Speaking today during Aon’s Navigating Market Cycles panel, Rachel Turk, Chief Underwriting Officer at Lloyd’s of London, the specialist insurance and reinsurance marketplace, said that the market’s London Bridge 2 PCC insurance-linked securities (ILS) structure has become an attractive place for third-party capital.
Moderator of the panel, Molly Tully, Executive Managing Director at Aon, asked Turk how the structure is helping Lloyd’s and its market participants achieve their strategic goals
“I think London Bridge 2 has been really quite successful. There have been around 21 separate transactions on it so far, including one ILS structure, and I think the Lloyd’s market is proving it’s a really attractive place for third-party capital right now,” Turk commented.
“We obviously went from entirely third-party to a lot of corporate capital. But then the names were roughly eight or nine percent. But now, we’ve got a lot more third-party capital in there which is great.
“It has different time horizons, that sort of capital. It also has different return expectations, and different levels of due diligence sometimes as well. And all of that can be really net positive to the overall industry. Sometimes getting a different group of people ‘kicking the tires’ on particular businesses I think is really valuable.”
Turk also went on to explain how the balance between risk and capital fits into Lloyd’s strategy.
She continued: “When I look at the strategy overall for Lloyd’s and what we’re trying to achieve, it’s trying to make that matching of risk and capital is the most effective place and doing it through Lloyd’s makes the most sense.
“And therefore, if you’ve got an account, and there’s a lot of capital interest at the moment, then you know the risk interest is pretty strong as well. And the more capital interest you have, the more risk will find its way to Lloyds because it’s got the sophisticated capital waiting to back it. So, it’s really that base.
Turk concluded: “When we have a real problem, is when we’ve got way too much risk and nowhere near enough capital. Obviously, prices then tend to adjust as a result of that, but we really want to have a position where we’re relatively equally matched between risk and capital. And I think we’re getting to that position.”
Also read:
– London Bridge has supported £2.2bn of new capital entry to Lloyd’s: Tiernan.
– London Bridge 2 pipeline remains healthy: Lloyd’s Deputy CFO Cliff.
