Lloyd's capacity remains steady

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The Independent Online
Managing agents in the Lloyd's market expect insurance capacity to rise only marginally next year to pounds 10.17bn from pounds 9.99bn, Lloyd's said yesterday.

The tiny rise in the figures, released as the market prepares for Monday's start of the first of a groundbreaking series of capacity auctions, suggests agents are still cautious about the outlook for insurance rates. Capacity is a measure of the total amount of insurance premiums the market can accept in 1997.

The auctions will allow members to bid for capacity on the syndicates of their choice, turning membership into a tradeable commodity with a market price.

Paul Sandilands, managing director of Richmond Underwriting, said he expected much more interest in the auctions than the first time round last year, when the procedures were on trial.

He expected corporate investors in the market would show "a significant interest for the first time" and prices to rise.

One advantage of the auctions is that members can readjust their portfolios by buying and selling in the market. Some agents, including Mr Sandilands, believe that eventually the only way to get in and out of the Lloyd's market will be at auction.

The first will be completed a few days ahead of the key meeting of Lloyd's members in the Royal Festival Hall on Monday week to approve the pounds 3.1bn reconstruction and renewal plan on which the rescue of the market is based.

With hopes rising that the vast majority of members will vote in favour, Lloyd's also appears to be making headway in negotiations to remove the most serious obstacle to the rescue.

This is the threat that the US authorities will deem the plan to include the issue of a security, which would prevent the rescue going ahead in its present form in the US. Lloyd's said: "Hopes remain high that we can resolve this by the end of next week."

Lloyd's is expected next week to announce profits for 1993, the latest accounting year, of more than pounds 1bn.