Zurich to launch Lloyd’s of London syndicate as backup for Beazley bid

Zurich is preparing to launch its first Lloyd’s of London syndicate in a matter of weeks even as it pursues a £7.7bn bid for Beazley, the FTSE 100 group that also operates in the insurance market.

Chief executive Mario Greco told the FT that Zurich was finalising plans for a syndicate, which would give it access to private capital to back risks underwritten at Lloyd’s. Doing so would provide Zurich with another avenue into the market if its takeover bid for Beazley was rejected.

On Monday Zurich went public with what Greco said was its fifth bid for Beazley, which sells protection against risks such as cyber attacks.

Meanwhile, Zurich is in late-stage talks with Lloyd’s about setting up a new entity at the marketplace, which Greco said could launch as soon as April 2.

Zurich would not confirm if it intended to proceed with launching the syndicate, which pools investor capital at Lloyd’s to underwrite insurance risks, if it did win control of Beazley.

The syndicate would aim to write hundreds of millions of pounds of annual premium, a revenue measure, said a person familiar with the deal. It would give Zurich another channel to expand its speciality business, Greco said, amid a recent influx of private investment through Lloyd’s.

“You can do deals on the Lloyd’s platform where you access private capital, which is different from capital offered by the reinsurance companies,” Greco said, adding that agreements through Lloyd’s were “competitive with the best conditions you can find outside” the market.

Traditional reinsurance houses such as Munich Re and Swiss Re face a growing threat from private capital groups.

Blackstone has set up multiple Lloyd’s syndicates with New York’s AIG, while Oaktree — the credit investor majority owned by Canada’s Brookfield — recently set up a new Lloyd’s syndicate with Allianz.

Zurich declined to comment on whether it would use an investment partner for its planned Lloyd’s syndicate.

Speciality insurance and reinsurance companies have enjoyed a run of elevated profits since raising prices in 2023. Prices are now beginning to fall as more capital floods into the sector, but brokers have predicted that bumper profits could be delivered until the end of 2027 at least.

Hedge funds and private capital groups have increasingly invested in risks at Lloyd’s through tax-exempt vehicles such as London Bridge. About $1.92bn had been invested through the vehicle as of the end of 2024.

Private investors have pushed into speciality insurance and reinsurance because of relatively higher profits and returns that can be less correlated to broader markets, since they depend on the timing and severity of natural catastrophes, terror attacks and other business risks.

Investors in insurance can also access “float” or money paid in as premiums and held to pay claims, that is in effect low-cost funding.

However, investors in property and casualty insurance have also been burned by large losses connected to events such as hurricanes, wildfires and war.

As reinsurers have lost business to alternative investment managers, some reinsurance executives have argued that private capital lacks expertise in evaluating insurance risks and could ultimately face large losses.