Lloyd’s poised for next wave of RITC activity

The reinsurance-to-close (RITC) market at Lloyd’s appears to be entering another period of heightened activity with two syndicates taking steps to hand off their back books to legacy carriers.

The Insurance Insider understands both Barbican and AmTrust have appointed brokers to engage with the RITC market to assess interest or start a bidding process.

Barbican is exploring the possibility of an RITC transaction for the 2016 and prior years of account (YoAs) for Syndicate 1955, and has asked Aon Reinsurance Solutions to hold discussions with RITC carriers.

While conversations are said to be exploratory at this stage, a number of legacy sources believe Barbican will eventually proceed with a transaction.

It has been suggested that the reserves in scope for the Barbican RITC deal are in the range of £200mn ($259mn).

Meanwhile, AmTrust made clear in its 2017 syndicate accounts that it was planning an RITC transaction for the four most recent YoAs at Syndicate 2526, the former AG Doré syndicate.

The syndicate, which was put into run-off in 2017 due to adverse reserve development, will look to RITC the 2013, 2014, 2015 and 2016 YoAs once the 2016 YoA reaches the 36-month stage at the end of 2018.

This publication understands a broker has now been appointed to run a formal process for the RITC deal.

Syndicate 2526 had previously battled with adverse reserve development for some time on its professional indemnity and medical malpractice books.

There have also been suggestions from the market that MS Amlin will look to RITC some of the underperforming lines from Syndicate 2001, although no action has yet been taken to get the ball rolling on a potential transaction.

The launch of the Barbican and AmTrust RITC processes comes amid a push from Lloyd’s for syndicates to address profitability and performance issues.

The two deals also signal continued interest from carriers in RITC deals. The market reignited last year after a period of low activity, with a number of large deals signed between live syndicates and run-off players.

Enstar signed two RITC deals via its Shelbourne syndicate in December
2017 to take on a collective £1.26bn of reserves from Neon and Axis.

Other parties that are believed to have shown interest in the former Novae book at Axis include Pine Brook-backed Vibe, legacy titan Berkshire Hathaway and Arch’s run-off joint venture Premia Re.

Randall & Quilter has also been active in the space, signing two RITC deals of a much smaller scale for ProSight’s defunct Syndicate 1110 and a £30mn of old Sportscover business for Hamilton.

Previously, Lloyd’s required RITC transactions to encompass all business for a single YoA, but with the Corporation seemingly now willing to consider partial or early RITC deals, the legacy sector could see a diverse wave of liabilities brought to market.

Amid a persistent low interest rate environment and thinning margins as a result of the soft market, carriers’ focus on capital efficiency has intensified.

Historical UK employers’ liability and US asbestos, pollution and health hazard liabilities have been of particular focus for recent run-off deals in the wider legacy market, so the widening of RITC opportunities could come as a welcome source of diversification for legacy players with Lloyd’s operations.