Syndicate Business Forecast (SBF)

For the 2019 year of account, the Corporation of Lloyd's sent part of the managing agents' plans back with a simple instruction: fix or close the least profitable decile of each book. The vehicle for that discussion was the Syndicate Business Forecast, the plan each syndicate files every year for the following year of account: gross premium by class, broken down by Lloyd's risk codes, rate change assumptions, expected loss ratios, reinsurance program, expenses, projected result. It goes in with the capital submission, because a growing plan calls for more capital, and the Corporation reviews the two together. It approves, approves with conditions or cuts, or refuses, and a syndicate without an approved plan does not write. For a long time approval passed for a formality: the market grew, and so did the plans. Since 2018 it has been a filter. Growth is capped in loss-making classes, assumed rate increases have to be justified, and a plan whose projected combined ratio rests on rates the market has not yet given goes back to the agent. During the year, the Corporation compares actual figures with the plan, and a deviation beyond tolerance means asking for approval again. The flaw is timing. The plan is judged on the agent's own assumptions, and an optimistic expected loss ratio holds until a closed year of account proves it wrong, three years later at the earliest. Underwriters know this, and the review looks more and more at the gap between past plans and the results that came in. Not to be confused with underwriting appetite, an internal document of the managing agent, nor with the Decile 10 review, a one-off campaign run through these plans.