Tom Gauge and David DeJong on the growing role of consortia at Lloyd’s

The role of consortia at Lloyd’s is changing. Once seen primarily as a way to aggregate capacity around underwriting expertise, the model is becoming a more strategic tool for syndicates.

Tom Gauge and David DeJong, Managing Directors at Howden Re, joined Aditi Mathur of Intelligent Insurer at the Rendez-Vous de Septembre in Monte Carlo to discuss what's driving that growth, the changing relationship between lead and follow capacity and where they see opportunities for the model to develop next.

From capacity to strategy

“The profile of the consortium product is growing quickly,” said Tom. “In the past, it's been seen as a tool to aggregate capacity around a product expertise. Increasingly, though, syndicates are using it in a much more strategic manner.”

That shift comes as syndicates focus more closely on underwriting economics. Consortia can provide access to follow capacity without requiring the same capital commitment, while creating opportunities for leaders to generate fee income from their underwriting expertise.

At this stage of the cycle, that matters.

“It's about managing underwriting expense at this stage of the cycle and really focusing on bottom-line profit rather than top-line growth,” David said.

A changing lead-follow market

The growth of follow-only capacity is also changing the role consortia can play.

For follow markets, the model provides access to established underwriting expertise. For lead syndicates, Tom and David see an opportunity to make more of the value they create through risk selection and underwriting.

“For the leaders, it's about monetising that leadership status and being paid to underwrite profitably on behalf of others,” David said.

That creates a different dynamic between lead and follow capacity – one where underwriting expertise itself has greater economic value.

Bringing new business to Lloyd’s

Looking ahead, Tom and David see an opportunity for consortia to do more than improve the economics of existing business.

“I really think it's about bringing new business into the Lloyd’s building,” David said.

The model can give syndicates a way to bring together capacity around opportunities from markets including the US, Australia and Bermuda, as well as respond collectively to new insurance needs.

Innovation will be part of that next phase too.

Howden Re is working on new approaches to data, reporting, capacity and placement for the consortium market, including tools designed to make it easier for clients and follow markets to participate.

Watch the full Intelligent Insurer interview to hear Tom and David discuss why consortia are attracting more attention from syndicates, how lead and follow capacity is evolving and the new tools Howden Re is developing for the market.