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Lloyd's has a reduced pipeline of potential new entrants to the market and will maintain a cautious stance ahead of Solvency II implementation, according to its performance management director Tom Bolt.

A frenzied period of M&A activity among Lloyd's players this year has varied from the aborted (Sagicor) to the interminable (Omega) via the successful (Brit, Chaucer, Jubilee, TSM and Whittington).

Nonetheless, there is little doubt that the platform remains an attractive proposition to (re)insurers because of its capital efficiencies, strong ratings, access to global licences and position as the world's pre-eminent specialty risk market.

One reason cited as a driver of M&A interest is the Lloyd's franchise board's uncompromising stance on new entrants.

Speaking to The Insurance Insider at the Baden-Baden meeting today (25 October), Lloyd's performance management director Tom Bolt admitted that the market's pipeline "is not as full as it has been for pure new entrants".

Bolt's comments may suggest that 2012 could be the first time in several years that the Society has not welcomed a new start-up on 1 January.

"However, there are quite a few new things happening with various new corporate Names supporting existing syndicates and with a fair bit of M&A," Bolt noted.

One barrier to any aspiring Lloyd's entrant would be the difficulty of convincing the Corporation that a new syndicate would immediately be up to scratch on Solvency II regulation and could be integrated into the market-wide implementation plan that Lloyd's must oversee.

"We have zero interest to adding to the pot of managing agents if they aren't going to display the ability to meet our solvency requirements. And the requirements of Solvency II are stated by the Financial Services Authority (FSA), so in that regard you need to show a certain level of competence on that to qualify."

However Bolt said there was no "meaningful impediment" to prevent new entrants entering the market through a turnkey managing agent.

Lloyd's performance management director said this was almost always his preferred way for new entrants as it helps them acclimatise to the way the market functions and gives them access to variable rather than fixed costs at start-up.

Turnkey providers include Argenta, Chaucer, R&Q and Whittington.

Moving capital into Lloyd's
Another feature of the market is mounting speculation that current players will seek to move business across from their company market platform into Lloyd's as (re)insurers seek capital efficiencies with Solvency II requirements in mind.

Last month, The Insurance Insider revealed that UK insurer Brit is migrating some of the business currently written on its UK FSA platform into the Lloyd's market.

Though Bolt declined to comment on individual firms, he acknowledged that there was "probably more than one" company looking to move business into Lloyd's, adding that it was a great endorsement of the market.

"We're happy to see people shift elements of business from outside of their Lloyd's platform into Lloyd's as long as we can look at the business in a deep and detailed way, it has a track record of profit and we understand the business logic of why it should be sold at Lloyd's rather than at its existing platform," he said.

Additionally, Bolt said that he was not aware of any "material issues" that would prevent any of the current Lloyd's crop from putting up their capital and "coming into line" in time for the 28 November deadline.

Size matters
Commenting on the recent trend of smaller Lloyd's platforms being put up for sale, Bolt conceded that there was a sense within the market that a certain level of premium volume and scale was required for a competitive advantage.

However, he said Lloyd's would continue to work hard to make room for smaller players to ensure that its innovative spirit was preserved.

"I like the smaller guys. If you think about it that's how people start and you need a certain amount of fresh growth to make the market robust," he said.

"It's going to take some work from us, the FSA and over time probably even the EU to not make ourselves uncompetitive as a result of better and more solid solvency regulation."

One of Bolt's key battlegrounds this year has been over underwriters offering energy liability cover within blended energy policies.

In the face of market criticism, the former Berkshire Hathaway executive reportedly reached a compromise where underwriters will continue to be able to offer blended policies that include liability cover, despite having raised concerns over the problem of monitoring aggregations.

Though some market watchers have interpreted this as a climb-down by the franchise board, Bolt remains adamant that the objective of raising the issue was only ever to generate a dialogue over the potential for energy liabilities to aggregate, rather than to campaign against them.

"The whole point of the exercise was to engage with the underwriters through the business planning process to make sure they had thought through the potential aggregation of liabilities," he said.

"Despite a wide amount of press coverage, and press comment, we were actually able to have that dialogue."

Bolt added that he was "very happy" with the business plans he had received from the key energy writers at Lloyd's.