- A Special Purpose Arrangement (SPA) is a type of Lloyd’s syndicate that is similar to a reinsurance sidecar in the company market.
- A SPA is a structure created to allow investors to capitalise a portfolio of business.
- A SPA can only write a single quota share reinsurance contract of another Lloyd’s syndicate, referred to as the ‘host syndicate’, with both syndicates under the management of the same managing agent.
- A SPA quota share reinsurance contract can provide whole account reinsurance of the host syndicate or it can cover specified classes of business. It does not have to reinsure all of the host syndicate’s business.
- SPAs reinsure a single year of account but can also be re-established annually to cover additional years of account.
- The host syndicate must retain a minimum of 10% of any business it underwrites.
“I want to partner with an existing syndicate to develop my business.”
What is Special Purpose Arrangement?
Why establish a SPA?
The SPA is a flexible model that can be used by existing market players or new entrants to the market.
SPA’s have been established for a variety of reasons, including:
- Capital management: a means of introducing third party capital support to the host syndicate Business Plan, reinsuring the whole account or selected classes of business. This model allows the SPA capital providers to participate in the host syndicate’s business without requiring the infrastructure associated with a full syndicate.
- Capacity management: a means for the host syndicate to secure third party capital support and thus manage exposures within it’s risk appetite.
- Partnership: a third party introduces business to the host syndicate, which is then reinsured to the SPA. The SPA may be capitalised by a third party. Such an arrangement may be a first step towards developing a standalone syndicate. Lloyd’s agreement to this model does not necessarily mean Lloyd’s will accept a standalone syndicate application in the future.
Lloyd’s assessment criteria
Lloyd’s has established overarching criteria for the assessment of all new entrants; these criteria are provided for by the Underwriting Byelaw and are set out in full in the requirements made pursuant to the Underwriting Byelaw.
More broadly, Lloyd’s will also consider the extent to which the applicant’s proposed business adds value to the Lloyd’s market, having regard to criteria including:
- the nature and robustness of the business plan of the syndicate;
- whether the applicant is a competent, proficient and capable organisation;
- whether the applicant is of appropriate reputation and standing;
- whether the applicant has adequate capital and financial resources;
- whether the applicant is able to meet Lloyd’s Principles framework where applicable; and
- the applicant’s support for ‘Future at Lloyd’s’ and other market-wide initiatives.
Fees and charges
- Application fee is £75,000 (VAT is not applicable)
- The application fee invoice will be issued once the application has been recommended to the Council by the Business Opportunities Committee.
- Please note the application fee is non-refundable.
- Further information on charges payable by members to operate in the Lloyd’s market can be found in the Triage Quantitative submission.
- We review our charges annually and every September we release a Market Bulletin confirming the charges for the following year
Download the SPA Guide to find out more about our assessment criteria and how to apply.
You can find all the materials required for your application, including templates, by visiting the Useful resources page.