The number of temporary insurance vehicles in Lloyd's could rise in 2007 following completion of the market's first syndicate sidecar.
Hiscox has finalised an agreement with Bermuda reinsurance company Panther Re, formed by WL Ross & Co, which will allow Hiscox Syndicate 33 to write an increased amount of property catastrophe business in 2007 and 2008.
The deal will allow Syndicate 33 to reinsure 40% of its property catastrophe portfolio to Panther Re, which will in turn share the economic risk of business covering risk areas such as Florida windstorm and Tokyo earthquake.
Charles Dupplin, director of M&A, told Insurance Times that as a result of the agreement he expected more managing agents to look at limited life vehicles as a way of taking advantage of strong underwriting opportunities, particularly US catastrophe risks.
He said: "This is a good agreement and is an ideal method of getting temporary capital into the market when it is short of capital."
Formation of the market's first sidecar has required a number of changes to be made to the way Lloyd's is set up.
Dupplin said: "When temporary capital comes looking for exposure in the market, if Lloyd's cannot offer it a home then it will go somewhere else and its market share will undoubtedly shrink over time."