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Leadenhall hopes to enter Lloyd’s

ILS fund Leadenhall is in talks with Lloyd’s about new entry routes to the market for open-ended funds. 

Leadenhall CEO Luca Albertini said the proposals it had submitted were not a straightforward example of the “syndicate in a box” or “follow-form” syndicates that Lloyd’s discussed in strategic proposals revealed earlier this year.

“What we are trying to do requires time,” he told sister publication Trading Risk, adding that the firm wanted to take time to make a syndicate work for its open-ended funds.

“We have found an open and co-operative counterparty [at Lloyd’s] on the other side.”

The ILS manager already relies on its affiliate MS Amlin to front around $2bn of limit for it via Lloyd’s, but does not have a direct presence there.

It uses various Bermuda reinsurance vehicles to face MS Amlin to accept fronted risks but often keeps tail risk itself as the rated parent does not always offer it leverage.

By contrast, setting up a type of follow-form syndicate would allow MS Amlin to transfer risks to the ILS manager within the Lloyd’s framework while giving Leadenhall the back-up of the Central Fund to take tail risk beyond remote levels such as the 1-in-2,000-year exceedance probability.

It would also be an alternative to the route that other ILS managers are taking in setting up their own sources of rated paper.

Two firms have already got through the standardised Lloyd’s entry process to establish their own syndicates – Nephila and Credit Suisse. Meanwhile, the latter firm and LGT ILS Partners have set up rated offshore entities.

However, Leadenhall estimates it would cost $800,000 or more to manage such a vehicle and require at least $200mn of permanent capital to back a $2bn book of first-loss limit.

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