Global Head of Energy - London/Paris
2014 represented the first full underwriting year for the Energy account and we are pleased to say that development was almost exactly in line with our expectations. It was additionally a very benign year in respect to loss activity and consequently a pleasing result should be realized for shareholders.
The negative consequence of this lack of loss activity, coupled with a large surplus of capital in the global markets, has seen a surfeit of new capital enter the class. The natural consequence of this is pressure on pricing, which although featuring throughout the year, accelerated significantly in the fourth quarter. We expect this to continue in 2015 and anticipate no respite until industry combined ratios climb to over 100%; something that will invariably happen in the same way as a boulder invariably rolls down a hill. Given these circumstances we closely watch pricing adequacy on any risk written as assessed by our underwriting tools and deploy capital accordingly.
We increased our capacity mid-year 2014, taking the opportunity to grow our presence whilst sharing the risk. Consequently we have realized the anticipated benefit in the growth of the account. We do not plan any further increases in capacity for 2015, but stay alive to opportunities.
Our focus continues to be on business from developing markets and our geographical risk distribution bears this out – less than 5% of our business comes from USA and Europe. We are focused on extending our penetration into these markets in 2015. We also are sticking closely to our areas of expertise. Tempting as it is to broaden the scope of what we do, and we have many offers, we do not see our role as being to provide dumb capacity on under priced business. We are happy to leave that to others.
Internally, we added to our team in 2014 and expect to continue this in 2015. These resources are necessary in what is a very technical business line. However, we still run possibly the lowest expense ratio in the market and intend that to continue.
In a challenging market we remain focused on profitability and delivering a satisfactory return to our shareholder.