Lloyd's Capacity Even With ?03

Lloyd's Capacity Even With ?03

NU Online News Service, Jan 6, 12:12 p.m. EDT?Lloyd's of London announced today that the market will have the capacity to underwrite ?14.9 billion of business in 2004?the same level of capacity reported for 2003.[@@]

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

Nick Prettejohn, Lloyd's chief executive, commented in a press statement that the level capacity figure demonstrates Lloyd's focus on underwriting discipline within the Lloyd's businesses. "The market's priority is to continue to improve the quality of its business, rather than simply increasing market share," he said.

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

According to figures supplied to National Underwriter by representatives of Lloyd's last year, capacity has grown each year since 1999--from ?9.9 billion ($17.8 billion) in 1999 to the current level.

Lloyd's also said today that the 2004 capacity figure excludes Qualifying Quota Share arrangements which Lloyd's typically approves later in the year. Melanie Batley, a spokesperson for Lloyd's, explained that QQS is a form of short-term capital that gives syndicates flexibility to raise capital without having to raise permanent capital.

Distinguishing QQS from permanent capital, she described QQS as an opportunistic kind of capital raised about midway through the year?when business opportunities arise.

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

Explaining the drop, she said the replacement of short-term capital with permanent capital maintains discipline and reduces associated credit risk.

The announcement of capacity for 2004 follows the first business plan approval process under Lloyd's new Franchise Board and Franchise Performance Directorate. This business planning process sets out guidelines for best practice and performance to help members of the market strengthen profitability and increase standards of risk management.

"The first year of the new Franchise structure has helped to ensure that the market's plans for 2004 are grounded in the reality of external market conditions, to deliver underwriting profit and maximize 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 countries worldwide.