Lloyd's of London is set to cut the amount of short-term capital coming into the insurance market by up to 50% next year, as it prepares for a slowing in the boom in premiums that followed September 11, The Daily Telegraph has reported.
The newspaper said the move affected qualifying quota share reinsurance, which has a faster approval process than permanent capital and can be raised mid-year rather than through Lloyd's annual venture.
Typically, it accounts for annual capacity of about £300m at Lloyd's but it soared to £1.3bn in 2002, the Telegraph said. It added that this year, quota share arrangements were providing £600m of Lloyd's capacity but it was likely that the 2004 figure would be much closer to the £300m average.
Julian James, Lloyd's director of worldwide markets, said in the paper: "We are going to be a little bit harsher on some of the guidelines on the approving of these contracts in 2004 so that syndicates have more permanent capital than short-term capital.
"With the debate in the market about rating coming down in 2004, we feel it is vital that syndicates have permanent capital.
"We are not opposed to this capital in our market. It is very good in that it can be opportunistic and can be put in very quickly. But you have to get the credit risk right and it is not permanent capital."
