Despite its announcement last week that it would slash ?250 million off the amount of business it will write next year through its Lloyd's syndicate, ACE said it remained committed to the Lloyd's insurance market.

ACE said it was writing ? 900 million of business this year at Lloyd's but would cut that by nearly 30 percent to ? 652 million next year.

The Bermuda based insurance giant took over control of Lloyd's syndicate 2488 in 2000 and according to a report in the Financial Times is the largest Lloyd's syndicate operator.

An ACE spokeswoman last week said its decision was made on commercial grounds with the balance of money going into its other operations: "We have submitted our ACE Global Markets provisional 2003 business plan to Lloyd's. The plan represents a 27 percent reduction in stamp capacity from the 2002 level of ? 900 million. However, our intention is to utilise all of our available licensed entities to underwrite certain business here in London.

"Our continued presence and support for Lloyd's is demonstrated by our substantial planned stamp capacity for 2003."

ACE's decision turns up the heat for the legendary insurance market already under pressure from its 12,000 members to modernise the way it operates. Christopher Stockwell of the Association of Lloyd's Names, which represents individual investors, or Names, said the decision by ACE was a worrying move.

"It is bad news if people like Ace are scaling back capacity when they have the option to increase it," Mr. Stockwell told The Financial Times. FT called Ace's decision "a surprise blow" coming at a time when some corporate backers are increasing the amount of business they underwrite at Lloyd's.

It said further that it could spur Lloyd's members to vote in favour of reforms, which are aimed at encouraging corporate capital to remain at Lloyd's. A special meeting on reform is scheduled for September. A key element of the reforms is to cut the cost of doing business at Lloyd's - something that corporate investors have complained about.

If Lloyd's is unable to get the reforms through then it is feared that some corporate investors could in future years reduce the amount of business they conduct at Lloyd's. And there is already evidence of that with a study from Swiss Re research unit Simga indicating XL Capital will shrink its Lloyd's capacity by ten percent to ?440 million next year and St. Paul has said Lloyd's must demonstrate improvement by 2002 or it will withdraw from the market. Insurance company Safeco has also said it will withdraw from Lloyd's.

The study also showed that despite current market conditions with a void in capacity and billions of capital coming into the sector, Lloyd's has largely missed out on new capital.

The majority of the capital has instead gone to existing and new Bermuda insurance companies - Lloyd's has only garnered between five to seven percent of the new capital, according to the report.

The study said money has bypassed Lloyd's because "alternative vehicles may operate at a lower cost with fewer operating restrictions."