London Bridge (Lloyd's)
A protected cell vehicle created by Lloyd's in 2019 to let insurance-linked securities investors provide capital to syndicates directly from London.
Lloyd's syndicates traditionally get their capital from members, companies and individuals, who deposit funds at Lloyd's to back their commitments. Investors specialized in insurance-linked securities, pension funds and dedicated funds, accessed the market indirectly, through collateralized reinsurance or offshore vehicles. In 2019, Lloyd's created London Bridge Risk PCC, a protected cell company authorized as a UK securitization vehicle. Each cell receives an investor's capital, holds it as collateral, and provides the syndicate either with members' funds or with fully collateralized reinsurance. A second structure, launched in 2021, broadened the arrangement. The aim is twofold: to draw to London capital that was going to Bermuda, and to let investors gain exposure to a syndicate's diversified portfolio rather than a single catastrophe. For syndicates, it is an additional source of capacity, sometimes cheaper when reinsurance hardens. For the market, it is a step toward convergence between traditional insurance capital and financial capital, with the question every arrival of volatile capital raises: will it stay after a bad year?
Hypothetical case: a Canadian pension fund wants diversified exposure to the London specialty market. Through a London Bridge cell, it provides 75 million dollars of capital to a syndicate for the underwriting year and receives in return a share of its result, losses included.
London Bridge Risk PCC, London Bridge 2, Lloyd's ILS
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