Lloyd’s Poised To Grow In U.S. Market
By Sam Friedman
NU Online News Service, Jan. 16, 4:20 p.m. EST, New York–Flush with new capital, bolstered by aggressive market conduct reforms and led by the first industry outsider in its 314-year history, Lloyd’s of London is poised to build on its position as one of the top sources of coverage in the United States, the market’s new chairman, Lord Peter Levene, declared here today in his inaugural address to an American audience.
“While changes have taken place at the instigation of Lloyd’s itself, much of the impetus to reform has come from the need to maintain our interdependency with the U.S. industry,” said Lord Levene, speaking before a joint meeting of the Association of Professional Insurance Women and the Society of Chartered Property Casualty Underwriters.
He added that the recent reforms at Lloyd’s–including the establishment of a Franchise Board to set performance standards and screen out potential rogue players–had been driven by the need to compete in a global market in which U.S. customer service standards are the norm.
“I am part of the reform program,” he said, noting that Lloyd’s had always drawn its prior chairmen from the ranks of underwriters and brokers, while he brings a fresh perspective as someone with no Lloyd’s “baggage” from prior-year struggles to burden him.
Lord Levene’s career includes stints in the government (serving in the U.K. Defense Ministry and as Lord Mayor of the City of London) as well as the private sector. Among his many posts, he was chairman of Bankers Trust International, the Docklands Light Railway Ltd. and Canary Wharf Ltd.
While Lloyd’s reputation took a beating in the past decade, its premiere brand name remains one of its greatest assets, according to Lord Levene.
“Even my two local travel agents in Vietnam–who were once members of the Communist party at one time, but who are now entrepreneurs–were instantly aware of what Lloyd’s is and what role it performs in the world when I told them what job I held,” he said.
“We’re the Coca-Cola of insurance. Our global brand recognition is a priceless advantage.”
Lord Levene also said he is fortunate to take over the market at a time when oversight reforms have already been put in place, record-setting capital levels have been committed, and a hard market is entrenched, guaranteeing healthy demand for Lloyd’s capacity and pushing premium income higher.
He reported that Lloyd’s underwrote $8.2 billion in U.S. premium income last year, a gain of 15 percent over 2001 and a new record. The market is already the leading surplus lines underwriter in this country, he added.
Looking ahead, Lloyd’s is boasting its biggest capital base ever for 2003–about $22 billion, with about 30 percent generated by U.S. and Bermuda investors, he noted.
“Given these numbers, it’s difficult to think of ourselves as just another ‘alien’ insurer,” he quipped.
Lloyd’s proved itself as an invaluable source of U.S. capacity on Sept. 11, 2001, he said. “Lloyd’s has the single largest loss of any insurer,” he added. “To date, we have paid over $2.8 billion in claims, and we’ll ultimately sustain a net loss of $3.11 billion.”
He said that “in the dark days that followed 9/11, the ability of many U.S. insurers to write terrorism and property cover almost collapsed. Not only were U.S. insurance businesses having to deal with their own personal shock, they were grappling with an entirely new set of risks and aggregations, and almost infinite possibilities. The Europeans were able to step in to fill the breach.”
He said that Lloyd’s has come a long way since its coffeehouse origins, helping lead a globalization of the industry that is accelerating each year. “We still have a coffee house on the premises, only now it’s Starbucks,” he quipped.
He closed with the prediction that the specter of Lloyd’s brokers “going about the market with file folders, riding elevators, and walking around to trade with people who put little stamps on pieces of paper is not the way Lloyd’s is likely to continue doing business in the future.”
He predicted that the Internet will continue to revolutionize the insurance industry in general and Lloyd’s in particular.
“Electronic lines of communication have created a web of commercial transactions which are now binding global industries like our own together in a new and powerful way,” he said. “It is a web that will only grow tighter and more all-encompassing as the power of our technology and our imagination grows stronger. Lloyd’s is only too aware of this sea change, and is taking steps to ensure it is a major player in the coming revolution.”