Chubb: New Lloyd’s Syndicate is a Natural Step
Copyright: | A.M. Best Company, Inc. |
Source: | BestWire Services |
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The creation by Chubb Insurance Co. of Europe SE of a new Lloyd’s syndicate and managing agency reflects a growing sense by the group of the attractiveness of the Lloyd's market, according to Rob Cage, the syndicate's active underwriter.
The new syndicate, which will underwrite business effective from July 1, has been named Chubb 1882, after the year Chubb was established. It will be managed by Chubb Managing Agent Ltd.
The syndicate will insure such lines as marine, professional indemnity and technology. Capacity for the second half of 2010 has been set at 41.5 million pounds (50.2 million euros).
"It's a development of our business here in Europe," Cage said.
As Chubb was pursuing its wholesale activities in London over the past five years, it was also "looking at the evolution of the Lloyd's market and increasingly liking what we've seen," Cage said.
Chubb has been active in Europe since the early 1960s and involved in Lloyd's since 1994, said Cage, who will oversee a team of 16 specialist underwriters.
"We decided the time is right now for us to take the next logical step from being simply a London market insurer writing from within the Lloyd's building to actually being a fully formed member of the Lloyd's community," Cage said.
Chubb's aim with the new syndicate is to begin with retail cover and then roll out to wholesale, said Cage, the former head of Chubb's U.K. commercial business. A great deal of work was necessary in order to get the two sets of approvals needed to create both a syndicate and a managing agency, he said.
Given the long-term nature of the move, Chubb believed there were "a lot of plus points in creating our infrastructure on day one," Cage said.
Michael Casella, chief executive of Chubb Insurance Co. of Europe, said the new syndicate "fulfills a key strategic objective of providing a new distribution channel" for the group.
"We will now have access to the international markets in which Lloyd's operates," Casella said in a statement.
If anything, Chubb was reassured by the difficulty of the process, Cage said. Lloyd's has "definitely raised the bar certainly for the whole market, particularly for new entrants," he said. "And we had to clear that bar."
Chubb decided not to set up a turnkey operation with an existing managing agency. This has become "the route of choice of the last few years," said Cage.
Catherine Thomas, managing senior financial analyst at the A.M. Best Co. in London, said the launch of Chubb's syndicate coincides with the creation of a new Lloyd's syndicate by Bermuda-based Allied World Assurance Co. Holdings Ltd.
"We continue to see new syndicates coming into Lloyd's," Thomas said.
Allied World has said its Syndicate 2232 will focus on Latin America and the Asia/Pacific region and cover such lines as general casualty, international property, international treaty and professional lines (BestWire, June 7, 2010).
"For Chubb, Lloyd's is an attractive platform," Thomas said. "It offers access to business. It has its worldwide licenses. It has strong ratings, although Chubb itself also has strong ratings."
Current interest in Lloyd's follows the wave of purchases of Lloyd's business from Bermuda in 2007 and 2008. The goal for these organizations was diversification, said Thomas.
This process has slowed, she said. While Lloyd's "remains very attractive to insurers," the rigor of the approval process can make it difficult to form new syndicates. Opportunities are further restricted by the current weak state of the underwriting cycle. Prospective entrants "have to really add something new to the Lloyd's market," said Thomas.
Chubb hopes to renew its existing Lloyd's business into the new syndicate. "The foundation of our business is the company market writings that we've participated in for 15 years-plus within that building," Cage said of Lloyd's.
The weakness of the underwriting market has made Chubb cautious about its expectations for the new syndicate. "Now is not the time to significantly grow our business," said Cage.
Cage would not predict the syndicate's capacity in five years, other than to say, "I'd like to be thinking of significantly more than we have today."
While the new syndicate will react to opportunities as they appear, Chubb's current focus is on putting the infrastructure in place, he said.
"We believe that when the time is right and when market conditions become more appropriate, we can grow perhaps more strongly in a syndicate environment than we possibly can within our retail operations around Europe," he said.
Units of Chubb have current Best's Financial Strength Ratings of A++ (Superior).
To hear the full interview with Rob Cage, go to http://www.ambest.com/media/media.asp?RC=173974
(By Robert O'Connor, London editor: [email protected])
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