Three funds raise 403m pounds in corporate capital for Lloyd's

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The Independent Online
THREE investment vehicles launched yesterday to bring corporate capital into the Lloyd's insurance market next year raised a combined pounds 403m. The figure shows that funds are still attracted to the market despite Lloyd's devastating losses in recent years and a shortage of quality underwriting capacity.

The concept of opening the market to companies on a limited-liability basis represents a turning point for Lloyd's, which for 305 years has relied upon capital supplied by 'names,' individual members who guaranteed the market with unlimited liability.

The largest fund to launch its prospectus so far, the Limit investment trust created by Samuel Montagu and James Capel, attracted more interest than it expected. Limit underwrote its entire pounds 280m issue yesterday and received undertakings from UK institutions to subscribe to the full amount, but pounds 70m of ordinary shares are reserved for the public offering, open until 10 November.

Sir Laurie Magnus, a director of Samuel Montagu, said: 'It has been oversubscribed and we had to scale institutions back.' He attributed the fund's success to an early start in obtaining guarantees from well run syndicates for underwriting capacity.

Limit will back 98 Lloyd's underwriting syndicates - more than half the number now operating - to diversify its risk and replicate the trading strategy employed by most Lloyd's advisers.

But the CLM Insurance Fund, sponsored by BZW and Sedgwick, the insurance broker, raised pounds 80m, well below its initial target of between pounds 100m and pounds 200m. It hopes to raise a further pounds 30m from the public.

'We believe there is a very limited amount of quality syndicate capacity on the block for 1994,' Michael Wade, chief executive of CLM Advisers, said. 'They won't make available the amount of corporate capital that was expected just four weeks ago.'

With about 20 corporate investment schemes hoping to launch Lloyd's funds, more corporate capital than expected has been scrambling to get underwriting capacity on well run syndicates. In addition, many names who had been expected to drop out after big losses have stayed in the market.

Investors were believed to have balked at CLM's relatively high running costs, which include commissions of 7.5 per cent.

The smallest fund launched yesterday, Masthead Insurance Underwriting, sponsored by Hambros Bank, raised pounds 33m, with a further pounds 10m being offered to the public. It said investors 'lapped up' the issue, partly because of confidence in the Murray Lawrence Members Agency, which will act as Masthead's members' agent and adviser.