Lloyd’s of London to stage bond market return

The specialist insurance market, rated A+/AA- by S&P and Fitch, is preparing to meet investors in London and Edinburgh on Monday and Tuesday of next week to discuss a dated sterling denominated subordinated bond.

Barclays, Citigroup and RBS have been hired to lead manage the transaction.

The bond that is expected to carry a 10 year maturity and be callable after five will allow the issuer to create a much more stable form of capital and make it less reliant on the liquidity of its members.

Lloyd’s has 94 syndicates that underwrite insurance and have to contribute to a central fund. That fund has a £3.2bn surplus but could be depleted if its members were no longer able to pay.

The market backdrop may prove challenging however. Recent subordinated bonds issued by rival insurers and reinsurers are still struggling to perform although sterling transactions are holding up a bit better.

“Lloyd’s will go ahead if market conditions are stable,” said a debt capital markets banker.

“Insurers aren’t really in the eye of the market storm so I would imagine conditions will be fine.”

Lloyd’s has issued three subordinated bond transactions in its 325-year history. Its most recent - a £500m perpetual non-call 10-year Tier 1 bond - was sold in 2007.

Lloyd’s had a subordinated debt pile of £714m as of May 2013.