APCL: Lloyd’s still attractive but syndicate selection paramount

The Lloyd’s market can continue to deliver attractive returns for third-party capital despite softening rates. However, investors will increasingly need to distinguish between syndicates as performance begins to diverge amid market competition, Argenta Private Capital Limited (APCL) told GR.

Managing director Robert Flach says returns were coming down from an unusually strong peak, with the 2023 year of account generating a return of around 35% for its clients.

“The market is softening. Rates are coming off, but they are coming off from a high watermark,” Flach says.

“Our expectation is that, come 2027, given where we’ve come from, rate reductions would still produce more attractive returns for our investors from a pure underwriting perspective.

“When you add to that the fact that reserving levels are considerably higher than they have been, there’s hopefully lots of fat to be able to supplement a poor year if need be.”

Higher reserves are also producing investment income, while slower premium growth means that income should represent a greater proportion of returns. 

Start small

APCL encourages investors to approach Lloyd’s as a long-term allocation rather than attempting to enter and exit the market according to the cycle.

“When the market’s hardening or improving, you want to increase by more than the market, and when the market’s softening, you want to reduce by more than the market to beat the cycle,” Flach says. “There’s not a bad time to invest in Lloyd’s if it’s an asset class that you don’t currently have. Come into the market now, take a small line, a learning line, get to understand the market, and then you’ll know when the right time is to increase or double your investment.”

APCL executive director Kate Tongue says its analysis showed the importance of syndicate selection as market conditions become less favourable. The firm rates syndicates accepting third-party capital from A+ to D, with D not recommended. “The A’s were in the top two quartiles at least 75% of the time,” Tongue says.

“Those key performers with the strong reserves, that have evidenced their ability to perform throughout market cycles, are going to come through.”

Flach expects the previously narrow gap between stronger and weaker syndicates during the hard market to widen.

“The third quartile combined ratio for 2025 was 90%, still not a bad place to be in the third quartile,” he says. “The average difference between the bottom quartile and the market average [in earlier years] was about 25%. Over years 2022 to 2025, it’s 12%.”

Flach adds that adept performance management by Lloyd’s had contributed to narrowing that gap, while Tongue pointed to tighter scrutiny of new entrants alongside action to remove weaker performers.

New sources of capital

The nature of capital approaching Lloyd’s is also changing. 2025 saw alternative investors seeking to deploy large sums, while APCL is now seeing greater interest from mutual insurers and investors attracted by diversification rather than headline returns.

“They’re looking to Lloyd’s for that diversification play, not necessarily minding too much if the returns aren’t as strong as they were in 2023, 2024, 2025,” Tongue says.

Rather than seeking to deploy hundreds of millions, she says these investors could bring portfolios closer to the £50m premium range.

For APCL, the challenge will be ensuring investors retain access to the strongest syndicates while taking advantage of Lloyd’s broader diversification and improving efficiency.

“The next stage is determining what percentage of underwriting our clients should have on those better rated syndicates,” Tongue adds, “recognising that the majority of those better ones, you need to spend money in the auctions for, and there isn’t significant capacity around, so it’s creating those opportunities to get access.”