r10 have undertaken a detailed study of the contents of Blueprint One and over a series of bite-sized articles will be providing a breakdown of the proposed changes to help you digest what they will mean for your business. Here, in the sixth article, we look at the proposals for Syndicate in a box.
What are the Syndicate in a box Proposals?
As with the Capital Solution, discussed in the previous article, the Corporation are exploring ways to attract new capital and talent into the Lloyd’s market. Syndicate in a box is designed to allow smaller, more entrepreneurial businesses to enter the Lloyd’s market in a cost-effective manner, by leveraging the Lloyd’s services hub & data platform and writing non-cat exposed lines for an initial period of three years.
So, how will it work?
Lloyd’s will set clear qualifying criteria for those wishing to join the market via this opportunity: –
- By year three all participants must have a next combined ratio <100% & net expense ratio <35%
- Entrants must enhance the Lloyd’s franchise by introducing innovative, new products &/or distribution opportunities
- Entrants must aspire to become full syndicates, but will be limited to a maximum of GWP £100m in year 1
- Classes written will typically be short tail and non-cat exposed
Syndicate in a box entrants will benefit from an entry fee reduced from £200k to £100k and shortened approval time to just 3 months. This will be enabled through a more standardised entry process and greater reliance on the sponsoring Managing Agent. The 20% capital uplift for new entrants will be lifted, and further relaxations in capital requirement will be allowed for syndicates starting mid-year.
Oversight will be tailored to the risk profile of new entrants. By restricting classes of business and GWP the Corporation will be able to balance opportunities and constraints. All new syndicates in a box will undergo quarterly and annual assessments to ensure that the business remains accretive, profitable and delivers against it’s original business plan. Those that do not meet the required success criteria will be placed into run-off.
Syndicates in a box are not permitted to have a physical box within the Lloyd’s building, so there is no requirement for them to be located in London, further increasing opportunity to reduce operating costs.
Syndicates in a box will be expected to integrate with the services hub and take advantage of the Lloyd’s ecosystem which may extend over time to include a policy administration system, internal model capability and data & analytics services. Being physically remote, they will need to optimise their use of the Risk exchange, Complex risk and claims platforms to maximise efficiency
What will the timeline be?
Lloyd’s have published the following timeline
How will the new capital solution impact your business?
Lloyd’s focus on attracting innovative, accretive capacity to the market is interesting. MGA’s may wish to consider Syndicate in a box as an alternative method of gaining access to capital and existing managing agents may well examine the opportunity closely when contemplating new product lines – as proven by Munich Re.
Brokers embracing electronic distribution channels early may find advantage in building strong relationships with this new class of syndicate, with it’s focus on digital presence.
How r10 can help
With our in-depth London Market expertise, r10 is uniquely placed to help guide your organisation through the Future at Lloyd’s change programme and over the coming weeks will be updating our blog with insights & guidance on what the changes may mean for you.
Please get in touch for more information on how r10 can help you prepare to play your part in the market of the future.
Read the next bite-sized article in our Bite-sized series “What are the Services Hub Proposals?”, which is the seventh out of the twelve proposed Future of Lloyd’s capabilities.
Author: Chris Carney