LONDON—Ryan Specialty Group L.L.C. last week bought London-based Jubilee Group Holdings Ltd., making Ryan Specialty the first broker to own a Lloyd's of London underwriting business since a longstanding ban on such relationships was lifted in 2008.

Other brokers are said to be looking at Lloyd's, though only a few are likely to be interested in owning a managing agent at this stage, experts say.

Neither Ryan Specialty nor Jubilee was willing to discuss the deal until they receive regulatory approval from the Financial Services Authority and Lloyd's, though the Chicago-based wholesaler said in a statement that Jubilee represents a strategically important acquisition that gives “direct access to the Lloyd's market.”

Terms were not disclosed.

If approved, the deal would be the first in years in which a broker has owned a Lloyd's managing agent, which underwrites and manages one or more Lloyd's syndicates.

Broker ownership of managing agents was once common at Lloyd's, said Sean McGovern, London-based director of North America and general counsel at Lloyd's. But concerns arose over how conflicts of interest were managed, and the Lloyd's Act was enacted in 1982 prohibiting brokers from owning managing agents and vice versa.

That ban remained until changes to the Lloyd's Act were enacted in 2008.

The ban was lifted because it “had become an anachronism” that “placed restrictions on Lloyd's that did not exist outside the market in the United Kingdom or elsewhere in the world,” Mr. McGovern said.

Conflicts of interest now are better managed, according to the Lloyd's general counsel. Unlike the 1980s, the FSA now regulates insurance brokers, including Lloyd's brokers. Insurers also are subject to higher standards of regulation today, he said.

Allowing cross-ownership of brokers and managing agents could mean more business is brought to Lloyd's in the long term, said Mr. McGovern. The move also could give the market access to additional sources of capital, he said.

Since changing the rules, several brokers have expressed interest in acquiring operations in the Lloyd's market, particularly U.S. brokers. “We have seen interest, but it is still early days since changing the rules, and market conditions are likely to be a significant drag on such transactions,” said Mr. McGovern, referring to the prolonged soft market and other factors that have held down the values of companies.

Indeed, the appetite of other brokers to follow Ryan Specialty's example is likely to be limited, said Nick Johnson, insurance analyst at stock broker Numis Securities Ltd. in London.

“Most brokers do not wish to carry underwriting risk on their balance sheets,” Mr. Johnson said. Instead, there has been a trend “toward brokers buying MGAs, where they can earn fees but not take on the risk of an insurer.”

U.S. brokers could use a Lloyd's managing agent to place client retentions or take a slice of the business they place.

“Brokers sometimes want to have some skin in the game, and the Lloyd's structure may give them the opportunity to do that—provided there is a credible business plan and conflicts are managed,” Mr. McGovern said.

Under Lloyd's rules, Ryan Specialty will be limited in how much business it can put into Jubilee; a managing agent can take on a maximum of 20% of its business from the owner-broker.

Ryan Specialty also is unlikely to make quick changes in Jubilee's strategy. Any departure from Jubilee's business plans for 2011 would need Lloyd's approval.

Jubilee, which underwrites personal lines, life and commercial property insurance through three Lloyd's syndicates, appointed JLT Advisory in February to review the business. The company was sold by Travelers Cos. Inc. to management and Caribbean insurer Guardian Holdings in 2005.

Analysts said the deal makes sense for both companies.

“We have yet to see exactly what Ryan Specialty's strategy is for Jubilee. The company says that they want to use it as a vehicle for international expansion, but what this means for Jubilee's existing operations is only likely to be clarified once the acquisition is approved,” said Robert S. Smith, director-insurance at Moody's Analytics in London.

Still, the deal appears to be “a good fit for both companies as it sorts out the issue of ownership for Jubilee and gives Ryan Specialty access to Lloyd's international licenses,” Mr. Smith said.

Ryan Specialty Group was formed in 2010 by Patrick G. Ryan, retired executive chairman of Aon Corp., with the intention of providing specialty insurance services to retail agents and brokers globally. It has made several acquisitions since then and now is a global holding company for wholesale brokerage, managing general agent and managing general underwriter operations as well as other specialty services for agents, brokers and insurance companies.

“Given Ryan Specialty's size and footprint, it's only natural for them to want to have a presence in the London marketplace, as much of the (excess and surplus lines) business gets placed in that market,” said John W. Wicher, principal at John Wicher & Associates Inc. in San Francisco. In addition, “being a principal rather than a correspondent relationship has some advantages.”

Given current weakness in the E&S market, it probably was a good time for Ryan Specialty to make the acquisition, Mr. Wicher said. As markets harden there will be increased demand for E&S lines and the services of managing general agents.

When that turn occurs, “being a principal in London is going to be an advantage,” Mr. Wicher said.

“It's an opportune time to get a transaction like that completed,” he said, predicting that it will become more difficult to do such deals in 2012 and 2013, and that valuations for acquisition targets in the London E&S market also will change when the market turns.

“There's a whole chorus of people that see no relief in rates,” Mr. Wicher said. “But at some point, the future is now.”

Special Projects Editor Rodd Zolkos contributed to this report.