Posted 06/12/2023 – LLVs for Sale
Henderson Underwriting Ltd
Henderson Underwriting Ltd is now being advertised for sale.
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How it works
Investing at Lloyd’s
Investors at Lloyd’s provide capital to syndicates and special purpose arrangements (SPAs). In return they receive a share of the profits or losses in proportion to their commitment.
The Lloyd’s market
Lloyd’s is not an insurance company, but the world’s leading specialist insurance market. It comprises different managing agents that operate a total of 91 syndicates and Special Purpose Arrangements (SPAs).
Investors at Lloyd’s provide capital for these syndicates and SPAs. At the start of 2023, there were 18 full tenancy syndicates and 11 Limited Tenancy Syndicates (including SPAs) open to private capital. More syndicates may choose private capital in the future. Syndicates and SPAs have different areas of expertise and transacts a wide variety of insurance business on behalf of its capital providers.
For 2023, the Lloyd’s market is forecast to underwrite gross premium income of approximately £56bn (£46.7bn in 2022) which makes it one of the larger insurance providers in the world.
Capital providers receive a share of the profits or losses that accrue from the underwriting business of these syndicates and SPAs in proportion to their commitment.
Lloyd’s has a sought-after network of overseas business licences that gives syndicates direct access to most major overseas markets..
For over 330 years, Lloyd’s has never failed to pay a valid insurance claim. Lloyd’s has built a Central Fund of pooled reserves which stand as a guarantee behind each of the trading units at Lloyd’s. All Lloyd’s syndicates enjoy the benefit of these capital resources and share financial strength ratings: Standard & Poor’s A+ (Strong); Fitch AA- (Very Strong); A.M. Best A (Excellent); and Kroll Bond Rating Agency AA-.
The Lloyd’s Performance Management Directorate
The PMD (formerly the Franchise Performance Directorate) was set-up in 2003 to ensure that the Corporation of Lloyd’s undertook an active commercial role in managing market performance..
The principal purposes of the PMD are to:
- Protect the Central Guarantee Fund
- Monitor and improve the long-term performance of Lloyd’s syndicates
- Raise standards across the Lloyd’s market
As such, its responsibilities include:
- Reviewing, challenging and approving business plans
- Setting guidelines for the levels of risk to be taken
- Ensuring a competent standard of underwriting across all syndicates in the market
- Improving the performance of the bottom quartile syndicates
The PMD was set-up in 2003 to ensure that the Corporation of Lloyd’s undertook an active commercial role in managing market performance. To participate within the market, syndicates are given a licence to trade by the PMD, which is reviewed annually.
The principal purposes of the PMD are to:
- Protect the Central Guarantee Fund
- Monitor and improve the long-term performance of Lloyd’s syndicates
- Raise standards across the Lloyd’s market
As such, its responsibilities include:
- Reviewing, challenging and approving business plans
- Setting guidelines for the levels of risk to be taken
- Ensuring a competent standard of underwriting across all syndicates in the market
- Improving the performance of the bottom quartile syndicates
Advantages
The main benefits of Lloyd’s membership are:
- Limited liability
- Attractive returns
- Liquidity via sale of LLV
- Low correlation with other asset classes
- Double use of assets and some leverage
- Tax efficiency & estate planning benefits
Risks
Prospective clients should note that underwriting at Lloyd’s involves a significant degree of risk and will be exposed to the risk of underwriting losses, both from current underwriting and from exposure to prior years.
Should claims reserves prove inadequate, members remain liable for losses until the liability of all syndicates participated upon have been closed by means of reinsurance. Even then, in the event of failure of the reinsurer, the ultimate liability remains with the member.
For a Limited Liability Vehicle (LLV), this liability is limited to the total Funds at Lloyd’s in place plus any pipeline profits, the value of syndicate capacity, and funds held in the LLV.
The capital value of syndicate capacity can rise or fall, so any member risks capital losses as well as underwriting losses.
A brief history of Lloyd’s
Further information published by Lloyd’s
Like most trades, the insurance industry – and the Lloyd’s market in particular – uses its own jargon and acronyms. You may therefore find the Lloyd’s Glossary to be useful occasionally.
How the Lloyd’s market works
Lloyd’s Brokers
Lloyd’s Underwriters
The corporation
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Investing at Lloyd’s
Find out more by reading our brochure.
What we think
Market insights.
Posted 01/12/2023 – Quick takes
Lloyd’s market message Q4 2023
The executive team of Patrick Tiernan, Chief of Markets, Mirjam Spies, Interim Chief Actuary, and Peter Montanaro, Market Oversight Director, delivered the Q4 Lloyd’s quarterly market message on 30th November.
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Posted 17/11/2023 – Quick takes
Forecasts as at 30th September 2023
Latest 2021 and 2022 year of account forecasts as at 3oth September 2023
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