Lloyd’s has been warned not to give too much money back to the market, after it announced it will repay £335m in syndicate loans.
Syndicates that have paid money into the Lloyd’s central fund, levied at the rate of 0.75% of capacity, will be repaid later this year.
This follows the successful raising of £500m through the issue of tier 1 perpetual subordinated debt last week.
But, the decision to give central fund contributions back to syndicates has been met with a mixed response from the market.
One senior Lloyd’s figure, told Insurance Times: “While it is efficient for the market to have a big central fund there is nothing better for underwriting discipline than high capital requirements.
“It is a delicate balancing act, therefore, for Lloyd’s to achieve, but overall I would not want to see too much of what looks like giving back funds.
“In fact, given market conditions, I would expect capital obligations for individual businesses to increase.”
The debt issue, which was met with a positive response from a wide range of institutional investors and was several times oversubscribed, will also enable Lloyd’s to strengthen further the central fund.
Charles Dupplin, director of M&A and member of the executive group at Hiscox, said: “This long term money at a reasonable price is a help to the perception of the central fund and thus the strength of the market.”
Stephen Catlin, chief executive of Catlin, the only other Lloyd’s entity to successfully place tier 1 subordinated debt, added: “This is a very positive development for the Lloyd’s market.
“Tier 1 subordinated debt is an extremely efficient capital tool in the insurance marketplace and the raising of this debt will benefit Lloyd’s syndicates as whole by further strengthening the financial security which Lloyd’s offers to it its policyholders.”
