The insurance market is very attractive for investors at the moment. Private equity firms, hedge funds, pension funds and other investment groups are raising record amounts in a bid to secure a stake in the industry.

According to the latest figures, more than $30bn of new capital has been raised since the 2005 hurricanes, going to both existing reinsurers and new start-ups. 

Sky high rates, the potential for record profits and increasing ways of making returns makes insurance so appealing to capital investors at the moment.

In recent months, Lloyd's has become a more diverse platform for investors with Lloyd's insurers looking increasingly at alternative ways to mitigate their risk exposure through sidecars and catastrophe bonds.

Tie this together with new market rules on mid-term start-ups and a more flexible approach to raising capital and the market has gone from one that traditionally proved difficult for backers to dip in, make their money, and dip back out again, to one where the question has increasingly become: "Why wouldn't people be looking to enter the Lloyd's market?"

Look no further than new Lloyd's underwriting agency, Ark. It is backed by not one, but two private equity firms, with additional clout provided by one third of the Greenberg insurance dynasty.

The managing principal of Aquiline, the lead investor behind Ark, says: "The initiatives undertaken by Lloyd's management have significantly strengthened Lloyd's franchise as a premier global insurance and reinsurance market."

And he is not the only one to think so. Aquiline and Lehman are by no means the first to stump up cash to get into Lloyd's.

Century Capital Management took advantage of changes in the mid-1990s, when Lloyd's opened the market to institutional investors for the first time, by investing in DP Mann, which was later acquired by General and Cologne Re.

Duke Street Capital and Englefield Capital also had a holding in Equity Insurance Group before selling to Insurance Australia Group for £570m last year.

Yet while investors' appetite may be strong, there is some speculation that private equity could be on the verge of overheating and, as one report says, "losing its edge".

News that private equity house Blackstone is itself considering a flotation has led some to question whether the private equity boom has passed its peak.

One commentator says that the growth of competition and the high quantity of money in the market has led to private equity firms paying increased prices for their investments.

Whatever the future of private equity, there is no escaping that Lloyd's has become an attractive destination for investors and until market conditions prove otherwise the rewards are there to be had. IT