Lloyd’s predicts more syndicates backed by alternative capital will join the market as investor demand for new revenue streams grows.

Approval for Nephila Capital – the first syndicate on the market to source all underwriting capacity from insurance-linked securities (ILS) – is “another stepping stone”, according to Lloyd’s Performance MD Tom Bolt. “This sort of capital is here to stay.”

Nephila’s experience attracting big institutions will help educate a new audience of global investors about Lloyd’s, Mr Bolt says.

“Over the long term it makes a bigger universe of investors familiar with Lloyd’s and its mechanics. That opens up a lot of options for those investors and for Lloyd’s to attract more of that capital, either through new or existing syndicates.”

Since the global financial crisis investors have sought alternative income streams that are independent of other markets.

Nephila’s Syndicate 2357 will underwrite property catastrophe reinsurance risks, with a focus on the US. It has developed county-weighted industry loss products that let buyers closely align cover with regional exposure.

“Lloyd’s can provide us with access to licences and ratings that as an ILS fund you just don’t have,” Nephila Principal Frank Majors said. “That was the motivation for beginning the negotiations.”