Lloyd’s of London Diversifies Investments from Bonds to Infrastructure

Lloyd’s of London, the general insurance and reinsurance market established in 1688, plans to shift 10% of its £2.5bn central fund away from bonds and into other asset classes. As part of this strategy it is considering investing in infrastructure projects.

“We’d like a shift away from bonds because there’s not a lot of opportunity to generate much income from there,” the market’s finance director, Luke Savage, told the
Wall Street Journal
. “We manage this fund centrally. It’s a fund which we invest and manage to pay for claims in the event an individual business goes bust.”

Lloyd’s central fund grew by 4.5% last year, to £2.49bn from £2.39bn a year earlier, while pre-tax profits recovered to £2.77bn from a pre-tax loss of £516m in 2011 when the market was hit by a string of natural catastrophe losses such the earthquake and tsunami in Japan and floods in Burma.

He added: “We’d like to invest more in other asset classes which we already hold, like equities, commodities, hedge funds and property. We’re also considering infrastructure lending, like investing in power stations, roads and hospitals. These are things which the UK government is promoting to stimulate economic growth. This is something we’ll look into over the course of 2013.”

Savage said that the insurance sector had adopted a more responsible attitude and companies were not chasing sales at the expense of profitability.

“They’re not flooding the industry with surplus capital that would otherwise drive prices down and make the industry uncompetitive,” he said. “Historically this is an industry that’s highly cyclical and would go from boom to bust. It’s encouraging that in recent years it’s been far more disciplined.”

Savage also told the
WSJ
that Lloyd’s is looking into growing its presence overseas and wants to expand its services in India and Turkey.

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