Only two markets reported ratios below 100% in 2002 - Bermuda and Lloyd's of London. Interestingly, both have taken the role of 'market as last resort' at times of crisis, and unerringly managed to outperform the global market during the upturns in the cycle.

When Lloyd's opened up to corporate capital in 1994, Bermuda-based players saw it as an opportunity to diversify their portfolios with access to business which otherwise they wouldn't see, particularly due to Lloyd's network of licenses across the world.

New twist
The course of 2002 saw a particularly interesting new twist in the relationship between Lloyd's and Bermuda. Previously, Bermudian companies' involvement with Lloyd's had been either through the ownership of managing agencies - the companies that run the syndicates - or as investors within those syndicates, or, of course, as a combination of the two. But a new type of connection developed over the year, as an increasing number of Lloyd's companies diversified by setting up their own Bermuda-based operations. For some, these were used to take advantage of the market conditions by effectively increasing the amount of business written in Lloyd's through the use of quota share arrangements. Other opportunities included access to the fastest-growing market in the world in (unencumbered) capacity terms, which was proving increasingly attractive to buyers (so much so that London-headquartered reinsurance broker Benfield opened an operation in Bermuda in 2002), in a tax-efficient and lighter regulated environment compared to the UK. By contrast, although several of the so-called 'class of 2001' extended their operations to include Europe, and indeed London, none decided to set up in Lloyd's.

Rise in capacity
Lloyd's continues to increase the proportion of capacity provided by corporate investors, with almost 90% of its £14.25bn ($22.96bn) total capacity for 2003 provided by the corporate market. Bermudian companies maintain a significant capacity presence at Lloyd's, with the total provided by the top six Bermuda-owned managing agents (ACE, XL Capital, Westgen, Trenwick, AEGIS and Danish Re) reaching £2.45bn ($3.95bn), a 13% increase on the 2002 capacity provided. In overall Lloyd's terms, though, the marked increase in capacity for 2003 meant that the proportion provided by these agencies dropped from 17.8% in 2002 to 17.2% for 2003.

After several years of severe losses, Lloyd's has posted an £834m ($1.34bn) profit for 2002 on a pro forma annual accounting basis, with a projected £1.48bn ($2.38bn) for the 2002 underwriting year on the traditional three year accounting basis.

The recent string of loss years has meant that involvement in Lloyd's has been painful for some Bermudian participants. Stockton Re had an unhappy association through Crowe (which is no longer trading), and PXRE withdrew several years ago. Both ACE and XL have scaled down their Lloyd's businesses for 2003, though Westgen's involvement has been ramped up since Catlin's CICL started operating in 2002. At the outset, CICL wrote only quota share business of Catlin's syndicate 2003, but it has diversified to third party business. Wellington Re, the London market sister company to Lloyd's agency Wellington Underwriting Agencies Ltd, is providing a 7.5% quota share of Wellington syndicate 2020's whole account. Wellington Re is owned by Bermuda-based Aspen, which at the end of last year received an A rating from Standard & Poor's for its Bermuda-based reinsurance subsidiary, Aspen Insurance Ltd.

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