Des Potter, a Special Advisor for Lloyd’s and a former Guy Carpenter executive and ILS specialist, has asserted that Lloyd’s has “a pivotal role to play” in restoring investor confidence in the ILS class via its London Bridge 2 platform.
Speaking during a recent panel discussion on the expanded Lloyd’s ILS platform, Potter maintained that London Bridge “hasn’t been set up to compete with existing established vehicles” in other jurisdictions.
But at the same time, he noted that the ILS market is going through a “difficult time” in its relationship with investors and could offer a more attractive prospect for many.
“The privately placed collateralized market has lost a little bit of trust with the investor base,” Potter explained.
“And I do think Lloyd’s and the way Lloyd’s is governed and the way Lloyd’s has turned around its underwriting performance – and adding to that the attractive marketing business – I do think Lloyd’s can play a pivotal role in restoring some of that confidence with the investor base and actually offering the investor base a broader range of risks that have decent return characteristics and decent liquidity features,” he continued.
“So I do think Lloyds has a pivotal role to play in rebuilding that confidence that seems to be a little impaired at the moment in terms of the institutional risk base.”
Potter’s comments formed part of a wider conversation about how to optimise access to Lloyd’s through London Bridge 2, which was hosted by Arthur J. Gallagher’s alternative risk solutions company Artex, which also provides insurance management services for the platform.
Additional members of the panel included Ryan Mather, CEO of Ariel Re, which has already made significant use of London Bridge, having recently channelled $170 million of a total $270 million capital raise through the platform.
“Do we think Lloyd’s is the best platform to help capital take advantage of this current marketplace? The answer absolutely is yes,” Mather asserted during the discussion.
“It’s been a little bit forgotten, because a lot of the activity around third party capital is really centred in Bermuda. But really we’ve helped to rediscover Lloyds as an asset class,” he remarked. “The way Lloyds operates, it’s got 325 years of history, it’s got great licenses, and it’s got great ratings. And last but not least, it gives us financial leverage that we don’t think can be achieved anywhere else in the world. So overall … we think it’s a very compelling time and place to be doing this.”
Potter concurred that the disruption in the alternative capital market has highlighted the need for Lloyd’s market participants to be able to access new and diverse sources of sustainable capital.
However, he was keen to emphasise that the aim of London Bridge is to promote profitable growth for the whole ILS market, rather than to vie for existing business with other prominent jurisdictions.
“We haven’t set up London Bridge to move business from Bermuda to London,” Potter insisted. “We’re not looking to disrupt any existing risk transfer relationships that work effectively. What London Bridge provides is an alternative solution. It’s a solution that has been designed to support the underwriting within the Lloyd’s market.”
Looking ahead, Mather also expressed enthusiasm over the potential for innovation in the deployment of capital and investment structures that London Bridge could offer.
“We’ve already said that London Bridge is a great way for some of this institutional money to come into Lloyd’s efficiently and effectively. The bit that I’m looking forward in the very near future is really testing the flexibility of London Bridge 2,” Mather said. “Ariel is a business that really is trying to match high quality capital with high quality risks … We’ve now got to test the theory with the practice and that’s something that we’re going to be doing in the very near future.”
Register today for ILS Asia 2023, our next insurance-linked securities (ILS) market conference. Held in Singapore, July 13th, 2023.
Get a ticket soon to ensure you can attend. Secure your place at the event here!