Lloyd’s legacy enters a new age

News broken today by this publication that RenRe has engaged TigerRisk to once again explore the appetite of the Lloyd’s legacy market demonstrates the strong demand for retrospective reinsurance solutions on One Lime Street.

Not counting the deal struck this morning by RenRe and R&Q for Syndicate 1458’s casualty exposures on the 2009-2017 years of account, there are at least six live processes tracked by The ReInsurer at Lloyd’s.

Lloyd's building

These proposed transactions vary in size – with at the top end Canopius Syndicate 4444 being advised by Guy Carpenter on a potential ~£1bn ($1.32bn) back years’ solution – with other syndicates seeking solutions for low triple digit portfolios (see table).

The uptick in demand for legacy transactions has been driven in part by the Covid-19 pandemic, as (re)insurers increasingly look to restructure their portfolios to either sell under-performing units to run-off acquirers or release solvency capital via back-year transactions.

Active legacy deals in Lloyd’s market-3

However, with a number of retrenching or shutdown syndicates in the post-Decile 10 environment looking for full or partial run-off solutions, Lloyd’s had been the subject of heightened legacy activity before Covid-19 entered the common vernacular.

The remediation efforts spearheaded by then Lloyd’s performance management director Jon Hancock saw a number of business closures, including the exits of carriers including Vibe and Neon.

Supply and demand 

As more syndicates look to gauge the appetite of Lloyd’s legacy counterparties, both seasoned and start-up legacy reinsurers are also raising capital and building out their ranks. 

The Lloyd’s legacy market – traditionally dominated by three acquirers: Enstar, Riverstone and R&Q – has seen a flurry of newer entrants.

Newcomers include Marco, which this publication revealed was set to launch in July with Eur500mn of backing from PE house Oaktree Capital.

Recent investments and capital committed to run-off platforms

The start-up – led former Darag CFO Simon Minshall – also says it has a further Eur250mn in accessible “dry powder equity” ready to be deployed and has its eyes set on a Lloyd’s platform.

Marco is one of several start-ups to enter the legacy space, in recent years including giant AIG spin-off Fortitude Re, Bill O’Farrell’s Arch-sponsored Premia Holdings, Fleming Re and Karl Wall’s Carrick Specialty.

However, Lloyd’s insistence that RITC transactions are retained internally restricts the ability of legacy providers to provide solutions without a Lime Street platform.

Premia’s purchase of Charles Taylor’s run-off Standard Syndicate 1884 and managing agency last year also gave the legacy carrier a Lloyd’s platform, which its newcomer competitors currently lack. 

Of the established legacy acquirers at Lloyd’s, R&Q recently added fire power to its run-off capabilities with a $100mn equity raise backed by 777 Partners and HSCM (see table).

The ReInsurer Comment:

Run-off at Lloyd’s was once indelibly associated with failed syndicates, open years and RITCs. But recent transactions such as RenaissanceRe’s casualty deal with R&Q highlights the evolution of the sector into a vibrant service offering retrospective reinsurance, claims management and capital management tools…