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Lloyd's 2010 capacity still set for record after submission deadline

After Lloyd's (re)insurers submitted their 2010 business plans to the franchise department last week, the 300 year-old market will begin next year at its largest ever size in terms of capacity.

Although Lloyd's no longer publishes its aggregate stamp capacity figure - the total amount of premium income all its syndicates can write - it is widely expected to increase from the current £17bn to closer to £20bn in 2010.

This is despite a number of Lloyd's (re)insurers having recently scaled back their 2010 expansion plans, because rate improvements have not been as strong as predicted earlier this year for many lines.

Lloyd's syndicates had to submit their 2010 business plans by 18 September and, once approved, have most of the remainder of the year for "coming into line", which ensures they have sufficient capital to support their plans.

In the July issue of The Insurance Insider, we reported that early pre-emption plans from syndicates with unaligned capacity - such as Hiscox 33 and Tokio Marine-backed Kiln 510 - pointed to an average increase of 24 percent. Along with growth plans and higher rate expectations, these increases were driven by the stronger dollar. Around 40 percent of Lloyd's entire business emanates from North America.

However, in recent weeks a number of Lloyd's (re)insurers have reigned in their 2010 growth plans because many insurance markets remain weaker than anticipated. For example, Omega Underwriting Agents Ltd is now planning to increase its 2010 Syndicate 958 capacity by 12 percent to £280mn (2009 £250mn) - less than the initial 20 percent pre-emption conceived earlier this year.

Meanwhile KGM - the dedicated Lloyd's motor insurer owned by Luca Padulli's investment group Perseverance Ltd - said it would now keep its Syndicate 260 capacity flat for next year "in the light of current and anticipated market conditions".

Initially, KGM was expecting to increase its 2009 capacity of £72.5mn by 7.44 percent. Separately, Munich Re's Lloyd's arm, Beaufort Underwriting, said it was now reducing premium income estimates for its worldwide property account on Syndicate 318 by £20mn. It explained that the "levels of rate increases likely for 2010 [are] now less than originally projected".

Syndicate 318, which is underwritten by Michael Pritchard, initially planned to expand its capacity by 25 percent for 2010. Beaufort said it now plans to expand by 11.5 percent, taking the syndicate's capacity to £225mn for next year, with forecast gross premiums of £197mn.

A number of other Lloyd's (re)insurers, including private equity-backed Canopius, have also tugged the reigns on their 2010 plans. However, Lloyd's now allows syndicates greater flexibility to scale up their capacity swiftly if events change suddenly. In the summer, it published a paper ("Options for mid-year underwriting increases") that outlines ways in which syndicates can react speedily to underwriting opportunities by deploying additional capital.

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