Expanding the family: birth of a Lloyd's syndicate is labor intensive.

Bank of America's announcement that it is establishing a Lloyd's syndicate, may be evidence the three-century-old market is open to new business. But while Lloyd's welcomes new capital, the entry process for new underwriters remains rigorous.

Banc of America Insurance Group, the bank's insurance subsidiary, plans to write specialist liability and casualty covers and reinsurance risks through its own subsidiary, BA International Underwriters Ltd. The new syndicate will have a capacity of 33 million [pound sterling] (about $64.73 million).

In its drive to establish the new syndicate, Banc of America Insurance Group will have encountered Nick Charteris-Black and Matthew Chandler. Charteris-Black is head of capital and broker relationships at Lloyd's; Chandler, the market's head of admissions.

Charteris-Black is likely to be the first point of contact for an organization hoping to write business at Lloyd's. In the initial conversation, he said, each side would try to get a sense of the other. Charteris-Black, for instance, would attempt to find out if the organization's proposals "would fit the Lloyd's model?' Lloyd's is looking for a sense of permanency, Charteris-Black said. It does not want capital that will leave after a couple of years. Lloyd's also wants the business plan to show a good prospect of making a profit.

"Sometimes there's also a Lloyd's connection with the parties, which brings them back to Lloyd's," Chandler said. "They may have been outside of Lloyd's and decided to re-inquire."

Charteris-Black and Chandler spoke with BestWeek in an interview at Lloyd's.

Something New

Lloyd's would be pleased if a business plan suggested attempts to write new lines of business or penetrate new geographical territories "where there may be spin-offs to other existing syndicates within the market," Charteris-Black said.

If things go well at the first meeting, there would be a second session, at which Charteris-Black would ask the organization to submit a broad outline of its thinking. This would include information on the management team and a business plan that would detail the capital and the lines to be underwritten.

An underwriting business at Lloyd's would need a managing agent. A new entrant will have to form its own managing agent, subject to the approval of Lloyd's and the Financial Services Authority, or it will have to create a partnership with an existing managing agent. Lloyd's can provide guidance here.

While Lloyd's works determinedly to keep its international profile high, it does not beat the bushes in search of entities seeking to operate under its roof. The initiative normally comes from the organization itself, Charteris-Black said.

"They may already be an existing insurance business that's looking to expand their own distribution platform," Charteris-Black said. "They might be somebody in Bermuda or the U.S. who's looking to set up an alternative underwriting platform."

Looking ahead, a more assertive recruitment strategy may be something for Lloyd's to consider, he added. "We may well become more proactive in terms of marketing to specific new entrants where we think there is a good fit between their business and the Lloyd's platform," he said.

Chandler's involvement tends to take shape after the two initial meetings between the applicants and Charteris-Black. At this point, there will be definite interest on both sides.

"We ask them to come in and pitch to us with this high-level presentation covering the points that Nick [Charteris-Black] has highlighted," Chandler said. "And we have a panel of people that we field for that." Chandler is likely to find himself answering complex questions about costs, ratings and the Central Fund.

Lloyd's Collects Capital

Lloyd's is steadily attracting more capital from international and corporate sources in recent years. Along with that growth, many of the market's top capital providers and managing agents are showing a rapid rise in their individual commitments.

2007 Capacity Profile

Lloyd's opening capacity* for 2007 will be 16.1 billion [pound sterling]. This represents an increase of 9% on 2006 opening capacity of 14.8 billion[pound sterling].

* Capacity is defined as the maximum amount of premium (net of brokerage) that may be written in accordance with Lloyd's capital requirements.

Direct Capital Providers

                        2007
Capital Provider     Market Share

1. Catlin               6.8%
2. QBE (Limit)          6.3%
3. Amlin                6.2%
4. Liberty              5.7%
5. Beazley              4.4%

Largest Managing Agents

Managing Agent         2007 Capacity
                     ([pounds sterling]
                         millions)

1. Limit (OBE)            1,120 [pounds sterling]
2. Catlin                 1,094
3. Amlin                  1,000
4. Kiln                     990
5. Liberty                  917

Source: Lloyd's