Convex 1984 launch continues heightened momentum for Names capital

By Ryan Hewlett

March 4 - (The Insurer) - The upcoming launch of Convex Group’s Syndicate 1984 marks the latest in a string of Lloyd’s platforms seeking to access third-party capital, with members’ agents doubling down on the market opportunity for both existing and prospective Names.

London-Bermuda specialty carrier Convex announced in February that it had received in-principle approval to launch Names-backed Syndicate 1984. Confirming the launch in an interview with The Insurer, CEO Paul Brand said the syndicate would be almost entirely backed by private capital from launch following “fruitful” discussions with members' agents.

Brand said private capital, which makes up around 9% of Lloyd’s capacity, remains a “vital and highly resilient” pool of capital within the Lloyd’s market.

Argenta Private Capital Limited’s Katie Tongue said that Convex’s decision to seek Names backing highlights the continued attraction of “sticky” private capital, describing the launch as the latest sign that third-party Lloyd’s investors are willing to back proven management with clear strategies to capitalise on market opportunities.

“Managing agents, very much in the driving seat when determining where the capital stack for a new syndicate comes from, have made it very clear in recent times that they want capacity to come from third-party and flexible private clients,” said Tongue, executive director at APCL, in an interview with The Insurer.

“Names are providers of long-term capital and management is attracted to the ‘sticky’ nature of the capital they provide. It’s also true to say that they're typically very hands-off clients, which comes in contrast to certain institutional investors.”

Convex’s decision to employ private capital follows a similar move by 1.1 reinsurance startup Oak Re Syndicate 2843, which pivoted towards Lloyd’s Names/members’ agents having initially focused on private equity investors. This came after the Fidelis Partnership’s Syndicate 3123, launched at 1.7 last year, attracted such strong demand from Names and individual investors that commitments had to be signed down.

Tongue said members’ agents such as APCL are increasingly being engaged early in discussions with third-party managing agents ahead of prospective syndicate launches, which gives them time to review the business plans and recommend it to clients in time to support them for their launch.

“There's been a great deal of opportunities for private investors in recent times, and what we have seen is that Names have essentially jumped on those opportunities,” said Tongue, a leading adviser to private investors at Lloyd’s.

“We’re seeing clients taking advantage of where we are in the market cycle. As existing Names, they are able trade off the back-year profits and solvency credits and as a result there's quite significant levels of spare capital in that group which they're very keen to deploy and take advantage of the rates.”

Investors in Lloyd’s continue to be drawn by the potential for very high returns which are “uncorrelated” to those from other assets such as shares, bonds and property – a particular interest for family offices. Tongue said that another bonus is the scope for so-called “double returns”, with Names able to benefit from the profits from syndicates’ underwriting business plus interest or dividends from the assets committed as collateral.

While Tongue would not comment on specific years of account, APCL has enjoyed a successful run of results with the firm posting average annualised returns for investors in excess of 10% over a 14-year period, with returns in excess of 20% in recent underwriting years.

And these benefits are generating interest from a new cohort of potential investors, Tongue said, noting that APCL is seeing increased numbers of younger investors, entrepreneurs and women with the investor base largely moving it is moving in line with general wealth trends.

“The type of investor coming in is definitely changing. We're seeing a lot less of the traditional landed gentry, and a lot more from entrepreneurs who have exited businesses, particularly from in the tech space,” she said.

But Tongue acknowledged that the processes involved in becoming a new Lloyd’s third-party investor remain cumbersome. Typically, new entrants have to either buy an existing company or alternatively establish one under a strict timetable and then buy onto syndicates.

And once in the market, Tongue noted that Lloyd’s remains a “hands-on investment”.

Despite efforts to attract more retail investors, a number of new Lloyd’s investment schemes have struggled to gain traction – most notably the failure in early 2024 of the planned 1 billion pound capacity investment fund London Innovation Underwriters via the special purpose acquisition company Financials Acquisition Corp.

One success is the “Starter Home” initiative launched by Argenta and listed investment fund Helios in 2024. The initiative offer investors access to Lloyd’s via a rental fee, without the need to own the underlying capacity.

Now in its second year, Starter Home clients can invest in a portfolio of syndicates, curated Helios, for a single Lloyd’s year opf account. Tongue said the initiative is evidence of the innovation that is possible, but also the need for a more joined-up approach across the market in marketing the benefits of Lloyd’s to a wider audience.

“Names were probably slightly let down by new syndicates in the past, and as such, there weren't a huge number of syndicates that we recommended to our clients,” she said. “But Lloyd's growth plans have helped generate this jump in new business coming in and our investors are keen to get access to that diversified portfolio.”