Helios mulls capital raise to fund capacity expansion and growth plans

Lloyd's investment vehicle Helios Underwriting is considering a potential capital raise to fund its growth plans and increase its underwriting capacity from pre-emptions and acquisitions in 2021.

The company stated that its strategy is to "build a fund of capacity on the better quality syndicates at Lloyd's" by acquiring existing limited liability vehicles (LLVs) and by taking up pre-emption capacity offered by its supported syndicates.

"I am delighted that the improving market will likely present opportunities to underwrite additional capacity next year, acquire further LLV's and increasing retained exposure," said Nigel Hanbury, chief executive of Helios. "In the current environment we see significant opportunities to grow Helios and to significantly enhance value for shareholders."

Helios noted that the number of potential LLV acquisitions available in the market has increased recently due to rising costs and requirements to fund losses on the Lloyd's market.

The company believes that the increase in premium rates and hardening market will provide new opportunities for its shareholders to benefit from the improved rating environment.

For example, the company expects certain supported syndicates to offer pre-emption capacity that is able to be taken up by Helios for nil value. According to the company, preliminary indications show an overall increase in capacity from pre-emptions of between £5m and £7m for the Helios portfolio.

In addition, the company currently cedes 70 percent of its current portfolio to reinsurers in 2020, equating to approximately £49 million.

Due to the improving market conditions, Helios said its board is considering the possibility of retaining a larger proportion of any additional capacity underwritten, so that average capacity reinsured will remain at approximately £50 million going forward.

To take advantage of the attractive opportunities in the market, the company's board is "investigating options to finance the additional capital required to fund the increase in the capacity from pre-emptions, acquisitions and from the increase in retained capacity by Helios".