Interest rate rises force Lloyd's of London into loss

Rate increases by central banks in 2022 pushed Lloyd's insurance into overall loss, but underwriting remained strong

The Lloyd's building, home to Lloyd's of London. The world's largest insurance market swung into loss in 2022, although underwriting profits soared. Getty

Lloyd's of London swung into loss in 2022, as the insurance marketplace's bottom line took a pounding from the interest rate rise by the US Federal Reserve, the Bank of England and the European Central Bank over the past year.

Lloyd's pre-tax loss was £769 million ($948 million) for 2022, compared with a profit of £2.3 billion a year earlier.

The rapid tightening of monetary policy by the world's major central banks and the higher interest rates that resulted meant Lloyd's was forced to take writedowns on its fixed income investments.

But the mark-to-market principle that led to the writedowns on bonds should reverse in the next couple of years, as they mature.

Lloyd’s reported a net investment loss of £3.1 billion, after the market turbulence of 2022 eroded values across its portfolio. The company said the losses were in assets from investment grade fixed income bonds to equity markets, with long duration assets the most affected.

Bumper underwriting profits

Meanwhile, higher premiums meant profits from underwriting at Lloyd's were strong, jumping 53 per cent to £2.6 billion.

"Lloyd’s has every reason to be proud of its performance in 2022. Despite several years of turbulence; from the political shocks of 2016 to the pandemic which continues to have an impact in 2023, and headwinds which include major claims in Ukraine and Hurricane Ian in the US ― we continue to deliver sustainable and improving underwriting performance," Lloyd's chairman Bruce Carnegie-Brown said.