During a recent podcast interview with analysts from investment bank Peel Hunt, Adrian Cox, CEO of specialist insurance and reinsurance firm Beazley explained that he is open to using the new London Bridge Risk PCC insurance-linked securities (ILS) structure, launched by Lloyd’s, as a way to access third-party capital.
Beazley is already using third-party capital across its insurance and reinsurance platform at Lloyd’s, of course, with investors backing its syndicates and its largely third-party capital backed Smart Tracker facility, which we’ve covered before.
Beazley has continued to expand this market facilities unit and anticipates it becoming an increasingly important part of its overall business, with third-party reinsurance capital a key lever for growth and being able to bring more efficient risk capital to its client base and to the Lloyd’s market as a whole.
During the podcast interview, CEO Adrian Cox explained that Beazley intends to continue to pursue innovative ways to bring third-party capital into the Lloyd’s marketplace.
One of the companies current initiatives in this respect, is a new ESG focused Lloyd’s underwriting syndicate, for which Beazley is currently awaiting approval.
But, as well as this and the continued expansion of the market facilities and third-party capital backed Smart Tracker, Beazley also sees an opportunity to leverage the launch of Lloyd’s own ILS structure, the London Bridge Risk PCC vehicle.
Cox said that Beazley is open to using the London Bridge Risk PCC protected cells as a way to bring in third-party capital to Lloyd’s to support its ongoing initiatives there.
The London Bridge Risk PCC ILS structure allows syndicates and underwriting companies at Lloyd’s to tap into third-party investor appetite for risk, by allowing investors to provide quota share reinsurance to a specific Lloyd’s member.
So Beazley could leverage the London Bridge Risk PCC structure to bring in additional capital support, via reinsurance means, allowing investors to participate on a quota share basis in the underwriting performance of specific initiatives at Lloyd’s.
It could be a valuable way for a major Lloyd’s player like Beazley to add more capital and capacity, while not diluting its own corporate ownership and shareholders stakes.
We’d expect the majority of Lloyd’s markets are exploring how London Bridge Risk PCC could be of use to their strategy and we’ve also heard of a number of ILS markets exploring whether it is a suitable way for them to partner up with underwriting experts at Lloyd’s to provide some of their capital to the market and source Lloyd’s reinsurance-linked returns for their investors.