Lloyd's sets rules for broker — led reinsurance vehicles backed by third — party capital
By Ashish Tiwari Oct 16 (The Insurer) — Lloyd's has set out a framework for broker-originated reinsurance structures aimed at supporting broker-led portfolios backed by third-party capital while limiting concentration, governance and underwriting risks. The framework was announced on Friday and will take effect on January 1, 2027. “The growth of broker facilities and third-party capital solutions has created an emerging opportunity for broker-led reinsurance portfolios supported by external capital,” Lloyd's said in a market bulletin, adding that it expected demand for the structures to increase. Under the rules, brokers will not be allowed to own or provide capital to the structures, which will be assessed through the market's standard new-entrant approval process. The Lloyd's member aligned with the managing agent must provide at least 19.99% of capital. The framework initially limits the amount of an individual broker's treaty portfolio that can be placed into the structures to 10%. It also requires lead reinsurers to provide a minimum of 25% of capacity, with the panel agreed by the managing agent. Lloyd's said the arrangements must support its cross-cycle target of a 95% net c
By Ashish Tiwari Oct 16 (The Insurer) — Lloyd's has set out a framework for broker-originated reinsurance structures aimed at supporting broker-led portfolios backed by third-party capital while limiting concentration, governance and underwriting risks. The framework was announced on Friday and will take effect on January 1, 2027. “The growth of broker facilities and third-party capital solutions has created an emerging opportunity for broker-led reinsurance portfolios supported by external capital,” Lloyd's said in a market bulletin, adding that it expected demand for the structures to increase.
Under the rules, brokers will not be allowed to own or provide capital to the structures, which will be assessed through the market's standard new-entrant approval process. The Lloyd's member aligned with the managing agent must provide at least 19.99% of capital. The framework initially limits the amount of an individual broker's treaty portfolio that can be placed into the structures to 10%. It also requires lead reinsurers to provide a minimum of 25% of capacity, with the panel agreed by the managing agent.
Lloyd's said the arrangements must support its cross-cycle target of a 95% net combined operating ratio. The marketplace also set restrictions intended to curb concentration and anti-selection risk. Once a participation percentage is agreed, cedants must transfer either all or none of their eligible portfolio with the relevant broker into the structure, Lloyd's said. Hybrid fronting carriers, managing general underwriters and legacy providers are among business types that are out of scope.
Captive involvement will require prior submission to Lloyd's. Managing agents will be required to demonstrate reinsurance pricing and portfolio-management expertise, have sufficient access to data to test brokers' assumptions, and receive monthly reporting including dashboards, exception reports and bind-level data. Lloyd's will require quarterly data sharing and regular engagement, alongside governance, underwriting and portfolio-management controls agreed with both Lloyd's and the external capital provider. Structures that have not achieved at least 70% indexation by their third year could be wound up following discussions between Lloyd's and the managing agent.
The framework also bars exposure to cyber-war “type 4” language and says cedants should receive a share of operational and capital efficiencies through a client dividend. “The new framework seeks to support innovation and growth while maintaining underwriting discipline and protecting the Central Fund,” Lloyd's said.