Lloyd’s syndicates turning to sidecars, reinsurance too expensive

Lloyd’s of London insurers Beazley and Amlin are both turning to sidecars as a way to increase their reinsurance capacity at a time when retrocessional reinsurance is proving expensive.

Beazley is discussing the possibility of creating a new Lloyd’s special purpose syndicate to operate as a sidecar to its treaty reinsurance business. Demand for treaty capacity is strong right now and utilising a sidecar type structure will give Beazley the capacity it needs to increase its market share at a cheaper rate than traditional methods. The proposal is to create the SPS for two years and at the end of that time keep hold of the capacity, most likely by transferring it to an existing syndicate.

Amlin meanwhile is looking to expand it’s existing special purpose syndicate sidecar, Syndicate 6106. Again this is most likely due to the cost of retrocessional reinsurance and a general market wide feeling that it will be scarce in the next year or two.

We expect to see more of these deals as Lloyd’s vehicles realise they need to increase capacity despite costs and scarcity of reinsurance, sidecars provide a perfect medium for them to achieve that goal.