6 October 2014 Insurance

Prices fall in Lloyd’s capacity auction

Prices plummeted in the first Lloyd’s capacity auction of 2014 for Names-backed Syndicates. Despite more capacity being tendered than in any auction since 2011, interest in bidding for it was limited.

“Just £2 of bids to buy chased each £1 of capacity for sale; in auction one last year £5 of buyers chased each £1 of sales,” said members’ agent Argenta.

This culminated in average prices falling by 13 percent to 33p per £1 of capacity from an average of 38p in 2013’s auctions.

But a report by Argenta added that there are encouraging signs of greater liquidity in the first of this year’s auctions.

And it said that although the price of many syndicates is still trending up, specific falls in price for Syndicates 510 and 386, both a large part of the third party portfolio, were the drivers for the overall fall in the index.

Argenta also believes it is unlikely that prices will move up as strongly as they did in 2013’s auctions two and auction three.

“Last year, there were very few instances where capacity on core syndicates remained unsold. The amount of capacity available was limited and buyers were prepared to pay whatever sellers wanted. This year, more than £1 million of capacity on core syndicates such as Atrium 609 (£1.3 million at prices of 54p and above), QBE 386 (£4.6 million at 79p and above) and MAP 2791 (£1 million at 55p and above) remained unsold after auction one.

“These sellers may just be testing the water and will not sell if their price is not met, but if they are serious about selling they will need to lower their aspirations. Coupled with further volumes of resigned and deceased capacity, this will increase supply further in later auctions, meaning that prices are likely to stabilise and possibly fall slightly.”

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