CFO Keese: London Bridge 2 capital deployment set to top $1bn again in 2025

By Sophie Roberts

Jan 28 - (The Insurer) - Burkhard Keese has set ambitious goals for the London Bridge 2 investment platform in 2025, with the Lloyd’s CFO aiming to repeat 2024's rapid expansion.

Some $1.9bn of capital was deployed through the platform last year, a significant increase on the ~$500mn deployed in 2023.

In an interview with The Insurer TV, Keese revealed the platform has a robust pipeline for 2025, driven by innovative transactions and sustained investor appetite.

"We've committed $2.55bn as of today, signalling that Lloyd's now has the tools to attract institutional investors while maintaining flexibility," Keese said. “Because the market conditions are still good and it's still attractive, and we have quite a full pipeline, so I think we could probably see the same growth we saw last year,” he added.

He emphasised the platform’s growing appeal, with landmark deals such as those involving AIG and Blackstone showcasing its adaptability.

"London Bridge 2 has proven it can accommodate tailored solutions, making it an increasingly attractive vehicle for institutional capital," he said.

Cat bonds and tailored solutions on the rise

Keese highlighted the growing interest in cat bonds as a key trend, noting that their transparency and predictability appeal to financial markets.

"We hope to see more cat bonds coming via London Bridge, as it provides an easier and more flexible route compared to jurisdictions like Bermuda or the US," he said.

The platform's success is bolstered by regulatory reforms enabling capital deployment without the burden of double taxation, a cornerstone for investor confidence.

But Keese also viewed the removal of the double taxation burden via the London Bridge 2 vehicle as an alluring avenue to consider “in preparation of M&A transactions”.

“The avoidance of double taxation, I think, is a core principle of all international trading, because you can't tax the same profit twice, because then the profit is not there anymore,” he explained.

“So the way Lloyd’s is organised and structured, every underwriting enterprise, any member, had to pay UK corporate tax, and that stops institutional investors from investing into the members, because the investor of the institutional investor would be subject to double taxation.

“So with this creation of the ISPV legislation in 2017, there was an active act to avoid this type of double taxation in the insurance industry. And I do believe that without this legislation, London would have fallen behind the other capital markets who basically looked after this issue,” he said.

Keese went on to explain that in addition to using London Bridge 2 as a vehicle to deploy fresh capital into the London market, it can also be used to collect existing capital.

“I think in preparation of M&A transactions, I also believe it is a good idea to push existing capital into London Bridge 2 to make sure that you find the right investors for the future, because I think it's incremental for dealing with the challenge of finding the right investors in the right financing of underwriting exercises,” he added.

2024 results outlook: optimism amid challenges

As Lloyd’s enters 2025, Keese underscored the importance of underwriting discipline and capital profitability.

"We must defend underwriting conditions to ensure investors see returns," he noted, warning against the lure of unprofitable growth.

Looking ahead to Lloyd’s full-year 2024 results announcement in March, Keese expressed confidence, citing strong underwriting discipline and a solid underlying combined ratio.

"For the third consecutive year, the underlying combined ratio is around 80 – this is a critical KPI for us," he said.

Keese remained optimistic despite market volatility, suggesting 2024 could be another strong year for underwriting profit and investment returns.

CEO succession: Keese “respecting” the process

On the topic of John Neal’s departure as CEO, Keese remained diplomatic, refusing to speculate on his candidacy or others.

"The important thing is a robust process. I respect that process entirely," he said, sidestepping questions about his potential as Neal's successor.