Despite Lloyd’s strong-arming top line reductions for the majority of trading syndicates next year, the Dale Syndicate 2525 is aiming to increase its stamp capacity by 7.5 percent.
The Syndicate – which is small by Lloyd’s standards and specialises in employers and third-party liability – will see its stamp capacity increase to £70mn if its application is supported by its third-party capital backers and Lloyd’s.
Dale’s decision to grow the syndicate is set against a backdrop of other Lloyd’s players who have taken the decision to pull back capacity or completely withdraw from certain lines of business.
After last year’s £2bn market loss, syndicates have come under pressure from Performance Director Jon Hancock to either cut back or withdraw from seven serially-under performing classes (see chart) if they can’t be returned to profitability.
It is also widely expected that another 1-2 unprofitable syndicates may be ordered to cease trading by year-end following the recent Advent decision to go into run-off.
In a recent circular by members’ agent Hampden to Lloyd’s investors, the firm said the syndicate “expects more opportunities to arise as competitors reduce or withdraw”.
“The pressure brought by Lloyd’s and the PRA on the 2019 business planning process through the demand for restraint on growth has meant a number of Syndicate 2525’s competitors reducing revenue in, or pulling out of, certain classes of business,” the bulletin said.
“Syndicate 2525 underwriters feel this may have the effect of either presenting new opportunities or allow for rate improvement in the classes underwritten,” it continued.
Julian Tighe – CEO of the Asta Managing Agency that manages Dale 2525 – told Re-Insurance that the pre-emption is a “classic case of professional cycle management” and a response to “recent opportunities in the market caused by a number of factors including the Ogden rate change”.
“Over the past ten years or so the syndicate has carefully managed a significant reduction in premium volumes in response to market conditions,” Tighe said. “Aligned to its underwriting discipline the syndicate has diligently managed expenses over the cycle,” he added.
Hampden recommends that Names should back the proposal.
In the bulletin, Hampden said the larger stamp would ensure the syndicate has “sufficient capital headroom” which it said is vital to be able to harness opportunities in the market as they arise.
This is second consecutive year that Syndicate 2525 has upped its capacity, in 2017 it increased its stamp 30 percent from £50mn the year before.
In 2017 Dale 2525 was one of the relatively few syndicates to make a profit with a combined ratio of 98.3 percent against a market average of 114 perce