Could Munich Re be facing a battle with the names?

Munich Re’s acquisition of Syndicate 318, via its purchase of MSP Underwriting, has considerably expanded the reinsurer’s reach in the Lloyd’s market. However, over half of the Syndicate’s capital is held by third party names, who remain on the books of Beaufort Underwriting, MSP’s managing agent.

Obviously this raises the question of whether Munich Re is looking to take further control of Syndicate capital by buying out these remaining names. Both Munich Re and Beaufort said after the acquisition was announced that no major structural changes would be made in the near future, as their 2008 business plan has already been submitted to Lloyd’s.

But should they seek to gain greater control, they could face problems.

One chief executive who dealt with a similar scenario said: “The ability to buy out names is becoming increasingly difficult. As their numbers in Lloyd’s dwindle, the ones that remain hold on tighter to their shares of the capital because the market is still attractive to them.”

This is making it increasingly difficult for companies to gain 100% control because the names are asking for more money for their stakes.

But there is an alternative approach, which KBC Peel Hunt analyst Charles Coyne attributed to the success of Atrium’s Syndicate 609 so far this year. “They own only 25% capital, and I think that the less capital you have, the more likely you are to get a return on it,” he said.

It will be interesting to see what Munich Re will do.