Lloyds Keeps Capacity Even With 03
The Lloyds of London market will keep its 2004 capacity level even with last years figure, allowing syndicates to underwrite 14.9 billion of businesstranslating into about $26.7 billion under Dec. 31, 2003, exchange rates.
The level capacity figure demonstrates Lloyds focus on underwriting discipline, according to the markets chief executive officer, Nick Prettejohn. "The markets priority is to continue to improve the quality of its business, rather than simply increasing market share," he said.
The capacity figurerepresenting the total volume of business the market can acceptis provisional, according to Lloyds. The figure is set to be finalized in the first quarter of 2004, Lloyds said, noting that in January 2003 capacity stood at 14.4 billion, but that throughout 2003 the figure increased to 14.9 billion.
According to figures supplied to National Underwriter by representatives of Lloyds last year, capacity has grown each year since 1999from 9.9 billion ($17.8 billion) in 1999 to the current level.
Lloyds also said that the 2004 capacity figure excludes Qualifying Quota Share arrangements, which Lloyds typically approves later in the year. Melanie Batley, a representative for Lloyds, 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 yearwhen business opportunities arise.
According to Ms. Batley, the amount of QQS that Lloyds would be prepared to authorize for 2004 is 200 million. Stressing that this is "considered as totally separate from capacity," she said that last years 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 Lloyds new Franchise Board and Franchise Performance Directorate.
"The first year of the new Franchise structure has helped to ensure that the markets 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 Lloyds, covering all classes of business from over 120 countries.
Reproduced from National Underwriter Edition, January 16, 2004. Copyright 2004 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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