One of the best known Lloyd’s insurers today revealed a strategic pivot, saying its London market operations will “shrink materially” next year.
Hiscox, whose Lloyd’s footprint can be traced back over 70 years, said it can’t generate enough profit when underwriting aviation, marine and energy and US large property policies in particular.
Chief exec Bronek Masojada said that any margin the firm can make in the London market was “evaporating” and added: “We are adjusting our underwriting accordingly.”
The FTSE 250 insurer’s London market division represents non reinsurance underwriting operations in Lloyd’s. It wrote £520m of premiums during the first nine months of the year, up from £442m in the previous years.
Total premiums written by the business during the period stood at £1.9bn, up from £1.5bn during the same time in the previous year.
“We expect conditions in the London market to remain difficult. We will continue to explore creative ways to navigate this soft market and are actively reducing in areas where rates are under severe pressure… We expect the business to shrink materially in 2017,” the company said in a statement.
Shares in the firm rose around one per cent today, which analysts indicated was reflective of the way in which Hiscox manages the market and the cyclical nature of underwriting.
“Hiscox is a disciplined underwriter, and pinpoints that the [Lloyd’s] book has been already shrinking in low margin lines… It now however seems there is little scope to grow anymore. It is clear that shrinking the book going forward makes sense given the worsening rate outlook.” said Andreas van Embden of Peel Hunt.
Source: City A.M.