Understand the auction process.
Through the auction process, existing syndicate members are able to realise any value attaching to the surrender of all or part of their right to participate on a syndicate for a subsequent year of account.
Those members wishing to surrender capacity are known as tenderers. The mechanism for members wishing to surrender capacity is to enter a tender bid into the auction, stipulating the minimum amount, (the floor limit), in multiples of 0.01p per pound of capacity, which they are prepared to accept.
The auction process also enables members to gain access to syndicates where capacity is available. Subscribers (those wishing to acquire capacity) submit bids into the auction system, stipulating the price they are willing to pay to acquire capacity, in multiples of 0.01p per pound of capacity.
When all tender and subscription bids have been entered into the system, the auction matching process determines the amount of capacity to be transferred between members and the price at which capacity is transferred.
Each successful subscriber pays the amount stipulated in their order, although different subscribers may stipulate different prices on the same syndicate. The proceeds from all the successful subscriptions are divided equally amongst the successful tenderers, provided the minimum floor limit of each tenderer is met from the division of the subscription proceeds.
The matching process operates on the following basis:
- Subscription bids stipulating the highest price are matched first against tender bids stipulating the lowest floor limit.
- In the event that more than one bid per syndicate is entered into the auction at the same price, bids are matched in order of receipt, with the earliest bid ranking in priority.
- Subscribers always pay the amount stipulated in their order.
- Subscriptions are divided equally amongst successful tenderers.
- Tenderers always receive at least their stipulated floor limit price and, depending on the range of prices stipulated by subscribers, may receive more than their floor limit price.
For more information on the auction process, email Lloyd's auction office on: