Investment Strategies
BEST OF 2016 SO FAR - INTERVIEW: Why It Pays To Study The Case For Being A "Name" At Lloyd's

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.