Specialist insurance and reinsurance marketplace Lioyds of London has secured a landmark £650 million reinsurance cover for its Central Fund, which supports sustainable and profitable long-term market growth.
The £650 million protection has been structured and placed by Aon. It is a multi-layered structure supported by newly created cell company Constellation IC – financed by investment bank JP Morgan – as well as a panel of eight reinsurers, including Arch, Berkshire Hathaway, Everest Re, Hannover Re, Munich Re, RenaissanceRe, Scor and Swiss Re.
The new five-year cover will reimburse aggregate payments from the Central Fund in excess of £600 million up to £1.25 billion, which will serve as a key component in Lloyd’s chain of security.
The arrangement will provide increased protection for Lloyd’s customers and the market against severe tail end events and further improve the quality and financial strength of Lloyd’s balance sheet.
In addition to protecting the Central Fund, the cover will create a significant buffer against adverse solvency developments. It is expected that the new cover will increase Lloyd’s central solvency ratio. The capital buffer will also facilitate growth opportunities against the backdrop of current favourable market conditions.
Burkhard Keese, chief financial officer of Lloyd’s, said: “We are very proud to place this innovative cover with eight of the world’s leading reinsurance companies and secure the support and commitment from one of the largest investment banks, J.P. Morgan.
This unique structure will enable us to support the market’s growth ambitions over the next few years, whilst also strengthening the resilience of our balance sheet. Our capital management and position are now more resilient than ever, providing enhanced protection for customers.”