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LONDON -- The growing integration of corporate capital and underwriting capacity at Lloyd's of London is unstoppable and is generating increasing interest among insurance buyers, according to Standard & Poor's Corp.

Releasing its 1998 Lloyd's Syndicate Performance Measures last week, S&P said "integrated Lloyd's vehicles" are an increasingly key component of the Lloyd's market.

The development of ILVs appears "unstoppable at this point in time," commented Robert Jones, lead analyst with S&P's Lloyd's Market Ratings in London.

Since Lloyd's introduction of corporate capital in 1995, there has been a trend toward the ILV structure, where a Lloyd's managing agency is owned by the principal capital supplier to the managed syndicates. Under this structure, large corporate investors in Lloyd's can control the underwriting business where they place their money.

Kevin Willis, director of S&P's Insurance Ratings in London, agreed that ILVs are the way the Lloyd's market is moving forward.

He said ILVs usually are owned by insurance companies and are, in effect, their own "quasi-insurance companies."

Bermuda-based insurance companies have been at the forefront of the development of ILVs. In June, ACE Ltd. purchased Tarquin Ltd., a London-based holding company for the Lloyd's managing agency Charman Underwriting Agencies Ltd. and corporate capital investor Tarquin Underwriting Ltd.

ACE is the single largest investor in Lloyd's and now controls 9.2%, or about L938.4 million ($1.55 billion), of the market's capacity (BI, June 22).

In March, EXEL Ltd.'s purchase of Mid Ocean Reinsurance Co. gave EXEL control

of Brockbank Group P.L.C., a major Lloyd's managing agency (BI, March 23).

Mr. Willis said insurance buyers using the Lloyd's market are increasingly requesting more information on the financial strength offered by ILVs. "Policyholders are interested in (ILVs) as much as they are in individual syndicates," he said.

This year, for the first time, S&P has included an analysis of ILVs in its annual Lloyd's Syndicate Performance Measures. He said policyholders recognize the value of looking at the vehicles behind the syndicates.

The S&P analysis of ILVs summarizes the performance of the consolidated syndicates of the managing agent and owner, as well as highlighting any S&P insurer financial strength rating awarded to the parent insurers.

S&P's Lloyd's Syndicate Performance Measures report, now in its sixth year, provides detailed commentary on the financial strength of individual Lloyd's syndicates.

Lloyd's as a whole is bound by an A+ financial strength rating awarded by S&P in 1997 and reaffirmed this year (BI, Sept. 14). Therefore, an insurance policy underwritten by any Lloyd's syndicate offers the financial security of A+.

S&P's Lloyd's Syndicate Performance Measures rate individual syndicates against the overall Lloyd's market rating.

The latest ratings are based on an analysis of the past four closed years of account (1992, 1993, 1994 and 1995), and the two latest open years of account (1996 and 1997). The analysis includes gross and net claims ratios, expense and investment return ratios, underwriting profitability, levels of reserving adequacy and capacity development by underwriting year.

Ratings are marked in bells: One bell indicates performance that is no better than market level, two bells indicate performance that is better than market level, and three bells indicate significantly better performance than market level.

Mr. Willis said the latest ratings show marine syndicates continue to be the "powerhouse" of the market. Ten marine syndicates were awarded three-bell ratings, the highest number for any Lloyd's market sector.

But Mr. Willis warned he does not expect the Lloyd's marine syndicates' strong performance to continue. He said the marine market is now experiencing hard conditions, and premiums have been cut sharply. "It is natural to expect the strong performance will not be maintained," he said.

Both the composite and non-marine sectors had seven syndicates with three- bell ratings, while Lloyd's life and motor sectors had no syndicates rated with three bells.

Copies of Standard & Poor's Lloyd's Syndicate Performance Measures report cost L1,950 ($3,332) and are available from Helen Price, Standard & Poor's, Garden House, 18 Finsbury Circus, London, U.K. EC2M 7NR; 44-171-826-3654; fax: 44-171-826-3590.