Lloyd's managing agent Illium is planning to set up a service company in the North East to access regional liability business.

The company will be headed by former Munich American Re underwriter Julian Goodall.

A source close to Illium said: "Illium sees an opportunity to grow its presence outside London. The service company will allow access to business it wouldn't see in London."

Within Lloyd's, Illium will be reducing the capacity of Syndicate 4040 to £75m in 2005. This represents a 22% decrease on its 2004 capacity of £96.5m.

It is expected that Illium will underwrite only around £65m–£70m of premium income in 2004.

The source said that Illium would "undershoot" on premium income targets for 2004 because it failed to "hit the ground running" and get all its underwriters in place for the beginning of this year.

Illium Syndicate 4040, which writes employers' liability, third party liability, and contractors' all risks insurance, was launched on 1 January 2004.

HCC Insurance Holdings, which has a 20% stake in Illium Insurance Group, provided £25m of capacity for the syndicate.

Reinsurer Imagine Group, which owns a 10% stake in Illium Insurance Group, provided £15m of capacity.