On this episode of “The Practice Manual,” host Rob Chaplin is joined by colleagues George Gray, Theo Charalambous and Usman Sawar to explore the world of Lloyd’s of London, the one-of-a-kind insurance and reinsurance marketplace and market regulator that has the capability to write insurance in over 200 territories around the world. The team examines what makes the Lloyd’s market distinctive, why investors are drawn to Lloyd’s businesses and what buyers need to know when approaching a Lloyd’s acquisition. Among other key topics, they cover regulatory engagement and deal structuring to Funds at Lloyd’s (FAL), diligence considerations and the market outlook.

Episode Summary

Lloyd’s of London is not an insurance company but a centuries-old marketplace where insurance buyers and sellers come together, supported by a unique regulatory structure and a distinct chain of security that underpins policyholder protection. During this episode, host Rob Chaplin is joined by colleagues George Gray, Theo Charalambous and Usman Sawar to examine Lloyd’s hands-on, front-end and ongoing regulatory oversight — from approving syndicates, managing agents and corporate members to monitoring underwriting performance, reserving and capital adequacy — and why change of control at a managing agent or corporate member always requires Lloyd's approval, among many other topics

Key points

What makes Lloyd’s distinctive: Lloyd’s is a marketplace with over three centuries of history, global reach, specialty underwriting expertise and a subscription model for large and complex risks, with gross written premiums of £57.9 billion in 2025. Its chain of security provides layered financial protection to policyholders, from syndicate-level trust fund assets through to the Lloyd’s Central Fund as a discretionary backstop.

Why investors are interested: Acquiring a Lloyd’s business can be the fastest route to accessing global insurance markets, as well as established permissions, operational infrastructure and specialty risk exposure that may be less correlated with domestic insurance markets. Alternative routes to market, including London Bridge 2 structures and new syndicate formations, also offer capital-efficient access alongside traditional M&A.

Deal structuring and regulatory engagement: Lloyd’s M&A involves acquiring a group structure that may include a managing agent, corporate member and holding company, each with distinct regulatory status. Change of control requires Council of Lloyd’s approval and PRA sign-off after consulting the FCA.

Market outlook: The fundamentals for Lloyd’s M&A remain strong, supported by niche and specialty underwriting growth, the influence of AI and technology on underwriting platforms, new syndicate formations seeding future activity, and PRA and Lloyd’s reforms aimed at promoting innovation, international competitiveness and market accessibility going forward.

Rob Chaplin (RC): Welcome to another episode of "The Practice Manual," the podcast where we break down some of the mysteries and the latest trends in insurance and reinsurance. I'm your host, Rob Chaplin, head of the Financial Institutions Group here in Skadden London. Today, we're diving into the world of Lloyd's M&A, a topic which is a key part of our day-to-day practice and that's particularly relevant to interested buyers, both strategics and sponsors, looking at the series of PE-backed syndicate businesses approaching exit timelines and expected to come to market in the near future.

Today, I'm joined by my colleagues George Gray, Theo Charalambous, Usman Sawar. Great to be here. Theo, can you explain, in simple terms, what is Lloyd's of London? Big question.

Theo Charalambous (TC): Of course, Rob. Lloyd's of London, also known as just Lloyd's — it's an insurance and reinsurance market. It is not an insurance company, but instead a marketplace where insurance buyers and sellers come together. Lloyd's essentially acts as a market regulator, which sets the rules (by) which its members operate.

RC: And Usman, what does that regulatory oversight look like in practice?

Usman Sawar (US): Sure. So, that regulatory oversight from Lloyd's is both front-end and ongoing. And in many ways it's much more hands-on than other insurance markets. So, at the outset, Lloyd's approves the establishment of syndicates, the appointment of the managing agent and the classes of business that the syndicate can write, as well as its annual underwriting capacity. So, that upfront regulation effectively defines the parameters within which that business can operate.

Lloyd's also then approves the establishment of corporate members, and these are really the capital providers to Lloyd's syndicates, and it also closely scrutinizes the adequacy of that capital that's provided. And so beyond that, there's then the ongoing supervision of Lloyd's. So, Lloyd's monitors underwriting performance. It’s reserving, exposure management and adherence to its own minimum standards. And actually, it's got real intervention power where things are not going how it wants them to.

Then there's also the oversight of investment strategy, particularly in relation to premium trust funds and other syndicate assets to ensure that they comply with the Lloyd's requirements. And, importantly, in an M&A context, if there's a change in control of a managing agent or a corporate member, that will also require the approval of the Council of Lloyd's. So, I think the key practical takeaway from the Lloyd's regulation is engage with them early, get them on your side, and that will make your transactions much smoother.

RC: So, insurance, super competitive marketplace. Likewise, reinsurance. George, what makes Lloyd's stand out from the crowd?

George Gray (GG): It's a good question. So, I'm going to go slightly less legal here and really kind of just concepts. So, Lloyd's stands out for a few reasons. First of all, it is a true time-tested institution. It's been at the heart of the global insurance industry for over three centuries now. The origination story actually of Lloyd's is really fascinating. You can't say that for many kind of legal regulatory frameworks that sit around a commercial organization like Lloyd's, but we haven't got time for that today.

So second, it enables global reach. There are about 80 international insurance licenses, and it has the capability to write insurance in over 200 territories around the world. So, you can't really get much more global.

RC: Thanks, George. Some really good points there. And Lloyd's has been through the mill, it's fair to say, at certain times. The reconstruction and renewal process in the latter part of the last century was a major event in the Lloyd's market. But now Lloyd's is stronger than ever and prospering.

An important part of why Lloyd's is a reliable counterparty is the chain of security. Theo, tell us about the chain of security.

TC: That's right, Rob. Lloyd's benefits from a unique chain of security, which provides additional significant financial protection to policyholders. Under this chain, policyholder claims are first met from a syndicate's own premium trust fund assets. Once those assets are exhausted, Lloyd's will require additional capital from the corporate member or LB2[DF1.1][AS1.2] cell, as the case may be. Failing that, Lloyd's will draw down on a syndicate's funds at Lloyd's, including any letter of credit portion of those funds at Lloyd's. And as a final backstop, the Lloyd's Central Fund, which is a mutualized fund maintained by the Corporation of Lloyd's, steps in at the discretion of the Lloyd's Council to make sure that policyholder claims are met.

RC: Thanks, Theo. Let's dig a little bit deeper now into what's attracting investors to Lloyd's right now and focus, Usman, specifically on M&A activity. Tell us more.

US: Look, so for new entrants, acquiring a Lloyd's business is the fastest way to gain access to global insurance markets. You're not just buying a book of business, you're acquiring permissions, infrastructure and a seat at one of the most important insurance markets in the world.

But really, it goes beyond access. The rating environment over the past few years has been supportive, with improved underwriting discipline driving stronger profitability across many classes. That's made Lloyd's vehicles increasingly attractive from a returns perspective.

And there's also a diversification story here. Lloyd's offers exposure to specialty lines and international risks that are less correlated with the domestic insurance market. And that's particularly appealing for both strategic and financial sponsors.

And finally, and quite importantly, a lot of transactions are really about people and acquiring proven underwriting teams and track records, which could otherwise take years to build organically, is a real key driver in this space.

RC: And traditional acquisition, traditional M&A, is one way into the market, but with this market, it's not the only way into the market, Usman. How else can people access the market?

US: No, absolutely. And look, we've acted on a lot of transactions where investors are utilizing the London Bridge 2 structure to gain exposure to non-life insurance and reinsurance risks within the Lloyd's ecosystem. We're seeing new syndicates form through partnerships between your traditional insurance cedents[DF2.1][AS2.2] and private capital providers. And those insurance cedents are using their underwriting expertise and distribution, and the capital providers are deploying capital to effectively back the risks that are being ceded into the newly established syndicate. It's a very capital-efficient way to participate in the market without setting up a full platform.

But more broadly, these structures sit alongside traditional M&A as part of a wider toolkit for accessing the Lloyd's market. And, for existing players, M&A remains a key tool for scaling efficiently, increasing stamp capacity, broadening class mix and delivering cost synergies through shared platforms and central functions.

And with Lloyd's continued focus on specialty and complex risks, there's a clear premium on differentiated underwriting capability, and it gives entrants a potential for superior returns. So, I think we've got the traditional M&A alongside the more bespoke solutions, and that's driving a lot of activity in the market.

TC: And if only to reiterate, Usman, it's also worth noting the diversity of the buyer landscape. We are seeing both strategic buyers who are looking to expand their insurance footprint and capabilities, and financial sponsors who are attracted by the potential for strong returns and the ability to partner with experienced management teams in this space. The transatlantic flow of capital from the U.S. has definitely been a defining feature of recent deal activity.

RC: Let's get down to nuts and bolts now. So, George, from a transactional perspective, what's the difference between a Lloyd's M&A transaction and a standard carrier or intermediary deal?

GG: That's a great question, Rob. So, the first thing to understand is that when you're acquiring a Lloyd's platform, you're essentially buying a group structure which includes several distinct entities, much of which is quite specific to Lloyd's and would be differentiated from a normal carrier group that you're acquiring. So, at the core, you have the managing agent, and the managing agent is PRA-authorized, but PRA- and FCA-regulated, and that is the entity that is responsible for managing the actual underwriting operations of one or more syndicates.

Second, you have the corporate member. The corporate member is the entity that provides the capital to support the underwriting through the funds at Lloyd's or FAL, and we're going to have plenty more on FAL during the rest of this discussion. And above both usually sits a holding company. Now, each has its own regulatory status and its own contractual arrangements, so the deal structure and the diligence that you're carrying out really requires a deep understanding of how all of these components fit together.

RC: And, of course, the FAL arrangements are particularly important from a structuring perspective.

GG: They really are. So, FAL, the capital backing the syndicate's underwriting, that's typically provided through a number of different means. So first of all, through letters of credit — essentially promises from banks — deposits, or also quota share reinsurances. Now, understanding how FAL is structured and funded is quite essential because it directly affects deal economics.

Buyers also need to consider the managing agents' agreements, both with the corporate member and third-party capital providers, as these govern the operational and economic relationship that is really at the heart of the platform.

In the past six months alone, we have acted on every flavour of Lloyd's transaction. So, full acquisitions of Lloyd's groups, to more targeted investments in managing agents or individual syndicates, and a lot of work around what Usman was discussing earlier, i.e., what we term as balance sheet transactions, so those investments into LB2 structures.

RC: And there may be more evolution in that regard in the not-too-distant future.

GG: Quite right.

RC: So, that brings us neatly to the regulatory environment, Theo. So, Lloyd's is a multilayered regulatory environment. You've got the PRA, the FCA, the Council of Lloyd's. What does that mean for M&A transactions in the market?

TC: Thank you, Rob. The regulatory landscape is indeed multilayered, but navigable with the right preparation and expertise. As mentioned earlier, any change of control at the Lloyd's managing agent or corporate member requires regulatory approval as a condition to completion of the transaction. Importantly, the PRA acts as lead regulator and will issue the change of control approval in respect of a managing agent after consulting with the FCA. So, there is no need to do a separate FCA filing. Lloyd's itself also needs to approve any change of control of a corporate member.

RC: And Theo, what does that approval process actually involve?

TC: The process involves a detailed assessment of the buyer's financial strength, governance arrangements and strategic intentions. Beyond the regulatory approvals, buyers should also be aware that change of control provisions are extremely common in Lloyd's business contracts.

RC: So, Usman, moving things forward, what are the key considerations from a legal diligence standpoint?

US: So, given the various constituent elements we've talked about already, there's a number of moving parts in any Lloyd's business. So, Lloyd's M&A transactions do require deeper and more specialized legal due diligence than you would need, for example, on a brokerage or MGA acquisition. And you can divide those. Firstly, the key area is the target group structure. So, you need to confirm ownership and control of the managing agent, the corporate member and the participations in syndicates, including any interests held via London Bridge 2, protected cells or other capital vehicles. These structures are multilayered, they're quite complicated, so really getting to the bottom of and understanding the economic interest and where control actually sits is fundamental from the outset. And you effectively have to really understand how all of those relationships hang together.

And then, I think secondly, there's a strong focus on underwriting and operational matters, your delegated authority arrangements, binding authorities, reinsurance structures and the robustness of governance and controls in the businesses that you're diligencing. So, a lot of value sits in those arrangements, so you need to look at them carefully and ensure there's no real issues in there from a legal perspective.

RC: George talked about funds at Lloyd's — FAL — earlier. I'm guessing that those arrangements need very close scrutiny as well?

US: Yeah, exactly. Absolutely. That's another key area that you need to get comfortable with — how the FAL is structured and provided. That means reviewing subscription agreements, members, agent and managing agent agreements, any quota share or reinsurance structures pursuant to which FAL is provided, as well as letter of credit facilities and Lloyd's deposit trust deeds[DF3.1][AS3.2]. You really want to understand the terms on which capital can be withdrawn or replaced and any constraints on that post-closing. So really, it's about understanding the capital model that supports underwriting. How flexible is it? Is it adequately funded? And does it align with the buyer's intended underwriting strategy going forward? I think that's the key point on FAL.

TC: And the change of control provisions I mentioned earlier, Usman, become a major diligence focus, too.

Of course, in most cases, counterparties will have very limited commercial incentive to terminate such contracts, but the transaction document mechanics need to reflect those risks.

RC: And delegated authority, reinsurance agreements, asset management arrangements, Usman, they're another key area?

US: Yes, absolutely. The Lloyd's syndicates use standard Lloyd's Market Association binding authority and cover holder documentation. And you need to check whether they've got any unusual or onerous provisions.

And then look on asset management. That is an area that has become increasingly important with the asset management sector and the insurance sector kind of coming a lot closer together. A lot of people want to look at those asset management arrangements and see if they can take them in-house, particularly when you've got asset management providers coming in and acquiring these businesses.

RC: And Theo, reinsurance to close — RITC — a uniquely Lloyd's process. I take it RITC arrangements need to be diligenced?

TC: Absolutely, Rob. The RITC process is fundamental to how Lloyd's syndicates operate, and it must be carefully diligenced. At the end of a syndicate's third year of account, all remaining liabilities, including outstanding claims and incurred but not reported reserves, are transferred into a later year of account. The RITC premium is calculated based on the expected cost of settling these liabilities, including the reserving margin. In practice, once profits for the closing year have been distributed, the remaining assets and liabilities transfer to the receiving year, resulting in nil [DF4.1][AS4.2]net assets for the closing year. A buyer needs to review the RITC contracts for recent years and be comfortable with the actuarial assumptions underpinning those.

RC: And of course, we handle both RITCs, which are from one year of a syndicate to another year of a syndicate, but also third-party arrangements as well.

So, that's really helpful. Let's, George, talk about some of the key commercial and legal terms that are really important in Lloyd's M&A deals.

GG: Of course. It's a bit difficult to know where to start here, actually, because there are a number of features that are unique to either this type of insurance transaction or, specifically, a Lloyd's insurance transaction. So, I'll be brief because there won't be another time to cover it in a deep dive in this session. But I'd probably start off talking about pricing. So, the way you structure your pricing is key on any transaction, but specifically in a Lloyd's risk-carrying context. So, the form of mechanism and how that interplays with the accounting process for the group and how they go around reserving is obviously key. You also need to think about what type of lines is the syndicate writing and how might any cyclicality in relation to exposure to risks impact potential value in the business between the signing and closing period, e.g., is there any exposure to large risks through that period, and how are you dealing with that as part of the pricing process? That's an area where if you're unfamiliar with how that works commercially for the business and how you need to think about things legally, you could get really caught out as part of pricing the deal through the SPA.

So second, I'd talk about gap controls. They're also key. Typically, the Lloyd's target group will want to try and make sure that it's maintaining control of things like reserving. Also, its LOC arrangements and things of that nature. There's various processes that the group will be conducting each year in relation to its financing and its interactions with Lloyd's, where it won't want the buyer to have too much control there, if any control at all. So, that's obviously key, and we see that manifesting itself deal to deal as a real point of negotiation. The buyers obviously want to make sure that they know what they're getting in the usual way. Sellers want to make sure they're able to operate the business within their legal, regulatory and also commercial preferred framework.

Regulatory conditions precedent, we've already mentioned those. They're, of course, crucial. So, understanding how those work from a Lloyd's perspective is key. Ultimately, the transaction documents have to include a clear mechanism that provides that closing would only take place once those approvals have been obtained. We typically

see obligations as well on sellers to seek waivers of change of control, termination rights and material contracts.

Now, it is very important in terms of understanding your advisory community around the deal that you do engage people that understand the sector, because this is an area, for example, where someone that is less used to the sector may think that certain arrangements might be better presented as conditions precedent from a change of control perspective. Indeed, some of them often are. With other arrangements, it's quite routine to see waivers being dealt with in a different way, maybe not in the same way as the ultimate regulatory conditions, but either with obligations to go and do things without it being a condition precedent or, in some cases, as a closing deliverable or something that can be dealt with post-closing. So, really understanding how that's dealt with routinely is important.

The final point I'd mention is treatment of FAL, which is another key negotiation point. FAL has come up lots during the discussion so far. Obviously, a unique feature to Lloyd's. But, buyers will need clarity on how capital is structured, whether any consents from Lloyd's or other parties are needed to affect any post-closing restructuring. So there's a number of things in there which are very Lloyd's unique. I could go on, but I've hopefully given you a bit of a flavour.

RC: That's a good flavour, George. Yeah. And focusing on those LOC facilities is really important. I guess one of the other themes which really comes up on almost every deal nowadays is warranty and indemnity insurance, also known as rep and warranty insurance. I take it that is increasingly common in these deals?

GG: Yeah, very much so, Rob. So, sellers often push for clean exits with limited recourse. That is no different in the Lloyd's market than any other market. It's normally driven by market appetite for the asset and how hot the asset is. There's been a lot of Lloyd's M&A over the last year or two. I will leave you to draw your own conclusions about what that means for seller recourse and risk position.

From a buyer's perspective, it is crucial to ensure that the warranty and indemnity insurance policy can, where possible, adequately cover Lloyd's-specific risks. So, Lloyd's

-specific risks, for example, around reserving adequacy, historic years of account, any potential regulatory exposures. Some of that may be covered by a W&I policy. Some of it, e.g., around—

RC: Most definitely won't be.

GG: Around adequacy of reserves.

RC: Yeah.

GG: I was going to say you're going to struggle. The reality is it's just not happening.

So, knowing what can be covered and being able to scope that adequately, again, is key. And, if you're dealing with advisors who are familiar with this, they will be able to work with W&I providers or indeed your brokers. You should make sure that you're going with brokers who understand how the Lloyd's world operates. They will be helpful in terms of negotiating that with the underwriters and making sure you have as much coverage as possible.

RC: George, a lot of content there on deal mechanics. Theo, some of the less tangible aspects.

TC: Of course, Rob, and that is particularly important for non-U.K. buyers, I would say. While the deal mechanics are critical, the soft elements often determine the long-term success of an acquisition in the Lloyd's M&A space. Lloyd's places a premium on governance and reputation. In our experience, the most successful buyers invest early in understanding the target's leadership style and decision-making culture. You're not just buying a license, you're integrating into a unique ecosystem where relationships and how business is conducted is just as important as the underwriting results themselves.

It wouldn't be an understatement, perhaps, Rob, to say that a walk by the Leadenhall Market around the corner would teach a lot of the non-U.K. buyers a lot about the Lloyd's businesses.

RC: Well, Theo, that's a slightly oblique comment, but I think we know what you mean. And importantly, that brings us back to a point which comes up so often in these podcasts, which is about people and organizational culture. These businesses do have capital in them, but also they really are people businesses as well. So, it's important as an acquiror to really get under the skin of the organization to understand the culture, to understand the key people in the business, and work out what you're going to do with it.

US: Look, I think the fundamentals remain strong, and that's the headline message. The pricing cycle is softening, but despite that, I think growth in niche and specialty underwriting should continue. AI and technology are increasingly influencing underwriting and platform models, but we're seeing a lot of new Lloyd's platform formations, and that should seed M&A activity in the future.

And that aside, look, the PRA's got a real focus on growth, innovation and international competitiveness. If you combine that with Lloyd's own reforms, it's creating a really supportive environment. And Lloyd's strategic direction is clear. It's global relevance, accessibility and transparency. The message is very much that they're open for business. So, given those factors, we expect transaction activity to remain robust, and the market will continue to attract new capital and talent.

RC: Thank you, Usman.

So, what really comes out of this really great conversation is that Lloyd's remains one of the most attractive and dynamic insurance markets in the world for both investors and acquirors. It offers a unique combination of global reach, specialty underwriting expertise and access to a deep and well-supported capital base. But, as we've

discussed, success in Lloyd's M&A requires a deep understanding of the market structure, regulatory environment and cultural nuances.

George, Theo, Usman, thank you for taking part in today's conversation. And to our viewers, thank you for joining us. Until next time.

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"Practice Manual" is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates. Skadden is recognized for its deep experience in representing insurance and reinsurance companies and their advisers on a wide variety of transactional and regulatory matters. This podcast is provided for educational and informational purposes only and is not intended to be and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.