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Lloyd’s places innovative cover to support long-term market growth


Lloyd’s, the world’s leading marketplace for the underwriting of commercial, corporate and speciality risk solutions, today announced it has secured a landmark £650 million five-year cover for the Central Fund* which supports sustainable, profitable long-term market growth. The new and unique structure will also provide increased protection for Lloyd’s customers and the market against severe tail end events and further improve the quality and financial strength of Lloyd’s balance sheet.

The new multi-layered cover will reimburse aggregate payments from the Central Fund in excess of £600 million up to £1.25 billion, which will serve as a key component in Lloyd’s chain of security. The £650 million protection has been structured and placed by Aon. It is a layered structure supported by newly created cell company Constellation IC Limited** – financed by investment bank J.P. Morgan – as well as a panel of eight well-regarded and respected reinsurers, namely Arch, Berkshire Hathaway, Everest Re, Hannover Re, Munich Re, RenaissanceRe, Scor and Swiss Re.

In addition to protecting the Central Fund, the cover will create a significant buffer against adverse solvency developments. It is expected that the new cover will increase Lloyd’s central solvency ratio. The capital buffer will also facilitate growth opportunities against the backdrop of current favourable market conditions.

Burkhard Keese, CFO, Lloyd’s said: “We are very proud to place this innovative cover with eight of the world’s leading reinsurance companies and secure the support and commitment from one of the largest investment banks, J.P. Morgan. This unique structure will enable us to support the market’s growth ambitions over the next few years, whilst also strengthening the resilience of our balance sheet. Our capital management and position are now more resilient than ever, providing enhanced protection for customers.”

* Lloyd’s Central Fund is available, at the discretion of the Council of Lloyd’s, to meet any valid claim that cannot be met from the resources of any member. Should syndicates need additional assets to meet their liabilities, the funds at Lloyd’s ensure that members have additional resources available. In the rare event that a member’s capital is insufficient and that member is not able to provide further assets to the relevant syndicates, Lloyd’s central capital provides further financial support to ensure valid claims are paid. The Corporation calculates the central Solvency Capital Requirement, which is independently validated and overseen by the PRA. The Council sets the level of economic capital needed above the regulatory minimum to meet its risk appetite and support the market’s ratings and global licence network.

** Constellation IC Limited is an Incorporated Cell of White Rock Insurance (Guernsey) ICC Limited , a subsidiary of Aon and Managed by Aon Insurance Managers (Guernsey) Limited

1. The cover is effective from 1 January 2021
2. Tail end events are low probability but high impact events, such as the 2008 financial crisis or a global pandemic.
3. The most recent claim made against Lloyd’s Central Fund was in respect of the 2007 underwriting year and in all circumstances, there have never been aggregate claims in any one year to exceed the £600m retention applied to this new contract. 
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