Moody’s Investors Service believes rate increases, efficiency savings and changes in underwriting appetite at Lloyd’s all bode well for the market to build on the underwriting profit posted by the market in 2021 – the first for five years. Moody’s said it expected the market to deliver another strong underwriting performance in 2022.

Moody’s said: “Lloyd’s achieved a return on capital of 6.6% in 2021 compared with -2.8% in 2021, despite significantly lower investment income and above trend natural catastrophe losses.

“A key factor was Lloyd's stronger underlying underwriting performance, as reflected in a loss ratio (claims as a share of premiums) excluding major claims of 48.9%, down by 3 percentage points relative to 2020, and by 9 points compared with 2018. We see this improvement, driven by price increases, cost controls, and portfolio pruning to eliminate loss-making business, as sustainable.”

It added: “We expect further risk-adjusted rate increases and ongoing cost reductions to support Lloyd's underlying underwriting performance again this year. Good reserve adequacy - Lloyd's has recorded 17 consecutive years of reserve releases – will also underpin 2022 earnings.

“However, it also faces rising claims inflation and potentially sizable losses from the Ukraine conflict. This is likely to be a material event for the market in 2022, generating claims that could take years to settle fully.”

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