Lloyd's Capacity Even With ?03

NU Online News Service, Jan 6, 12:12p.m. EDT?Lloyd's of London announced today that the marketwill have the capacity to underwrite ?14.9 billion of business in2004?the same level of capacity reported for 2003.[@@]

In U.S. dollars, the 2004 capacity level is $26.7 billion (usinga Dec. 31, 2003, exchange rate of 1.79).

Nick Prettejohn, Lloyd's chief executive, commented in a pressstatement that the level capacity figure demonstrates Lloyd's focuson underwriting discipline within the Lloyd's businesses. "Themarket's priority is to continue to improve the quality of itsbusiness, rather than simply increasing market share," he said.

The capacity figure?representing the total volume of businessthe market can accept--is provisional, according to Lloyd's. Thefigure is set to be finalized in the first quarter of 2004, Lloyd'ssaid, noting that in January 2003 capacity stood at ?14.4 billion,but that throughout 2003 the figure increased to ?14.9 billioncapacity.

According to figures supplied to National Underwriterby representatives of Lloyd's last year, capacity has grown eachyear since 1999--from ?9.9 billion ($17.8 billion) in 1999 to thecurrent level.

Lloyd's also said today that the 2004 capacity figure excludesQualifying Quota Share arrangements which Lloyd's typicallyapproves later in the year. Melanie Batley, a spokesperson forLloyd's, explained that QQS is a form of short-term capital thatgives syndicates flexibility to raise capital without having toraise permanent capital.

Distinguishing QQS from permanent capital, she described QQS asan opportunistic kind of capital raised about midway through theyear?when business opportunities arise.

According to Ms. Batley, the amount of QQS that Lloyd's would beprepared to authorize for 2004 is ?200 million. Stressing that thisis "considered as totally separate from capacity," she said thatlast year's QQS figure was ?1.1 billion.

Explaining the drop, she said the replacement of short-termcapital with permanent capital maintains discipline and reducesassociated credit risk.

The announcement of capacity for 2004 follows the first businessplan approval process under Lloyd's new Franchise Board andFranchise Performance Directorate. This business planning processsets out guidelines for best practice and performance to helpmembers of the market strengthen profitability and increasestandards of risk management.

"The first year of the new Franchise structure has helped toensure that the market's plans for 2004 are grounded in the realityof external market conditions, to deliver underwriting profit andmaximize returns to capital providers," Mr. Prettejohn said.

In 2004, 66 syndicates are underwriting insurance at Lloyd's,covering all classes of business from more than 120 countriesworldwide.