Insurance market Lloyd’s of London has taken out £650m in cover to protect its backup central fund against possible high-risk events that could cause losses.
The five-year cover is financed by JP Morgan as well as other reinsurers including Berkshire Hathaway and Swiss Re, according to a Financial Times report.
The central fund at Lloyd’s is a £3bn backstop funded by its underwriting members to protect the market in times of stress.
The first £450m of the cover is said to have been provided using a newly established cell company and financed by JP Morgan.
The remaining £200m has been backed by eight major global reinsurance firms, including SCOR, Berkshire Hathaway and Munich Re.
“In the event that something really, really big happens, this makes it much more safe for our policyholders that we will basically pay out the claims they are entitled to receive some money for,” Lloyd’s CFO Burkhard Keese told the FT.
The report said that the arrangement will provide aggregate reinsurance protection to Lloyd’s Central Fund from an attachment point of up to £1.25bn.
The cover also has a lower cost of capital and should help the company to underwrite more business.