Problems for Lloyd's advisers: Warning of shortage of capacity in underwriting syndicates

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The Independent Online
THE huge amount of corporate capital being raised for Lloyd's of London could have a destabilising impact on the insurance market, a leading members' agent warned yesterday.

Andrew Hussey, a director of Murray Lawrence Members Agency, warned that some of the groups hoping to raise money are going to have difficulty finding capacity on underwriting syndicates. He said the new 'Lloyd's advisers', which are not based on traditional members' agents, will have particular problems, since they lack existing relationships with underwriters.

About 20 groups have plans to launch companies or investment trusts to provide limited liability capital for Lloyd's. Although many have still to announce details, it seems these companies are trying to raise at least pounds 1.5bn.

This would allow them to underwrite nearly pounds 3bn of premiums. Lloyd's total capacity next year is expected to be about pounds 8bn. Mr Hussey said syndicates' managing agents would give priority to Lloyd's traditional members, or names.

Mr Hussey said: 'I think it's destabilising to talk of bringing in pounds 300m of capacity. I think it's wrong suddenly overnight to change the whole equation. Corporate capital should come in slowly and it ought to grow slowly.'

Murray Lawrence is working with Hambros Bank to raise pounds 30m- pounds 50m for an investment company that will underwrite up to pounds 90m of capacity. Mr Hussey said his firm had already 'booked' pounds 35m of capacity, subject to raising the money.

Murray Lawrence will back no more than 25 syndicates, including four managed by the group itself. It claims to have produced a better return for its names than all but one of the members' agencies that look after more than pounds 100m of capacity. Its names still lost money in the disastrous underwriting years of 1989 and 1990.

Mr Hussey said Murray Lawrence works for an unusually large number of names working in the Lloyd's market, which helped give the firm access to market information.

Hambros and Murray Lawrence had decided not to seek investment trust status in order to retain greater flexibility. Hambros Investment Management will invest three-quarters or more of the money raised in gilts and other fixed- interest stocks.