Pioneer Underwriters has announced that following a strategic review it has determined that the cost of capital within the structure of its Lloyd’s syndicate, Pioneer Syndicate 1980, is no longer economically efficient when compared with its other capital arrangements, and will therefore be placing the syndicate into run-off.
Syndicate 1980 is one of Pioneer’s capital platforms that had significantly improved its underwriting performance in recent times with a forecast 2019 year of account combined ratio of 96%, versus 130% in 2018.
In spite of the improvements and the fact the specialist Lloyd’s of London insurance and reinsurance marketplace approved the syndicate’s 2020 business plan, with a small increase in underwriting capacity, the firm has decided to place the business into run-off.
This is because it has determined that the cost of capital within the structure of Syndicate 1980 is no longer economically efficient in comparison with its other capital arrangements.
“As a result, the board has decided not to proceed with the syndicate for 2020,” explains the firm.
Syndicate 1980 is managed by Asta, which will be working with Pioneer to ensure a run-off of the syndicate is achieved in a smoothly fashion, with brokers and clients to facilitate business transfer to replacement capital providers where needed.
Pioneer underwrites on behalf of more than 20 capital providers offering diversity of capital across its facilities. The firm notes that the renewal of these facilities is underway, adding that the largest facility has now been finalised.
The company also explains that supported by both renewal and new capital, replacing a sizeable slice of Syndicate 1980 capacity across numerous classes, Pioneer has plans to write more than £200 million gross premiums next year.
The decision to place Syndicate 1980 into run-off follows a wide ranging exercise undertaken by the firm to look at optimal strategic and capital options for 2020 and beyond. The firm states that its core operations, being the underwriting services business (MGA), has been remediated to ensure Pioneer’s focus is on business where the firm can offer differentiated value.
As a result of this strategic review, Pioneer has withdrawn from certain lines over the last year, and says that the results of this have been encouraging.
Andrew McMellin, group Chief Executive Officer (CEO), commented: “As a result of this work, Pioneer is leaner and focused on providing the value to capital necessary to generate superior returns through the core underwriting services platform (MGA). In our view, customers, employees and shareholders are better served by Pioneer as a focused underwriting services organisation and we look forward to a successful 2020.”
While there are clear benefits to being part of the specialist Lloyd’s insurance and reinsurance marketplace, it can be an expensive place to do business and as such, it might not be the most efficient place for some to operate in.