Lloyd's insurer SVB is to establish an FSA-regulated company which will underwrite small ticket SME business.

The move is expected to protect SVB profits from past liabilities suffered in the US, and create a new vehicle which will attract capital investment.

The insurer set up a scheme of arrangement this week. The new insurance company will sit under holding company Novae Group. It has been funded by a rights issue of £103m.

Chief executive Matthew Fosh told Insurance Times official approval from SVB's shareholders was in the pipeline. The FSA is expected to give authorisation to the new firm in the next few weeks.

He said: "We need a structure where we can attract new capital to grow the business. That new capital will not be exposed directly to the old years of account."

Fosh estimated three-quarters of the existing Lloyd's business would continue to trade within the market. The remaining quarter will write "low volatile SME" business in the regional market.