When corporate capital was first admitted to the Lloyd’s market in 1994, UK and foreign- owned insurance groups structured their participation in the market in a number of different ways.
A spread vehicle comprises one or more corporate members that participate in a number of different syndicates managed by different managing agents alongside individual participants. A holding company guarantees the underwriting of the corporate members, usually by providing a guarantee under a deed of covenant. This form of participation by companies has become less common.
An aligned member is one that is in the same economic ownership
as a managing agent (
LLM1090), and takes part exclusively in
syndicates managed by that managing agency. Many syndicates in the
market now have only a single corporate member, usually aligned
with a managing agent in the same group.
A dedicated member is one that holds 100% of the capacity of a syndicate, but is not necessarily aligned with that syndicate’s managing agent.
An ILV is one where the capital provider, managing agent, and corporate member are under common ownership, often along with other service and other group companies. Capital is provided exclusively to support corporate Names that take part exclusively in syndicates managed by the group’s managing agency. This is becoming the predominant structure of corporate capital participation in the market.
Some corporate members were initially set up as subsidiaries of investment trusts, which are quoted on the stock market, and invest their capital in a broad range of investments. The number of these investment trusts has declined as the move towards integration has made it difficult for them to meet the diversification requirements of ICTA88/S842, needed to exempt them from tax on capital gains. See LLM4260.
Captive insurers are allowed to enter the Lloyd’s market, although few so far have done so. GIM11000+ in the General Insurance Manual (see LLM10000) gives more information on captive insurance companies.