Goodbye Lloyd’s syndicate ventures

As Gallagher put it, “the experiment with Lloyd’s syndicates is now officially over.” Standard placed their syndicate into run off in late 2018 and finally sold the “Lloyd’s division” to a run off specialist during 2019‑20. Gallagher estimated that the experiment would appear to have resulted in some $100m of underwriting losses.

Gallagher observed drily that Standard could “perhaps reflect upon a lost opportunity to have given their members a 10% return premium for five years at the same cost”.

Skuld too has sold its “Lloyd’s division” to a run off company, citing excessive operating costs on the Lloyd’s platform. In this instance, the underwriting result of the venture was not clear, but a loss seemed probable, said Gallagher.

However, Skuld is sticking by its wider diversification plan, using its own corporate security.

The three Scandinavian Clubs, as well as North of England, Standard and the American Club remained the primary Clubs pursuing a diversification policy on the inside, notwithstanding the cessation of the Lloyd’s involvement.

The Standard Club has created a new delay/disruption class following its acquisition of the Strike Club. Britannia and UK were both diversifying into fixed premium P&I areas via unrelated companies within the control of their managers. While the Thomas Miller venture continued to grow apace with several acquisitions, the Tindall Riley facility has been “sold” to Michael Else & Co.

Gallagher claimed that to date there appeared to have been little tangible financial benefit arising from diversification beyond the “traditional” FD&D and War Risk classes, outside of Scandinavia, where the involvement in M&E has been more long standing.

“It is to be accepted that all business development into broader marine risks is a long-term project, but results so far suggest it has not been particularly financially successful on a free-standing basis”, said Gallagher, noting that this was the problem with trying to enter a market already flush with capacity and declining premium rates.

The broker felt that the benefit of Solvency II diversity credits was also somewhat overrated as the Clubs all carried sufficiently high free reserves such that they did not “need” those credits. Nonetheless, Gallagher observed that more and more the Clubs seemed to be adopting diversification strategies, with West and London expanding their fixed premium offerings and North re-entering the H&M class.