There are clear merits, practitioners in the field say, in becoming a "Name" at Lloyd's and getting exposure to this diverse insurance market.

(This article is being republished from earlier in the year; a seminar held in London drew considerable interest and this item is re-issued for readers' benefit as the summer vacation season winds down.)

Becoming a Lloyd’s “Name” can be rewarding over the long-term for those able to understand and handle the risks. These investors also support innovative ideas in underwriting new forms of risk, while adding to diversity of capital in this market. 

These are arguments made by Chandon Bleackley, the new chief executive at the Association of Lloyd’s Members, an organisation representing a significant chunk of such Names. Names now provide only about 10 per cent of Lloyd’s capital. The rest comes from larger companies, mostly insurance companies. One of Bleackley’s objectives as he takes the helm from Anthony Young, who has been CEO of ALM, is to ensure the role of Names remains important.

“It is good for syndicates to have diversified sources of capital and it is always good to have diverse groups of investors,” Bleackley told WealthBriefing following a recent conference organised by ALM with this publication’s support. (To see another article delving into the mechanics of the Lloyd's market in more detail, click here.)

In banging the drum for the role of Lloyd’s Names, Bleackley and his ALM colleagues lobby on behalf of members to the Lloyd’s market and to official bodies on issues such as tax treatment and regulation; the ALM publishes reports and guides to the market to spread awareness, while promoting the benefits of membership to investors, which include organisations such as private banks and family offices.

Recent market behaviour means now may not be the most tempting time to buy a seat at the table and purchase “capacity” (a term explaining how an investor participates in underwriting risk) because a run of strong profits and relatively few disasters (such as hurricanes and earthquakes) has reduced demand for capital and cut insurance rates. When demand for capital falls, it becomes more expensive to become a Name, and vice versa. But as any observer of markets and the world will know, nothing lasts forever.

“We haven’t had major catastrophic losses, particularly in the US,” Bleackley said, pointing out that the last major natural disaster to trigger heavy pay-outs, Hurricane Katrina of 2005, led to around $50 billion in losses. Since then, natural disasters – with some exceptions – haven’t occurred on the same scale; the recent fires in Western Canada will "probably cause losses but it is too early to know the likely cost," Bleackley said.

In making the case for being a Name, Bleackley knows he can point to a variety of benefits. The Lloyd’s market can produce returns with low correlations to mainstream assets such as stocks; it offers “double-use” of invested money and carries tax advantages, such as relief from inheritance taxes. 

A continued objective for ALM is to ensure people understand these attractions. However, this is a highly specialised market with a language of its own and not necessarily very prominent on the radar of many high net worth investors, Bleackley said.

“In many ways it is a question of education,” he said.

The conference in which this publication took part certainly was reminded by speakers that an ability to generate uncorrelated returns over the medium term, coupled with tax advantages and a range of risks, are big attractions for those willing to put in time to study and learn the market. Being a Lloyd’s Name is unlikely to be a “mainstream” activity, but for those wealth managers seeking specialist areas for certain types of client, it might pay to give it some attention. Bleackley and his colleagues will certainly be happy to welcome new entrants.