Lloyd's Poised To Grow In U.S. Market

By Sam Friedman

NU Online News Service, Jan. 16, 4:20 p.m. EST, NewYork--Flush with new capital, bolstered by aggressivemarket conduct reforms and led by the first industry outsider inits 314-year history, Lloyd's of London is poised to build on itsposition as one of the top sources of coverage in the UnitedStates, the market's new chairman, Lord Peter Levene, declared heretoday in his inaugural address to an American audience.

"While changes have taken place at the instigation of Lloyd'sitself, much of the impetus to reform has come from the need tomaintain our interdependency with the U.S. industry," said LordLevene, speaking before a joint meeting of the Association ofProfessional Insurance Women and the Society of Chartered PropertyCasualty Underwriters.

He added that the recent reforms at Lloyd's--including theestablishment of a Franchise Board to set performance standards andscreen out potential rogue players--had been driven by the need tocompete in a global market in which U.S. customer service standardsare the norm.

"I am part of the reform program," he said, noting that Lloyd'shad always drawn its prior chairmen from the ranks of underwritersand brokers, while he brings a fresh perspective as someone with noLloyd's "baggage" from prior-year struggles to burden him.

Lord Levene's career includes stints in the government (servingin the U.K. Defense Ministry and as Lord Mayor of the City ofLondon) as well as the private sector. Among his many posts, he waschairman of Bankers Trust International, the Docklands LightRailway Ltd. and Canary Wharf Ltd.

While Lloyd's reputation took a beating in the past decade, itspremiere brand name remains one of its greatest assets, accordingto Lord Levene.

"Even my two local travel agents in Vietnam--who were oncemembers of the Communist party at one time, but who are nowentrepreneurs--were instantly aware of what Lloyd's is and whatrole it performs in the world when I told them what job I held," hesaid.

"We're the Coca-Cola of insurance. Our global brand recognitionis a priceless advantage."

Lord Levene also said he is fortunate to take over the market ata time when oversight reforms have already been put in place,record-setting capital levels have been committed, and a hardmarket is entrenched, guaranteeing healthy demand for Lloyd'scapacity and pushing premium income higher.

He reported that Lloyd's underwrote $8.2 billion in U.S. premiumincome last year, a gain of 15 percent over 2001 and a new record.The market is already the leading surplus lines underwriter in thiscountry, he added.

Looking ahead, Lloyd's is boasting its biggest capital base everfor 2003--about $22 billion, with about 30 percent generated byU.S. and Bermuda investors, he noted.

"Given these numbers, it's difficult to think of ourselves asjust another 'alien' insurer," he quipped.

Lloyd's proved itself as an invaluable source of U.S. capacityon Sept. 11, 2001, he said. "Lloyd's has the single largest loss ofany insurer," he added. "To date, we have paid over $2.8 billion inclaims, and we'll ultimately sustain a net loss of $3.11billion."

He said that "in the dark days that followed 9/11, the abilityof many U.S. insurers to write terrorism and property cover almostcollapsed. Not only were U.S. insurance businesses having to dealwith their own personal shock, they were grappling with an entirelynew set of risks and aggregations, and almost infinitepossibilities. The Europeans were able to step in to fill thebreach."

He said that Lloyd's has come a long way since its coffeehouseorigins, helping lead a globalization of the industry that isaccelerating each year. "We still have a coffee house on thepremises, only now it's Starbucks," he quipped.

He closed with the prediction that the specter of Lloyd'sbrokers "going about the market with file folders, ridingelevators, and walking around to trade with people who put littlestamps on pieces of paper is not the way Lloyd's is likely tocontinue doing business in the future."

He predicted that the Internet will continue to revolutionizethe insurance industry in general and Lloyd's in particular.

"Electronic lines of communication have created a web ofcommercial transactions which are now binding global industrieslike our own together in a new and powerful way," he said. "It is aweb that will only grow tighter and more all-encompassing as thepower of our technology and our imagination grows stronger. Lloyd'sis only too aware of this sea change, and is taking steps to ensureit is a major player in the coming revolution."