A perfect storm of premium rating, investment earnings on premiums and reserves, as well as the impressive half-year performance of Lloyd’s, means investors are expecting good things from accessing the returns of the oldest insurance market in the world, according to Argenta Private Capital Limited (APCL).
Reinsurance News spoke with Robert Flach, Managing Director, and Kate Tongue, Executive Director at APCL, at the 2023 meeting of the reinsurance industry in Monte Carlo, about investor sentiment and growing demand for accessing the Lloyd’s market.
Argenta Holdings is a wholly owned subsidiary of Hannover Re, and APCL is the Group’s specialist insurance investment adviser which provides a range of products and advice to both individual and corporate investors at Lloyd’s.
Capital has been a hot topic across the industry in recent times, notably the lack of large raises and the fact there’s been no new start-ups looking to capitalise on hard market conditions.
“Interestingly, with all the talk about capital, we’re working on somewhere around 12 new corporate members coming into Lloyd’s for 2024,” said Flach. “Investors are recognising the benefit and the opportunity.”
When investing in Lloyd’s, you do so on an underwriting year of account basis, so the corporate members APCL is setting up for 2024 haven’t got the challenges of previous years, including the war in Ukraine and immature casualty reserves.
“It’s a purist way of acquiring that underwriting return and doing it on a 2024 underwriting year of account basis, you also haven’t got the stock market contagion, and that’s something that a lot of our clients see the benefit in,” continued Flach.
Flach and Tongue explained that it was somewhat of a surprise how many new investors entered Lloyd’s last year, and they’re delighted there’s been even greater interest in 2023.
“And, there’s a few more that are saying, we know we’re too late for 2024, we’re going to come in for 2025. And when you have pieces of really good news, like the Lloyd’s half year results, people are going to go, okay, well I missed it this year, but this is really good, so let’s start early for next,” said Flach.
Overall, investor sentiment is “really encouraging and people are expecting good things,” explained Flach.
“You’ve got that perfect storm of premium rating, investment earnings on the premium, investment earnings on the reserves, and investment earnings on the capital provided,” he added.
One of the ways capital market investors can access Lloyd’s is through its expanded London Bridge 2 insurance-linked securities (ILS) platform, and Flach and Tongue explained that this is something the marketplace has really pushed.
“We are promoting using London Bridge in conjunction with a corporate member. If you need a different cell for each reinsurance contract it starts adding up cost and capital wise. Whereas if you reinsure a corporate member, that corporate member can have a portfolio of syndicates and you get the diversification benefit as well,” said Tongue.
Ultimately, it’s another option for investors and in this perfect storm environment, having another entry point can only benefit APCL and Lloyd’s.
Looking forward, Tongue told Reinsurance News that there’s been a lot of interest in corporates this year and the expectation is that that will continue.
“We’ve also been spending a lot of time speaking to financial planners about it as a product for HNWs as well, and we haven’t really seen that filter through yet,” she said.
For APCL, explained Flach, the months ahead are about “solidifying and enhancing our position in the market as the go to for investing third-party capital in the Lloyd’s market.”
