Standard takes stake in club manager - 16/03/2015

Moves to launch new Lloyd’s of London syndicate gives P&I club a Charles Taylor shareholding

The Standard Club is set to become one of the larger shareholders in its London Stock Exchange (LSE)-listed management company, as it prepares to launch a Lloyd’s of London syndicate.

Transactions undertaken, ahead of the planned 1 April debut of the syndicate, will result in the Standard Club becoming at least the fifth-biggest shareholder in the Charles Taylor plc insurance management company.

Standard syndicate 1884 aims to write a wide range of marine and energy risks, with 40% of the underwriting capital subscribed by the Standard Club protection-and-indemnity (P&I) mutual.

The move into the Lloyd’s market is part of an ambitious diversification strategy being pursued by the Standard Club and Charles Taylor, which is already involved in providing a wide range of insurance market services.

The Standard Club’s investment in its manager has come to light as a result of Charles Taylor acquiring two start-up companies, Almond One and Almond Two, which are precursor ventures to what is expected to become the Charles Taylor Managing Agency.

Charles Taylor is paying £6.3m ($8.2m) for the Almond companies, so repaying the seed capital the club has invested. The repayment, however, comes in the form of Charles Taylor shares.

The asset management arms of the Delta Lloyd and Legal & General insurance groups are the biggest shareholders in Charles Taylor, with more than 16% and 11%, respectively. The US small cap investment funds, Columbia Wanger Asset Management and Kabouter Management, also have almost 9% and more than 7% stakes, respectively.

But it looks as if the Almond transactions will make the Standard Club, which previously had a stake below the 3% notification threshold, at least the next biggest shareholder.

About half the International Group P&I clubs are self managed and half run by management companies. The UK Club has a 15% stake in manager Thomas Miller, while in a number of cases the club owns the premises occupied by the managers.

The Standard Club is following a Lloyd’s diversification road already taken by Skuld, with a key attraction being the ability to access the underwriting licences the market holds around the world, as well as the reputation and brand recognition that Lloyd’s has.

“The Lloyd’s route is a very efficient and cost-effective way to access new markets,” said Charles Taylor chief executive David Marock.

Marock says the two Almond companies contain all the capabilities necessary to set up a turnkey managing agency, although regulatory approval from Lloyd’s, as well as the UK’s Prudential Regulation and Financial Services authorities, is still required.

Standard Club shipowners are to be invited to take underwriting participations in syndicate 1884.

Marock, who had a background in the Lloyd’s market before joining Charles Taylor, says he is confident that sufficient underwriting capital is available to fund syndicate 1884 but does not have a sense at the moment of how much Standard Club members might subscribe.

Syndicate 1884 is expected to launch with a “stamp” or underwriting capacity of £36m ($56m) and build up to £100m ($154m) in three years, offering shipowners not only a wider range of insurance covers but, if they are in the Standard, a return on the club’s investment.

Charles Taylor’s ambition is to develop a successful turnkey managing agency not only running syndicate 1884 but also managing a portfolio of three or more syndicates that may well not be marine focussed.

Marock says that as Charles Taylor already provides services to virtually every specialist insurer in the world and Lloyd’s is keen to attract new insurers from Asia, the Middle East, Latin America and Africa, there is a lot of potential to create a “healthy and sustainable” venture.

in 27 February 2015