Lloyd’s says third-party & ILS capital solution plans to continue

Lloyd’s of London said that it will continue progressing its plans to make the insurance and reinsurance market more welcoming and accessible to insurance-linked securities (ILS) capital providers, but only in parallel with its 2020 priority deliverables under the first phase of the Future at Lloyd’s.

As we explained earlier this month, Lloyd’s had lowered the priority level of plans to create new capital solutions to enable easier access to the insurance and reinsurance marketplace for providers of insurance-linked securities (ILS) capital.

When Lloyd’s revealed its ambitious “Blueprint One” last September, its plans to “build the most advanced insurance marketplace in the world” included a heavy emphasis and prioritisation on creating new capital rules and processes to make it simpler for ILS capital to access the market.

That has been pushed back, or de-prioritised in favour of other initiatives that Lloyd’s feels will have more benefits for the market.

Today, Lloyd’s has confirmed its priorities, but also tried to give comfort that other initiatives are being worked on in the background as well.

The priorities are explained as, “The investment in and development of the next generation PPL, as part of the complex risk platform; a new digital solution for Coverholder business as part of the Lloyd’s risk exchange that will make it quicker and easier for capital to attach to risk; and accelerated process improvements to claims, including piloting automated settlement.”

Also prioritised for 2020 are so-called “foundational initiatives” that lay the groundwork for the rest of the ambitious program of work, “Data and technology architecture, lead/follow (modern syndication of risk), and middle and back office transformation.”

In parallel, Lloyd’s says it will continue to progress certain ideas from the Blueprint One, including, “A prototype of the “data-first” version of the complex risk platform, new capital investment opportunities, including through the syndicate-in-a-box framework, and a commitment to ongoing cultural change.”

Obviously it’s the “new capital investment opportunities” that interest ILS fund managers and third-party investors the most.

Lloyd’s highlights a recent initiative from insurance and reinsurance firm Brit Ltd, which saw the company launching a new ILS fund to directly support its syndicate activities at Lloyd’s.

Of course, this isn’t the first use of ILS capital to back a syndicate at Lloyd’s, that has been done for a number of years now.

It’s novel as the mechanism Brit has used to enable its Bermuda domiciled Sussex Specialty Insurance Fund to take on whole account exposure to its Syndicate 2988 uses a corporate member vehicle, which is a first it seems.

It’s not the ground-breaking connections of external third-party capital with risk inside Lloyd’s many had hoped for, but Lloyd’s notes it as a learning exercise and a step on the way towards the capital solutions it hopes to develop in future.

It remains to be seen whether a solution can be found that really does open Lloyd’s up to third-party ILS capital in a way that puts determination in the hands of investors, rather than just in the syndicates that want to bring in more capacity from outside investors.

Read more on Lloyd’s Blueprint One update over at our sister publication Reinsurance News.