Third-party capital has been re-established at Lloyd's
and industry experts predict it will remain important.
Third-party capital has been re-established at Lloyd's - with industry experts predicting it will remain important.
Nigel Hanbury, chief executive of Hampden Agencies Limited (`Hampden'), the top managers of private investors' funds at Lloyds, told a conference for insurance industry experts today that "Third party capital had re-established itself and remains important to Lloyd's future".
Hanbury added: "The supply of third-party capital is considerably more beneficial to Lloyd's than is generally recognised. Third-party capital diversifies Lloyd's capital base, strengthens the Central Fund and makes less claims on it than others, and it acts independently at times of crisis such as when the World Trade Centre was destroyed.
"Third-party capital is a vital backer of syndicate start-ups and it does so without demanding management control."
He stated that they are actively seeking more such opportunities to add to the success of previous years.
Of the near £15bn capacity of Lloyd's of London in 2004, Hampden's research shows that 16% comes from the US insurance industry (such as Berkshire Hathaway and AIG), 14% from Bermuda (such as XL and ACE), 14 % from other countries (such as Talbot and Munich RE), 37% from UK-listed or unlisted insurance companies (such as Hiscox and Wellington) and 19% from individual investors (such as those managed by Hampden with £1.22bn of capacity this year). Hampden estimates that approximately 25% of Lloyd's overall capacity is supplied on a third-party basis.
Hanbury continued: "With ever-richer corporate and personal wealth, people are seeking evermore insurance protection. This is a good business and with the current high level of premiums, the insurance jungle is blooming. But he predicted the predators will return if harder times return".
For the high net worth individuals, Hampden believes investing in Lloyd's has attractions particularly now that it has introduced limited liability. He explained: "An investment in Lloyd's sits well as a separate asset class alongside equities, stocks, bonds and hedge funds; its cycle being uncorrelated to any of them. The company still offers the double use of assets and there are new convenient investment vehicles, considerable tax advantages and, as of this year, the protection of the Financial Services Authority."
