Syndicate, Lloyd's Part Ways

Thomas Miller, the U.K. protection and indemnity club manager, is the parent company of TMMA and Dex Serv. Dex Serv is a specialist marine intermediary that has underwriting authority to place business on behalf of the Dex syndicate.

Mark Carter, chief executive officer of Dex Serv in London, admitted to National Underwriter that Dex and Lloyd's had "a parting of the ways."

He said, "The Franchise Board has set certain requirements for doing business at Lloyd's, including line size, or the amount of the value per ship that a syndicate can insure."

Lloyd's was "seeking to drive that value down, and our business model demands that we have a high value per ship or per line so that we can provide the services that go with it; otherwise it's uneconomic to do so," Mr. Carter said.

"We typically write 40-to-50 percent of a value of a ship, [but] Lloyd's underwriting guidelines seek to restrict that to a much lower figure," he explained.

Dex was established as a "bluewater hull insurer with a desire to break the traditional mold," Mr. Carter said in a statement. Writing large lead lines "allows us to invest in our product and, more importantly, provide a high level of claims handling and other service to ship owners."

He said in an interview that, "although we understand where Lloyd's is coming from, [complying with the requirements] conflicts with our business model. So we decided it was time to set up elsewhere."

A Lloyd's representative acknowledged that Lloyd's has been in discussions with Syndicate 2241 to resolve a number of concerns, including the extent to which its 2004 business plan would comply with underwriting guidelines set by the Franchise Board, which "are based on sound business practices."

"Rather than make the suitable changes," Dex has informed Lloyd's "they intend to move their business outside of Lloyd's," the representative said. "Lloyd's is clear that going-forward businesses operating within Lloyd's should comply with franchise guidelines unless it can be shown to be inappropriate."

Dex, which has been underwriting since 2000, is a joint venture between Swiss Re and Thomas Miller and now has 300 ship owner clients.

"Swiss Re will remain part of the joint venture, but will become the preferred reinsurer, rather than providing primary capacity," Mr. Carter said. Swiss Re currently provides $50 million of capacity, while Thomas Miller provides the marketing and servicing to the joint venture via the company Dex Serv, he explained. Next year, Groupama will replace Swiss Re as the capacity provider.

"We are delighted to have found in Groupama Transport a long-term partner with whom we share common views on client servicing. We are confident that ship owners will see a seamless transfer as the service will continue to be provided in the same way by the same people," Mr. Carter said.

Vianney de Chalus, CEO of Groupama Transport, said, "We have been following Dex's rapid progress in the market and are interested in the opportunities that can be developed through Dex Serv?thanks to strong links with Thomas Miller and an original marketing approach combined with first-class service."

Although Mr. Carter projected a possible 15 percent return on capital invested for the 2003 year of account, Dex has made losses since its first year. "As with any startup company, we lost money in our first couple of years," he said.

Lloyd's reports show that Syndicate 2241 lost ?3.9 million ($6.6 million) on capacity of ?12.2 million ($20.7 million) during the 2000 year of account (which is a closed year under the Lloyd's three-year accounting system). As a result, the loss represented 32 percent of the syndicate's capacity.

The 2001 and 2002 underwriting years are still open, but based on the syndicate quarterly returns, the figure for 2001 shows an expected loss of ?3.4 million ($5.8 million) on capacity of ?12.2 million ($20.7 million), which represents a loss of 28 percent. 2002 has a projected loss of ?3.8 million ($6.4 million) on capacity of ?22 million ($37.3 million), which represents a loss of 17.5 percent.

Under its new business platform outside of Lloyd's, Dex's business will be underwritten in London by Dex Serv.

"If the rest of the year goes to plan, we'll write about $40 million worth of premium this year," Mr. Carter said, with the same planned for next year.