Ajmal Bhatty
Promoter of Ethical Financial Solutions
Founder of World-Of-Takaful

The Syndicate in a Box (SIAB) model at Lloyd’s offers an innovative and cost-effective pathway for businesses to establish underwriting platforms in the world’s leading insurance and reinsurance marketplace. For entities looking to set up a Takaful syndicate to cater to the GCC and Asia Pacific markets and to all the emerging Takaful markets in the EU, Asia and Africa, the SIAB model provides a unique opportunity to enter the Lloyd’s market with reduced barriers and tailored oversight.

Key Drivers for a Takaful Syndicate at Lloyd’s

1. Cost-Effective Entry:

  • The SIAB model is designed for smaller, entrepreneurial, and innovative business proposals, making it ideal for Takaful syndicates.
  • The application fee for setting up an SIAB is £100,000, significantly lower than traditional syndicate costs. Additionally, the initial capital load is proportionate to the risks written, reducing upfront financial burdens.

2. Faster Approval Timeline:

  • SIAB applications typically take three months from the Triage stage to permission to underwrite, allowing quicker market entry compared to traditional syndicates.

3. Proportionate Oversight:

  • SIABs are exempt from several financial reporting requirements, reducing administrative burdens. Business plans for years two and three are automatically agreed upon, provided there are no material changes to the initial three-year underwriting plan.

4. Focus on Short-Tail Business:

  • SIABs are expected to predominantly write short-tail business, which aligns well with the nature of risks in sectors like real estate, energy, aviation, and shipping.

5. Alignment with Global Takaful Principles:

  • o The SIAB model’s emphasis on innovation and differentiation allows Takaful syndicates to introduce Sharia-compliant insurance products.

Empowering Ethical Finance: The Role of Lloyd’s Syndicates in Global Takaful

  • Access to Lloyd’s Global Network:Establishing a Takaful syndicate at Lloyd’s provides access to its global network, enabling syndicates to underwrite risks across all takaful markets.
  • Credible Disruption:The SIAB model encourages innovation and differentiation, allowing Takaful syndicates to disrupt traditional insurance practices with Sharia-compliant solutions.
  • Reduced Catastrophe Exposure:SIABs can only write incidental exposure to Lloyd’s most significant catastrophe perils, ensuring a focused approach to underwriting risks relevant to the takaful markets.

Cost of Setting Up a Takaful SIAB

  • Application Fee:£100,000 (non-refundable).
  • Additional Fees:A £1,000 prospect fee for each entity onboarded within the application (waived for known entities). Third-party Funds at Lloyd’s (FAL) provider application fees are £2,000, with an additional £1,000 prospect fee for each entity.
  • Capital Requirements:The Solvency Capital Requirement (SCR) is calculated using Lloyd’s Standard Model (LSM) in the initial years, with adjustments based on business mix, volatility, and risk mitigation strategies.

Steps to Establish a Takaful SIAB

1. Initial Enquiry: Contact Lloyd’s New Entrants team with a concise summary of the Takaful syndicate’s proposition, including management team details, strategic plans, and business focus.

2. Triage Assessment: This is initial evaluation process used to determine whether a proposed syndicate meets the fundamental criteria for entry into the Lloyd’s market. This assessment helps Lloyd’s prioritize applications and focus on those that align with its strategic goals. This requires submission of qualitative and quantitative templates, typically covering:

  • Business Model Viability: Whether the syndicate demonstrates innovation or differentiation.
  • Financial Strength: Ensuring the applicant has sufficient capital and a sustainable expense ratio.
  • Risk Profile: Evaluating the syndicate’s exposure to major catastrophe perils.
  • Operational Readiness: Assessing whether the syndicate can function efficiently within Lloyd’s framework.
  • Strategic Fit: Determining if the syndicate adds value to Lloyd’s market.

3. This process helps Lloyd’s streamline applications and focus on syndicates that have the potential to succeed within the SIAB model. You can find more details in Lloyd’s official Syndicate in a Box Guide.

4. Business Opportunities Committee Presentation: Present a detailed plan, including governance, financial projections, and alignment with Lloyd’s cultural and sustainability requirements.

5. Lloyd’s Executive Committee Approval: Secure ‘in-principle’ approval after submitting the Syndicate Business Forecast and Economic Capital Assessment.

6. Operational Setup: Finalize capital arrangements, legal agreements, and Key Performance Indicators (KPIs).

7. Permission to Underwrite: Obtain final approval and launch the Takaful syndicate.

Conclusion

The SIAB model at Lloyd’s is a game-changer for businesses looking to establish a Takaful syndicate. With reduced costs, faster approval timelines, and proportionate oversight, it provides an ideal platform to underwrite risks in high-value sectors like real estate, oil, energy, aviation, and shipping. By leveraging Lloyd’s global network and innovative framework, Takaful syndicates can deliver Sharia-compliant solutions that meet the unique needs of these diverse regions, currently encompassing 35 takaful markets globally while contributing to the success of the Lloyd’s marketplace.