News of Sean Dalton's and Andrew Elliot's impending return to the Lloyd's market, just seven months after their surprise exit from Liberty, has certainly added interest to the new Leinster Syndicate 4882.
On the face of it, it's like any other specialty lines business, writing a mix of direct and facultative US property, with a bit of worldwide reinsurance thrown in for good measure.
But below the surface this proposition has a different dimension, one that it appears to be making a comeback in the Lloyd's market.
A core underwriting activity of Leinster, and Elliot, will be reinsurance to close (RITC), the method of reinsuring outstanding risks to enable the accounts for the underwriting year to be closed, allowing profit or loss to finally be determined. Until recently, RITC was a dying breed with little capacity, few players and viewed as a costly way of achieving finality.
Now, there are a number of syndicates returning to RITC business, with Leinster the second new syndicate in recent months to incorporate it into its business plan, along with RITC Syndicate Management.
Placed alongside Liberty, where Elliot carved his RITC skills, Markel and Imagine, the market is beginning to look a little more prosperous.
And if reported figures, which suggest that Lloyd's has some £7.5bn of post-1992 run-off liabilities are correct, then a more competitive market has to be welcomed.
But why is a business line that was once regarded as simply not worth writing, due to stringent Lloyd's rules, making a comeback?
According to one leading run-off expert it is down to two things. First, it offers a means of utilising additional capital unhindered by a soft market, and second, it comes on the back of changes to Lloyd's rules.
"In the past Lloyd's put the financial loading on the whole transfer price, which made it penal and totally unattractive for people to write," he explains. "It said RITC was a single transaction, a mono-line, but in fact it covers the spread of underlying business."
Fresh market interest could be sparked, but with only 64 open syndicates at Lloyd's, RITC may be confined to a simple side-line.
Lloyd's has hinted that it would only allow new start-up syndicates offering something different into the revered insurance market.
Leinster and RITC Syndicate Management certainly seem to have done that and their contribution should have a number of positive knock-on effects.
For the syndicates alone it is expected to improve investment yield on reserves, offer the potential for profit and ease initial cashflow strain. But, Lloyd's too will want to create a thriving market in RITC.
"Lloyd's needs a healthy market which is why it changed the rules," the expert says. "The only surprise is why it didn't do it earlier, since two syndicates have been authorised to do it."
The argument over whether the market needs alternative exit strategies to deal with its old-year problems will no doubt linger on, but an improved RITC market and renewed interest will go some way to tidying up the past. IT
