Lloyd's faces pounds 1.4bn flight of private capital

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Lloyd's of London is facing a flight of the capital provided by names, the insurance market's traditional backers, next year that will only be partly replaced by corporate funds. The loss of capacity in the market is expected to be about pounds 1.4bn.

According to Lloyd's own estimates, up to pounds 1.8bn of trading capacity provied by names will leave the market at the end of this year. Lloyd's corporate membership department's estimates for new corporate capital capacity this year range between pounds 350m and pounds 500m.

Lloyd's estimates are supported by a survey conducted by Inside Eye, a specialist publication aimed at the market's professionals and names, which predicts new corporate capacity to be pounds 430m next year.

Last year Lloyd's raised pounds 1.8bn in new funds from corporate capital providers. However some proposed investment trusts fell through as investors failed to come forward.

Most of last year's quoted trusts are trading at a discount to their issue price, and some of the new capacity was withheld from the market following concerns that there was not enough good business available.

New trusts this year include one launched by Jardine Matheson, which aims to raise pounds 50m from Far East and European investors, and Euclydian, a trust to be launched today, which plans to raise pounds 80m in new capacity.

However, most of the new corporate capital schemes for 1995 are through 'dedicated' vehicles, which will invest only syndicates managed by the underwriting agency managing the corporate vehicle.

In a speech to the Association of Lloyd's Members tomorrow, Anthony Cooper, chief executive of Wellington Underwriting Agencies, will warn the market to expect names to pull out in even bigger numbers in coming years.

Mr Cooper says the number of names writing business at Lloyd's will fall from 17,600 this year to 15,500 in 1995. He expects this to fall to 6,000 by 1998. Mr Cooper claims that most of those that stay will write an average of pounds 1m each.

'Lloyd's does need a lot of new capital over the next few years,' he said.

But he said he was confident that Lloyd's would be a more profitable place to invest than it had been in recent years. Of the 401 syndicates in existence in 1991 only 179 trade today. Most of these have traded profitabably through the difficult years.

A spokesman for Lloyd's denied that there was a problem with a fall in capacity. He said that not all last year's capacity was utilised.