Lloyd's capacity auctions

Every autumn, from late October into early November, the Corporation holds a series of auctions where members trade syndicate capacity for the following year, quoted in pence per pound. What changes hands is a right: the right to stay on the syndicate for the next year of account, pro rata to one's share, and to follow its growth if the plan is raised. The seller collects a price, the buyer takes over the share and has to back it with Funds at Lloyd's, and the managing agent receives nothing. This secondary market is first a tool for private members, Names, NameCos and SLPs, who come in, go out and rebalance their portfolio through their members' agent. It is also the one place where capital providers' judgment of a syndicate turns into a number. Capacity that goes at 50 pence means buyers are paying several years of expected margin up front; capacity that finds takers only at nil price says nobody expects a profit, and sometimes that the exit itself is what sellers want. The signal has its limits. The market is thin, a few orders set the price of a small syndicate, and an autumn auction mostly reflects the loss season just past. The price also serves in conversions: when the group that owns the managing agent wants to buy out third-party capital and align its syndicate, its offer is judged against auction quotes, under the rules the Corporation sets to protect minority members. Not to be confused with market capacity, a cycle notion, nor with approval of the business plan, which sets the size of the syndicate.