The increase in corporate capital makes up in part for the withdrawal of about 1,500 names from the market. Lloyd's agents are predicting the total capacity of the market for next year will be almost £10bn, compared with £10.9bn for 1994.
Last year, the first year corporate capital was admitted to the market; corporate investors provided £1.6bn of capacity.
In an unusual move, one syndicate will be entirely backed by corporate capital from one investor. Lloyd's usual rules restrict investment in any one syndicate by a corporate capital provider to 25 per cent, although dispensations are possible. The syndicate, number 190, is losing all its names as members` agents have withdrawn support. One said the syndicate had significant exposure to asbestos and pollution-related claims, currently hitting the market hard, and has reported large losses in recent years .
The new backer is Liberty Mutual Insurance, based in the US, one of whose directors is Dick Hazzell, who used to be the underwriter for Syndicate 190.
Liberty Mutual has invested £40m and will be allowed to write £40m of business, an unusually low ratio. Corporate capital vehicles are normally allowed to write nearer to two times their capital investment.
Syndicate 190 has seen a significant reduction in capacity since 1991 when it had £175m of capacity. Last year the syndicate had 5,000 names, giving it £51m of capacity.
New corporate vehicles this year include the publicly listed Matheson Lloyd's Investment Trust which has raised £25m in capital, allowing it to write £40m in capacity, and Euclidean, which has raised £20m in capital and will be allowed to write £80m in new capacity.
A further £97m of new corporate capacity will be provided by existing corporate investors ploughing back profit earned from 1994 trading.
Commenting on the overall level of investment by names and corporate capital, Anthony Cooper, chairman of the Wellington underwriting agency, said: "The business outlook for 1995 looks encouraging, although some rates, particularly motor insurance, have fallen. The market has come down from very high rates so there is still room for profits."
Lloyd's has been saying for some time that it was not too concerned about a small reduction in capacity which means investors will get a higher return, making the market more profitable.Reuse content