Barbican raising funds for collateralised Lloyd’s stop loss vehicle

Lloyd’s of London focused insurer and managing agency Barbican Insurance Group is reportedly raising funds for a new collateralised reinsurance vehicle that will offer stop-loss style retrocession products to Lloyd’s syndicates, with an initial fundraise of around $200 million (£160m) mooted.

First reported today by Reinsurance Magazine, the news shows that market participants understand that there are going to be opportunities to help Lloyd’s re/insurers better manage their exposures going forwards, by taking the peaks of loss events and providing efficient retro capacity.

Barbican will be hoping to take advantage of any capacity crunch that makes protection buying trickier at 1/1 renewals for syndicates at Lloyd’s, as well as bringing more efficient capital markets-backed capacity that may be able to undercut some traditional providers.

Sources told Reinsurance Magazine that the Barbican managed collateralised reinsurance vehicle will offer syndicates so-called “out of the money” stop-loss. Barbican has reportedly established an internal team to work on the opportunity.

The target is said to be the mid-sized Lloyd’s players, some of which will have been hit particularly hard by recent events and have eroded much of their existing reinsurance coverage.

With as many as four to six syndicates said targeted as buyers of the product for 1/1, if Barbican can raise the necessary capital and produce a product that helps Lloyd’s syndicates better manage the peak exposures within their books more efficiently it could easily find growing demand for such an offering.

It’s suggested that Barbican could look to increase the size of the collateralised Lloyd’s stop-loss vehicle to as much as $790 million (£600m) by 2020, if launch is successful and demand persists.

Barbican will earn underwriting, management and likely profit commissions from such a vehicle, providing a useful income source from a product seemingly designed to meet a market need at a time of stress.