MCI Syndicate-in-a-Box Gets Lloyd’s Nod to Provide Clinical Trial Funding Insurance

Asta, through its third-party managing agency at Lloyd’s, announced the “in-principle” approval of a syndicate-in-a-box (SIAB) to deliver a breakthrough insurance product that aims to accelerate the development of new therapeutic drugs.

MCI Syndicate 1966, supplemented by Lloyd’s consortia, is targeting commencing underwriting from April 2024 with a forecast annual gross premium written for 2024 of £75 million ($94.3 million), subject to the necessary final checks and processes from Lloyd’s.

(The SIAB model was developed by Lloyd’s to allow smaller, entrepreneurial business proposals the opportunity to establish an underwriting platform in Lloyd’s at a smaller scale and lower cost base, without the need for a physical presence in Lloyd’s.)

Syndicate 1966 will introduce to the biotech industry a product that insures clinical trial funding in the event a trial fails. Such an approach will use a new underwriting methodology and technology platform to assess and underwrite what was previously considered to be an exposure unsuitable for insurance.

Lloyd’s describes a syndicate-in-a-box as a market-facing syndicate that differs from a traditional syndicate in the following ways:

A SIAB can write less than £100 million gross written premiums in year one.
A SIAB can only write incidental exposure to Lloyd’s most significant catastrophe perils (US Wind, North American Earthquake, Japanese Wind, Japanese Earthquake and European Storm).
A SIAB should predominately write short-tail business.
A SIAB should have a projected net operating expense ratio (operating and acquisition cost) of less than 35% in its third year.

By insuring biotech companies against risks inherent in medical innovation and research, it not only greatly reduces the financial risks associated with the clinical trial but also supports growth in the therapeutic drug pipeline, Asta said.

Historically, clinical trial financing can present a high risk/high reward endeavour for biotech entrepreneurs, investors, and innovators, the company said, noting that such individuals and entities can find it difficult to secure adequate funding for their therapeutics without significantly diluting equity and compromising control of their concept/molecule.

Lenders and structured finance providers have historically had a lower appetite for the area, compared with other industries, Asta explained.

Supported by TJP economic consulting as concept innovator, MCI’s insurance product is designed to encourage both lending and structured finance in an innovator-led model, as well as traditional VC investment, to the ultimate benefit of biotech researchers.

“Clinical trial funding insurance is a revolutionary new insurance product that has huge unmet demand, and access to Lloyd’s will allow MCI to capitalise on this opportunity. This product is a clear example of what Lloyd’s has to offer society through innovation and technology-enabled underwriting,” commented Lorraine Harfitt, chief executive officer of Asta.

“Working side-by-side with lenders and investors, this new syndicate-in-a-box will promote medical innovation whilst also bringing new accretive and profitable business to the Lloyd’s market,” said Phil Trafford, chief executive officer of MCI. “We are grateful for the guidance provided by Asta whose experience in bringing new ideas to Lloyd’s has made the whole process quick and efficient.”

Established in 2014, Medical & Commercial International (MCI) commenced trading in May 2015 as an MGA. In 2021, MCI’s SIAB 1902 was approved at Lloyd’s, with trading commencing at Jan 1, 2022. MCI focuses heavily within the life science and healthcare industry sector, with a successful track record of converting academic/industry experts into underwriters.

Asta Managing Agency Ltd is a leading third-party managing agent at Lloyd’s and is responsible for 11 syndicates, six SIABs and one SPA, with capacity under management in 2024 of more than £2.5 billion ($3.1 billion).