Sedgwick pilot scheme takes off.

Sedgwick Insurance Strategy INSTRAT has launched a pilot Global Underwriting Index based on Lloyd's ...

Sedgwick Insurance Strategy INSTRAT has launched a pilot Global
Underwriting Index based on Lloyd's global results in a move towards
further converging the insurance and capital markets.


The launch is believed to be the first Lloyd's derivative aimed at
long-term corporate investors. It is understood the figures released on
the index will be altered once a year after the Lloyd's Global results
publication with the concept of the index aimed at giving information to
investors "to form their own views rather than the complete picture".


The index provides the first standardised contract for hedging and
establishing the market price for reinsurance linked to the overall
performance of the Lloyd's market. Andrew Martin, INSTRAT managing
director, said: 'The Index and the reinsurance or option contracts traded
on it can be traded in amounts as small as £1000 per 1% of Lloyd's loss
ratio, so professional corporate investors and insurance companies can use
the new market to explore pricing and supply and demand for reinsurance at
Lloyd's. However, the first bid on the Index web page was for £1m of
reinsurance capacity equivalent."


Corporate investors can use the index to hedge their overall market
exposure and investors can use it to buy or sell an asset-class
un-correlated with stocks and bonds.


INSTRAT spokesman Andrew Martin added: "London market interest in
standardised or index-based reinsurance transactions has been growing. The
market now has the opportunity to back theoretical interest with action,
trading the contracts in small numbers for price discovery, or in larger
size for serious reinsurance hedging."


The INSTRAT index web page is on www.instrat.co.uk/index.
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