Tangible evidence of innovation is now essential for new syndicate launches to be approved by Lloyd’s, according to Asta CEO Lorraine Harfitt.
As leader of the largest third-party managing agent at Lloyd’s – hosting 11 full syndicates, five syndicates in a box (SIABs) and one SPA – Harfitt gave her view on what makes a successful Lloyd’s entrant in a wide-ranging interview with Insurance Insider.
The CEO explained that the rhetoric from Lloyd’s regarding new entrants has shifted, from a focus on remediation and reluctance to accept new entrants during the performance drive, to a rhetoric of innovation and growth.
That is not to say innovation was not important to Lloyd’s in years past, she said, but the scope for innovation was generally focused on technological innovation.
“I think it’s wider than that now; Lloyd’s are more interested in new geographies, new classes of business and new distributions. I think Lloyd’s are genuinely looking for something that is a bit different.”
Harfitt explained that a lack of genuine innovation was overall one of the biggest factors in why new syndicate plans don’t make it through the entry process.
Of the approximately 50 enquiries for new syndicate launches received by Asta in the last quarter, according to Harfitt, around 30 were not taken forward because they were not “new” enough. Often, many plans will tout the unique selling point as the individual behind the business, rather than the innovative nature of the business itself.
“But I think Lloyd’s have gone past that now,” she noted. “It’s much more about there being something different [in the plan].”
Innovation in ESG and diversity is also sought after in business plans for new entrants. Harfitt speculated that bringing in these elements in new entrant form could help Lloyd’s move a little bit quicker in its push to become a more diverse and sustainability-focused marketplace, compared to the naturally incremental progress of bringing about change through incumbent firms.
As this publication has previously reported, syndicate launches at Lloyd’s have evolved away from the traditional Lloyd’s start-up model writing traditional classes of business. Recent launches have either had a focus on helping companies achieve strategic goals via Lloyd’s risk syndication capabilities, its capital leverage and its vast licensing network, or brought genuinely new business to the marketplace.
Competition for capital
However, aside from passing the innovation test, another key issue facing new entrants is finding the right capital to launch.
As this publication has previously explored, the combination of inflation and other macro factors has meant syndicates now require more capital to trade. While many are backed by corporate parents with capital to deploy, those syndicates dependent on third-party trade capital have found themselves fighting to pull together Funds at Lloyd’s amid dwindling availability.
Harfitt said this was even a challenge for SIABs, which have lighter capital requirements than a full syndicate.
“It’s quite a small investment for people. And it may be too small for a lot of the traditional players,” she explained.
“When you’re interested in putting up £5mn-£10mn of capital, it’s not worthwhile. Therefore, finding new sources that are willing to support a start-up and willing to take that kind of execution risk is tough for them.”
When it comes to the tight capital environment and supporting new entrants, Harfitt remarked: “We we’re not really seeing a step change in [the availability of capital]. I think there’s still going to be quite a lot of competition for the capital.”
She added: “I do think the London Bridge [vehicles] will help make it easier to dip in and out. I think there’s the thought [among investors] that once you’re in, you’re in [and] it’s not very easy to get it back out again.”
In the search for capital, more syndicates are now going through the more conventional route in looking at Names capital, Harfitt said.
Goals for Asta
Asta was acquired by professional services and technology business Davies in a deal which completed just under a year ago. Harfitt was promoted to CEO in September 2022, following the acquisition.
With eight months under her belt as CEO, Harfitt explained that one of her goals for Asta in the next year is to change the perception of Asta as a third-party managing agent from a must-have, short-term arrangement to a longer-term strategic choice of partner.
Using Asta’s eight-year-long partnership with Everest Syndicate as an example, she explained that, four or five years ago, working with a third-party managing agent would last typically three years. This then morphed into five-year relationships, and now there appears to be more appetite for long-term strategic partnerships.
To achieve this perception change, Harfitt said the role that third-party managing agents play will need to change.
She went on to explain that there could be improved economics for clients the longer they use Asta as their managing agent. There may be structures where clients could secure a better deal on fees for a longer tenure, she added.
“As syndicates and businesses mature, as well, they can do a lot more work for themselves,” Harfitt said. “So, it’s about actively helping them train up their teams to do that work and handing back the work, only keeping the bit that we have to do from a regulatory oversight perspective.”
Harfitt believes it’s also important for managing agents to be a value-add partner when it comes to the more strategic elements of setting up a new business.
For Asta, this comes from its long-standing relationship with Lloyd’s and its deep understanding of Lloyd’s processes, as well as having a wide client base into which it can tap in order to share knowledge, connections and opportunities.
An investigation put out by this publication last year found that, of the 18 executive positions among Lloyd’s managing agents held by women, Harfitt is the only CEO.
Harfitt explained that, in the Lloyd’s market, she believes this lack of female representation is a product of a prohibitive mindset around the skills needed to lead.
“I think there’s a huge expectation that most CEOs come from a CUO/CFO background, as that’s the skillset that is needed. But I think times have moved on a bit.”
She said the “CEO skill set” needs to be well honed but, when thinking about what those skills actually are, the attitude should be “little bit more open-minded”. These skills, she noted, should be less technical and more about leadership skills, stakeholder management, culture and communication.
“I don’t need to have the technical underwriting expertise,” she said, “that’s why I’ve got a CUO on the board.
Harfitt also discussed succession planning, a process she described as ‘vertical’, in which a successor is often the person directly below the predecessor in the company hierarchy.
“One thing we’ve been quite keen to do, and we’ve been encouraged to do is spread that wider. Thinking when you’ve got somebody who’s very talented, ‘what role could they do? What do their skills match to? As opposed to just saying [succession] must be vertical.”
This article was first published by Insurance Insider on 8th June and has been re-published here with their kind permission.