Tokio Marine HCC - Credit Group
Date: 28 April 2022
Authors: Mark Reynolds and Jerome Swinscoe
Executive Summary – Q1 2022
- QTD/YTD Results across all issuing companies:
o Q1 GWP totalled $25.5.M, a 20% increase from Q1 2021.
o Our Q1 combined ratio is 88.4% and PTOI is $2.8M, compared to 70.8% and $6.4M in Q1 2021. The deterioration arises from the increase of our gross loss target from 40% to 60% as of 1 January 2022, due to the Russian invasion of Ukraine. Our overall IBNR as of 31 March 2022 stands at $55.8M, an increase from $49.4M at year-end 2021.
- QTD/YTD Results on London/EU paper:
o London Q1 GWP amounted to $19.5M, a 27% increase over Q1 2021.
o Our Q1 combined ratio in London is 90.6% and PTOI is $1.7M, compared to 68.5% and $5.0M in Q1 2021. The deterioration is the result of increasing our loss target from 40% to 60%, due to the Russian invasion of Ukraine. Our London IBNR as of 31 March 2022 stands at $41.8M, an increase from $37.0M at year-end 2021.
- Losses: After several excellent months, losses increased significantly in March. The most significant activity was $8.1M of new reserves on two cases for Trafigura in Sudan. In spite of this, our incurred loss ratios in Q1 were 28% gross and 17% net across all issuing companies, and 40% gross / 31% net in London.
- Invasion of Ukraine: The 24 February invasion of Ukraine by Russia is expected to have a significant impact on losses for 2022. As noted above, we have increased our loss target for AY 2022 to 60%. We have added twenty-seven items to the Watch List, with total gross exposure of $128M ($120M on London/EU paper) and total net exposure of $103M ($97M on London/EU paper). No reserves have yet been posted, although we currently have $40M gross / $28M net on high-severity WL, which includes Severity 3 and 4.
- Production: As noted above, our production increased in Q1, returning to the level seen prior to the pandemic. Prior to the 24 February invasion of Ukraine, we had been seeing an increase in bound risks and benefitting from higher rates in some areas.
Current underwriting approach:
We have now reverted to the strict conservative underwriting approach implemented from Q2 2020 and are factoring in the multiple risk factors inherent to the current global environment (higher commodity prices, global inflation, volatility, supply chain disruptions, slowdown in Chinese economy and increasing interest rates). We are aiming for higher premium rates wherever justified. Our declination rate has once again increased.
· Production detail by Insureds and brokers:
Shown below are our leading insureds and brokers for Q1 2022 in UK/France, and their GWP for full-year 2021 (thousands of USD).
Debtor limits $15+M in Q1 2022 for Exec Summary and EUMC