Syndicate Parts Ways With Lloyds
Facing the requirements of the Lloyds Franchise Board, Thomas Miller Managing Agency, which manages marine hull and machinery Syndicate 2241, has chosen to move the business out of the Lloyds market.
From Jan. 1, 2004, the former Lloyds business, known in the market as Dex, will be supported by Groupama Transport, the French "A-rated" specialist marine insurer, which is a subsidiary of Groupama, the largest French non-life insurer. The runoff of Syndicate 2241 will be managed by Thomas Miller Managing Agency, or TMMA.
Thomas Miller, the U.K. protection and indemnity club manager, is the parent company of TMMA and Dex Serv, which 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 Lloyds had had "a parting of the ways. The Franchise Board has set certain requirements for doing business at Lloyds, including line size, or the amount of the value per ship that a syndicate can insure."
Lloyds 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 its uneconomic to do so," he said.
"We typically write 40-to-50 percent of a value of a ship, [but] Lloyds underwriting guidelines seek to restrict that to a much lower figure," he said.
The syndicate, known in the market as Dex, was established as a "bluewater hull insurer with a desire to break the traditional mold," said Mr. Carter 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 shipowners."
"Although we understand where Lloyds is coming from, [complying with the requirements] conflicts with our business model. So we decided it was time to set up elsewhere," he said in an interview.
A Lloyds representative acknowledged that Lloyds 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 Lloyds "they intend to move their business outside of Lloyds," the representative said. "Lloyds 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 shipowner 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 shipowners will see a seamless transfer as the service will continue to be provided in the same way by the same people," Mr. Carter said.
"We have been following Dexs rapid progress in the market and are interested in the opportunities that can be developed through Dex Servthanks to strong links with Thomas Miller and an original marketing approach combined with first-class service," said Vianney de Chalus, CEO of Groupama Transport.
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.
Lloyds 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 Lloyds three-year accounting system). As a result, the loss represented 32 percent of the syndicates 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 Lloyds, Dexs business will be underwritten in London by Dex Serv.
"If the rest of the year goes to plan, well write about $40 million worth of premium this year," said Mr. Carter, with the same planned for next year.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 26, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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