Lloyd’s based specialist motor insurer ERS will now back the Arcus 1856 syndicate at Lloyd’s, taking over the operation from the Credit Suisse Insurance-Linked Strategies (ILS) team.
It’s understood that Credit Suisse ILS had been looking for a buyer, or someone to step in and take over the Lloyd’s syndicates backing, as it had not proven to meet the returns required by its ILS fund management operations in recent years.
Arcus Syndicate 1856 at Lloyd’s was backed by third-party funds under the management of the Credit Suisse Insurance Linked Strategies team, as the ILS manager had sought new routes to risk through the Lloyd’s market.
Credit Suisse ILS is not the first to step back from traditional routes to access Lloyd’s underwriting, as operating syndicates and backing Funds at Lloyd’s have not proved particularly profitable for a number of ILS managers in recent years.
ERS’s said today that it will now back Arcus, Lloyd’s syndicate 1856 on a go-forwards basis, but is not taking on any prior year liabilities that the syndicate had underwritten or assumed.
Instead, ERS is acquiring the capabilities of the Arcus 1856 business, which now give the motor insurer a platform to expand into underwriting specialty insurance and reinsurance in the Lloyd’s marketplace.
ERS will now work with Arch Managing Agency Limited, subject to Lloyd’s approval, to transfer the Managing Agency responsibilities for Arcus across to it in the coming months.
Peter Bilsby commented: “Following on from announcing our expansion plans, we are delighted to have been able to move quickly to kick-start our growth plans. We have an ambitious agenda to create a balanced, multi-class insurance and reinsurance business over the medium term. The last month or so has been exceptionally busy as we have been building out our strategy to create a modern, analytical business – we’re looking forward to welcoming the Arcus team into the fold. We can’t wait to get started.”
So ends another ILS capital backed operation in the Lloyd’s marketplace.
The cost of doing business in Lloyd’s means a certain amount of scale is required to make the business pay for itself and deliver the returns ILS fund strategies require.
Lloyd’s can also lock-up capital for durations that aren’t as appealing to some in the ILS market, plus the results of the market have been less than impressive in recent years, and Arcus’ performance had suffered as a result.
The only significant ILS player now left operating meaningfully at Lloyd’s today is of course Nephila Capital.
But Nephila’s strategy has always been to leverage the efficiency aspects of the Lloyd’s structure, model and leverage, applying them cleverly to its overall global business, which has and continues to work very well for the ILS manager.
It’s going to be interesting to see whether operating within Lloyd’s confines remains appealing to the rest of the ILS world going forwards, at a time when the majority of ILS funds are perfectly capable of accessing business to build their portfolios of risk without requiring direct operational access to the Lloyd’s marketplace.