 60% of the insured losses.
Inga Beale, the Lloyd’s chief executive, said: “The market experienced an exceptionally difficult year in 2017, driven by challenging market conditions and a significant impact from natural catastrophes. These factors mean that for the first time in six years Lloyd’s is reporting a loss.”
The world’s oldest insurance market made a pretax loss of £2bn last year, compared with a £2.1bn profit the previous year. The group’s combined ratio – a measure of claims and costs as a proportion of premiums – worsened from 98% to 114%. A figure above 100% indicates a loss.
Its annual report showed Beale was paid £1.3m last year, down from £1.5m in 2016. Along with other executives, she did not receive a bonus payout under the Lloyd’s performance plan last year because the LPP only pays out if the company makes an annual profit of more than £100m.
Lloyd’s was one of the first UK businesses to publish its gender pay gap, revealing that women earn 32.1% less than men (for bonuses the gap is even bigger at 40.7%).
Beale said she was “not proud of that at all” and that Lloyd’s was taking action, having signed up to the government’s women in finance charter and introduced a back to work programme for parents. Its goal is to have women in 40% of its top management jobs in the next five years, up from 33.8% today.
Women were not allowed into the Lloyd’s underwriting room until 1973, when Liliana Archibald became the first female broker there.
Lloyd’s reiterated that its new office in Brussels would be up and running by July, ready to start writing business in January. However, Beale was concerned about what would happen to existing insurance policies across the EU after Brexit.
She urged European regulators to agree a solution soon, as transferring the contracts to new entities would be an “unnecessary expense and definitely doesn’t benefit the consumer”.
Transferring insurance contracts would take 12-18 months and involve the courts, according to the Bank of England. It estimates 6 million UK policyholders and 30 million policyholders across the rest of the EU could be affected.
