Former Lloyds kingpin to cash in with new company, writes James Brewer- Tuesday July 25 2006

BATTLE is intensifying in the marine war risk market as an increasing number of specialists plough in for a share of profitable business.

In what could be a significant spur to the market, one of the great underwriters in the sphere, former Lloyds kingpin Richard Brindle, disclosed he plans to set up a new company in London.

Much war risk business continues to be underwritten in Lloyds, although some companies with overseas parents, as well as Hellenic War Risks Mutual, which serves Greek tonnage, the Strike Club from Germany and other facilities are making a growing impression.

It is usually highly lucrative, but one analyst warned that the availability of too much capital could turn the sector into a damp squib.

Much of the money is made from the declaration of breach additional premium areassuch as currently apply to Lebanese and Israeli waters. Voyages to Haifa have been attracting additional premium rates in the region of 0.25% of hull value, and to elsewhere in Israel around 0.1%. Rates for evacuation ships have been quoted as high as 1.5% of hull value per day, it is believed.

This is where things can start getting cut-throat, because it is fast and it is cash,said a London source.

Mr Brindle, who reportedly made handsome profits during the Gulf War, raised $1bn to set up a Bermuda company at the start of 2006 and named it Lancashire, after his native county.

Lancashire Holdings has now revealed that the UK Financial Services Authority is minded to grant authorisationto a new underwriting company, to be called Lancashire Insurance Co (UK).

The company expects to satisfy the conditions set down by the authority by the end of August 2006. It cannot accept risks until authorisation is granted. A statement from Lancashire said simply that the UK company would be able to write the classes of business currently written in Bermuda, but with its expertise it will clearly be tempted to attract war risk.

It would initially be capitalised at £20m ($37m), rising to £60m by 2007.

Mr Brindle said the move would provide Lancashire with increased flexibility and access to a larger pool of quality risks.

Fahad Changazi, insurance analyst at Cazenove Equities, said: A presence in the London market will provide Lancashire with another platform to source new business. We view this as an opportunistic move, given the group revised downwards its 2006 premium target at the last trading update in May, from $822m to $675m, as rates were disappointing in the marine class business which the group chose not to write.

Mr Brindles strategy shows that London is still unique in giving access to many specialities and will dispel some of the alarm caused by a disproportionate flow of capital to Bermuda at the end of 2005.

Lancashire chief operating officer Neil McConachie said: We are following a path already taken by a number of Bermuda insurance and reinsurance groups.

The group sees the London and Bermuda operations as complementary.