Strength in syndication
14 November 2008
A trend for big businesses to place their insured risks with a larger number of individual insurers has prompted specialist broker Bowring Marsh to create a new range of products that are syndicated predominantly at Lloyd’s.
Bowring Marsh has created five bespoke risk transfer products covering property, casualty and terrorism risks.
The majority of the placement for all the products will be at Lloyd’s, which has A range ratings from Standard & Poor’s, A.M. Best and Fitch.
Clients are not necessarily expressing a particular concern about insurer security, says Nick Bacon COO at Bowring Marsh, they’re simply saying that it may be better to diversify their risk more.
“What we’ve seen over the last couple of months is that clients have started to rethink how they structure their insurance programmes. They’re asking themselves, ‘do I want to have my programme placed substantially with anyone in particular? Or would I prefer to see a broader diversification of participants on my insurance?’.”
Bacon told lloyds.com: “We have responded to that by producing products that have syndication at their core – which is very natural for the Lloyd’s market.”
One of the products, the Bowring Marsh Worldwide Terrorism Facility, is underwritten by 13 Lloyd’s syndicates. It provides up to $250m property damage and business interruption coverage following an act of terrorism and/or sabotage.
The terrorism facility is worldwide and doesn’t have any particular excluded territories; it offers standard or all risks wordings, primary or excess, direct or reinsurance – including reinsurance of a captive.
Another feature of the terrorism facility is that quotes are made by the three leading syndicates that will each have a different appetite for certain types of risk, Mr Bacon explained. “That allows flexibility in designing the terms and conditions for the individual risks concerned,” he said.
The casualty programme is worldwide but it is also a lead facility for US business, reaffirming Lloyd’s commitment to the sector.
“The amount of capacity in the world market for US casualty lead business is limited, so there are more opportunities for [Lloyd’s] underwriters to innovate in this area and secure the terms and conditions they want,” Bacon said. “Again, our clients who are looking to put together a programme for their casualty risks are big corporations. They increasingly want to diversify risk across a greater number of markets and geographies.”
Bacon says that he has received more enquiries about Lloyd’s and its Central Fund in the last two months than in the last two years: “That’s one of the reasons these facilities are 100% Lloyd’s or mainly Lloyd’s. The central fund is a security feature that is unique to the Lloyd’s market.”
Clients took it for granted during the soft market years and it was very difficult to ‘sell’ the value it represented, according to Bacon.
“However, a major client said to me recently, ‘a good thing about being insured by Lloyd’s is that it has the central fund.’ I nearly fell off my chair,” Bacon said.
The new products also include a North American Property Facility that provides $25m primary capacity. The placement is 100% Lloyd’s security with participating syndicates agreeing to be bound by the two leaders, Ace Global Markets and Catlin.
The North American Excess Property Facility makes a large amount of capacity available, responding within 48 hours. The majority of markets agree to be bound on a non-catastrophic basis by the leaders, Catlin Syndicate 2003 and Reith Syndicate 1414.
The Worldwide Power Facility can provide up to $135m capacity as part of a $500m limit. Designed specifically to accept power and utility business worldwide on All Risks of physical loss or damage, including boiler and machinery, it is intended for primary and quota share placements. Again, the placement uses 100% Lloyd’s security.
Last updated on 16 Apr 2009
