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Update on Lloyd’s

Update on Lloyd’s. CAS Spring Meeting, Miami May 8, 2001 Todd J. Hess. Lloyd’s Overview. Insurance Company Licenses Paper Common rating Marketplace over 100 syndicates Subscription market Competition. Market Participants. The Corporation of Lloyd’s Syndicates Brokers

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Update on Lloyd’s

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  1. Update on Lloyd’s CAS Spring Meeting, Miami May 8, 2001 Todd J. Hess

  2. Lloyd’s Overview • Insurance Company • Licenses • Paper • Common rating • Marketplace • over 100 syndicates • Subscription market • Competition

  3. Market Participants • The Corporation of Lloyd’s • Syndicates • Brokers • Capital Providers • Managing Agencies • Members’ Agents

  4. Capital Providers • Bespoke Names • Corporate Capital • MAPA • Conversion Vehicles • Listed Companies

  5. View of Lloyd’s for Capital provider

  6. Integrated Lloyd’s Vehicle • Common ownership of capital and agency • ILV ownership variants • Listed company • Privately held • Combinations there-of

  7. ILV Organisation Chart

  8. Chain of Security (Doug’s topic) • Premium Funds • Trust Funds • Held for Three Years (3 year accounting) • Solvency Reserves • Funds at Lloyd’s (FAL) • Central fund • Actual Funding • Reinsurance Layer • callable funds

  9. 3 year Accounting • Year of Account Focus • Closing a year • Reinsurance to Close (RITC) • Equity among names • Reserving/cash flow

  10. US Situs Trust Funds • Name (Premium Trust Fund) suggests that funded by premium • CRTF (100% of gross, cash) • SLTF (30% of gross-may be LOCs) • NYID has held-up release of funds for some syndicates

  11. Bigger Burden for Lloyd’s Requirement not exclusive to Lloyd’s, but • Higher reinsurance spend • Capital structure often cash light • Double-funding of losses > 100%(solvency reserve and trust funding if fund as LOC)

  12. Reconstruction and Renewal • Agreed in 1996 • Equitas took RITC for 1992 and prior • Equitas solvency position • Lloyd’s welcomed rating agency review • Less data for on-going business (tails look shorter)

  13. Lloyd’s Core Strengths • Strong Brand • Marketplace where difficult things get done • Leader in important markets • Never failed to pay valid claim • Global Licenses • Mutualised Security • ‘Robust Regulatory Management’ (from S&P)

  14. Lloyd’s Challenges • World-wide competition increasingly technical • Cost of Capital • ART and other non-traditional • Service Standards • Rating issues

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