Illium turns to Lloyd's of London after float plans are rejected

A new insurance company is launching through Lloyd's of London after it abandoned plans to raise up to £100m in a stock market flotation.

Illium, which will be the managing agent for a new Lloyd's syndicate, used the investment bank ABN Amro to test the market earlier this year for interest in a new insurance issue.

However, Illium's management decided instead to set up its new business through the Lloyd's market and will raise capital from Names, the investors that provide capital backing to the insurance market.

"We looked at a number of ways of setting up the business and how to raise capital, and one of those was a float," Russell Benzies, the chief executive of Illium, said yesterday. "But there is a lot of pressure for premium growth in insurance, and you have to grow the business prudently. Lloyd's is a good environment in which to do that, as you are not under the same pressures as a public company. We are a start-up company, and people like track records. Lloyd's is the appropriate place for us right now."

The abandonment of the float plans amounted to a second flotation disappointment for ABN Amro in the insurance sector in recent months. It tried to float Creechurch, an existing Lloyd's vehicle, earlier this year but had to suspend the plans, blaming poor market conditions.

It was news from Lloyd's saying that it was looking for new syndicates that made Mr Benzies decide against raising money through a stock market listing. He has not ruled out looking to the stock markets for capital when the business is more established.

Illium's syndicate will write third-party liability insurance, such as employer's liability insurance where premiums have rocketed in the past year. A number of insurers have withdrawn from the market, creating a shortage in capacity. Some premiums have been increased by more than 400 per cent in a year. The management wants to raise between £80m and £100m for 2004 from Lloyd's Names and investors. This, it hopes, will give it a 4 per cent share of the £3bn employer's liability market. Its reinsurers will be Swiss Re and Munich Re.

Illium has Hampden Capital Partners supporting its launch. It is one of the largest agencies in Lloyd's. "It is a boost for Lloyd's that Illium has chosen this route to raise capital, instead of the FSA insurance company route," John Francis, a director at Hampden Private Capital, said yesterday.