Insurance market Lloyd’s of London has said that the UK should remain in the European Union, stating that it would be a “better outcome” for the group in the upcoming referendum on June 23.
Lloyd’s made the remarks in its annual report, which also stated a drop in the group’s profits. It also mentioned it was making contingency plans in the event of an EU exit.
Pre-tax profits saw a decrease of 30%, from £3bn in 2014 to £2.1bn in 2015, amid “challenging” conditions, according to the group. This is likely due to low interest rates and low investment returns.
"It is already clear that the conditions we faced in 2015 are continuing into 2016," said Lloyd's chairperson John Nelson. He added that the uncertainty over the UK’s EU membership is another unsettling ingredient in the mix.
“We’ve taken a double hit from reduced margins in underwriting and lower investment yield,” said CEO Inga Beale. “On the investment side we saw a dramatic reduction in 2015 that was a massive hit” to earnings.
Increased claims saw the combined ratio rise to 90%, from 88.4% last year. Massive incidents, such as the explosion at the Chinese port of Tianjin and numerous claims in the energy sector also hit the group’s earnings.
"We believe strongly that continued membership would be the better outcome for Lloyd's and the businesses in our market but we are preparing contingency plans in the event of an exit," said Nelson.
Continued UK membership ensures continuous access to the European Union, the world’s largest insurance market. An exit will undoubtedly place roadblocks with Lloyd’s business in continental Europe. The group sees the global economic outlook remaining challenging in the coming future.