Heavyweight Australian insurer IAG is engaging with Lloyd’s on the launch of a syndicate, as the Corporation forges ahead with attracting large global carriers to the market as part of CEO John Neal’s $100bn-premium plan, Insurance Insider can reveal.
Sources said discussions are in the early stages on a potential start-up for the Australian carrier, although preparatory work by IAG to assess the opportunity is believed to have been ongoing for some time.
Neal is understood to have close links to IAG CEO Nick Hawkins through his time in Australia as QBE CEO.
A start-up syndicate would mark a fresh attempt by the Australian carrier to make a Lloyd’s strategy work, after having lost significant money at Lime Street from the mid-2000s to the early 2010s.
IAG entered the Lloyd’s market in 2006 via the A$23mn ($15mn) acquisition of Lloyd’s managing agent and specialist Asian syndicate Alba from Whittington. IAG had previously provided capital support for Alba before acquiring the entity.
As part of a push into the UK market, IAG also acquired motor insurer Equity in 2006 for £570mn ($380mn) – only 18 months after a management buyout had valued the firm at £298mn, together with £130mn of debt.
However, it was forced to shut Alba in 2008 after the syndicate failed to scale significantly and continued to make losses, and no buyers were ultimately found.
As part of a wider retreat from the UK motor market, IAG also sold motor insurance operations Hastings, Advantage and Equity Insurance Brokers and scaled down its specialist motor underwriter Equity Red Star. The whole withdrawal resulted in a write-down of A$340mn.
Equity Red Star continued to struggle, and its Lloyd's Syndicate 218 became something of a poster boy for the motor industry's woes, with a loss of £499mn in 2010 alone, driven by massive reserve strengthening. It also later faced regulatory fines for its conduct.
IAG eventually sold Equity Red Star to Aquiline in 2012 for £87mn, a figure that represented a 33% discount to reported book value.
The Corporation of Lloyd’s has been on a charm offensive with major global players as it seeks to attract new entrants and new business to the market.
The drive, which this publication has termed “Big Game hunting”, is a significant part of plans to expand Lloyd’s market premium to $100bn in the next five years.
Major carriers to enter the market in the past 12 months include The Fidelis Partnership, with a syndicate to bring Names capital to service its MGA, and Aviva, with its acquisition of Probitas.
Rumours around interest from Allianz have been circling the market for the last few months, with Fenchurch understood to be retained to advise on a solution, but nothing concrete has come to light on plans as yet.
IAG and Lloyd’s declined to comment.