Although there have been a few acquisitions at Lloyd’s since, none were as bold as Catlin’s takeover of Wellington in 2006 in the aftermath of Hurricane Katrina. The new enlarged syndicate immediately became the largest at Lloyd’s; a position it holds today, writing gross premiums of nearly £1.8 billion last year. Surprising many back then, in addition to acquiring the managing agency, Catlin also bought out Wellington’s 1,200 Lloyd’s names (investors); paying £ 119 million cash compensation for them to leave the market freeing Catlin to provide 100% of the capacity in the merged enterprise.

Aligning underwriting and capital under one common-ownership was all the rage then but in just a few short years attitudes have changed a lot. So much so that even Stephen Catlin, talking to analysts on the recent release of his group’s half-year results, reportedly said that third-party capital could once again feature in their 2014 business plan. Whilst Catlin and many others have for some time nurtured small special purpose syndicates and sidecars, the current frenzy of companies eager to play more seriously with other people’s money, as well as their own, suggests a profound switch in market sentiment.

For some time capital has been relatively easy to come by but until recently was mostly unneeded. Insurers and reinsurers had plenty of their own and were happy to risk it in markets where premium rates were decent enough by historical standards. However, the sharp downturn in prices this year and the threat of big shifts in the way brokers distribute business has unnerved the industry.  In response companies who would otherwise have cut-back their lines are being lured instead into offering their clients alternative forms of capital to keep relationships alive and maintain market share. Fees and commission for managing third-party pots of money will stave off the hit to profits of shrinking down the risk-bearing business. At least that is the theory.

Yet, according to AM Best, the motivation for carriers to embrace new sources of capital might not just be about plugging short term holes in their income statement. Last week the rating agency published a special report on the reinsurance sector and portentously characterised third-party capital management as the “wave of the future”. With pension and endowment funds increasingly replacing hedge funds as investors in the sector, they see third-party capital as starting to look a lot more permanent and less opportunistic. A wonderful irony, in many ways, that the wider market is potentially transitioning to a business model of managing multiple sources of outside capital that harks back to the Lloyd’s way of days gone by; shunned nearly two decades ago as being out of step in the modern world.