View from City Road: Lloyd's new money may run into old problems

New money is flooding into the Lloyd's of London insurance market. Peter Middleton, Lloyd's chief executive, said recently that companies seeking to become members of the market with effect from next year had booked around pounds 600m of investment with insurance syndicates. The anticipated final booking for the 1994 account is just under pounds 1bn.

This is below the frothier estimates of up to pounds 2bn at one stage. Those new investment vehicles that have withdrawn have found Lloyd's just does not have enough business to satisfy the new demands. Moreover, competitive pressures among the new-style investment operations have forced out the less impressive.

The most ambitious of the vehicles, the London Insurance Market Investment Trust (Limit), organised by Samuel Montagu and James Capel, intends to raise pounds 280m - more than a quarter of the capital that could be booked by the end of the year.

Of Limit's 280 million shares, 210 million will be placed with institutional and other investors and 70 million are being offered to the public. Applications for a minimum of 1,000 shares will close tomorrow.

There are obvious attractions for the sophisticated: vehicles such as Limit offer professional expertise; liabilities, unlike individual investment at Lloyd's, are strictly limited; capital is allowed to work at least twice over through the investment returns on the money put upfront, and (it is hoped) insurance profits; and the insurance market is said to be on an upswing.

The other side of the coin is that a trust the size of Limit may catch a cold if the cycle of insurance rates turns down again. For anyone seeking to join the market now, there is also the worrying spectre that perhaps they may have to finance the problems of the loss- making market's past.

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