Underwriting at Lloyd's presents, to both private and institutional investors, the opportunity to participate directly in the Lloyd's market, accessing the underwriting business of syndicates.
Underwriting at Lloyd’s has five main benefits to the client:
• The Double Use Of Assets: Existing assets you hold, such as equities and gilts can be used to support underwriting (Funds at LLoyd’s) whilst remaining under the management of your existing investment advisor. Alternatively, a bank guarantee or letter of credit can be used for part of the capital requirement. Cash can also be used to provide capital. Whatever you chose to use to support underwriting at Lloyd’s remains under your management, the results of underwriting can therefore provide a secondary return on the underlying assets.
• Limited Liability: All new participants in the market underwrite with the protection of limited liability.
• Direct Investment Into A Historically Low-Correlated Asset Class: Unlike the returns from shares in an insurance company, which are subject to a dividend policy, the returns made by syndicates are fully distributed to capital providers. It is a demonstrable fact that the returns from underwriting at Lloyd’s have historically had a very low correlation with those from other asset classes.
• The Potential To Make Underwriting Profits And Capital Gains: Underwriting at Lloyd’s has the potential to make profits not solely from the results of syndicate underwriting activities, but also by way of capital gain on the acquisition and disposal of syndicate capacity.
• Potential Tax And Estate Planning Benefits: Underwriting at Lloyd’s is not considered to be an investment but rather a trade and as such its activities are taxed as being those of a trading entity. Amongst the benefits of such treatment is the availability of Business Property Relief (after two years of trading) and Entrepreneurs’ Relief. This is an important and complex area where specific advice from your accountant should be sought.
• Diversification: Underwriting at Lloyd’s can be, for most families and individuals, considered a diversification into an asset class (insurance and reinsurance) away from other asset classes and mainstream investment