Private investors flock to Lloyd’s as ‘safe haven’

A growing number of private investors, wary of unstable equity markets and encouraged by potentially lucrative returns, are helping provide underwriting capital to Lloyd’s.

Amlin’s new Syndicate 6106, raised about £50m from private investors – called corporate members – in December, just a few weeks after its formation.

Hampden, one of the three members’ agencies responsible for bringing in private investment, said individuals were eager to take advantage of a hardening market.

On Monday, Rolf Tolle, franchise performance director at Lloyd’s, said the market was seen as a “safe haven” in choppy economic waters.

He added that he expected rates to increase over the next two years, albeit at a slow pace.

Many private investors regard a hardening market as a sign of healthy returns, although there is still a risk they could lose money to potentially devastating claims.

The demand for private investors is also high as some Lloyd’s insurers have been hit by the weakening pound and need capital to boost their underwriting capacity.

Lloyd’s has about 2,500 private clients – each with assets worth at least £5m – who provide about 17% of Lloyd’s £16bn underwriting capacity. Private investment can range from £100,000 to many millions.

James Mackay, executive director at Argenta members’ agency, said the market was attracting up to 40 private investors a year. He hoped it would attract more than 100 this year, with each client investing £1m.

He said Argenta had 634 active clients, supplying underwriting capital of £896m. It would not be long before funding exceeded £1bn, he added.

“Lloyd’s is a cyclical market and the cycle has bottomed out and is now moving up. This year will reflect that and we are optimistic about 2010.

“The timing could not be better. There also will be more capacity in syndicates as they expand because of the effects of the strength of the dollar against the pound, not just because of an increase in premium rates,” he said.