At the Lloyd's of London "Meet the Market" event in SanFrancisco on Oct. 7, CEO Inga Beale discussed the firm's history inthe Golden City as well as local risks and innovations in heropening speech to attendees—which included Lloyd's syndicates,coverholders and MGAs. She later sat down with NationalUnderwriter P&C's managing editor Melissa Hillebrand foran exclusive Q&A.

Melissa Hillebrand: I wanted to discussthe Lloyd's City Risk Index, which analyzes the potentialeconomic impact of 18 natural and man-made threatson more than 300 worldwide cities. How long didthis project take to implement? How do you see brokers or riskmanagers using this new resource?

Inga Beale: It took three years to puttogether, based off of the work from a lot of researchers. What wewant to do—and it's not just about scaring everybody—it's aboutencouraging a dialogue, and recognition that the risks arechanging. And so it's not just risk managers, brokers andbusinesses, but we also want to have dialogue with governments. AndI actually have had some interest from city councils who have said,"We never thought about this aspect, or this affecting our citybefore." That's what we really want to spark, to have people starthaving a dialogue of "Oh gosh, these are the threats out there.What do we need to do to build resilience into our cities, ourbusinesses, and how can insurance help?"

Hillebrand: The top 5 risks areconsistent across a wide majority of regions. It's interesting tosee how something like a potential stock market crash or cyberthreats can impact so many different cities. It's a shared set ofconsiderations, worldwide.

Beale: Everything is interconnected in thewhole world now, like never before. And this gives insurers a bitof a challenge. For instance, if a hurricane came in, we knew itwould hit this certain geographic area. But the interconnectedworld, with everything being intangible, this gives us a real, realchallenge. By the end of the first quarter next year, we willrelease some cyber scenarios that we think are realistic. We aregetting experts together and looking at potential scenarios acrossthe globe, given all that interconnectivity—what insurancecoverages can be given, what roles insurance will play, and come upwith realistic disaster scenarios and estimate dollar amounts tothem.

Hillebrand: Did the City Risk Indexidentify any emerging markets?

Beale: What is interesting, say if it wassomewhere in China, some of the cities we identified people haven'teven heard of, and these cities have bigger GDPs than the whole ofSweden, for example. It's staggering. The reason we came out withthe City Risk Index is to alert people, get them thinking, andrealize that this world really is changing. And whereas a lot ofthe analysis done by, for instance, the World Economic Forumgroups, highlight a lot of the emerging risks—but no one has putnumbers on some of the risks like we have done.

Hillebrand: What emerging risks isLloyd's looking at right now?

Beale: So the cyber piece is the one we talkabout quite a bit a lot, and we also are looking at the whole areaof drones. We are looking at the supply chain, although supplychain insurance has been around for a long time. But what ishappening is the supply chain is so interconnected across the wholeworld, so we want to help businesses calculate what could be thebreaks—what could snap in their supply chain and cause a loss. Weare looking at reputation and how you can limit reputation damage.You can look at the Volkswagen issues for a start, and how thatnews gets across the world in seconds.

 Attendees at the "Meet the Market" event in SanFrancisco (Photo provided by Lloyd's of London) 

Hillebrand: What are you seeing, in thecorporate assessment of cyber risks outside the U.S.? You mentionedthat the majority of Cyber policies written by Lloyd's affiliatesare for U.S. clients. 

Beale: What's interesting to me is, why is itthat U.S. businesses are buying and practically nobody else? Ithink it's because of the regulatory environment. The regulatorsare saying, "You have to report this information, you have to takenecessary action if something has happened." That approach hasn'thappened elsewhere in the world. In Europe, we would like that sameapproach. Right now, businesses are forced to put cyber on theboard agenda and you move away from this concept if the head of ITdoesn't want to admit that anything might be at risk in the firm.So they don't want to volunteer that cyber issues are a risk. Butif you force through regulation that every hack has to be reported,suddenly it gets on the board agenda. And then it's OK for the ITmanager to admit that this could happen and that could happen.

Hillebrand: What can you tell us aboutLloyd's modernization initiative?

Beale: We have a paper-based process. We are aphysical trading floor, we have brokers coming in with the risks onactual pieces of paper that get stamped and signed. And they arephotocopied. And because we run a subscription market, you mighthave 10 or 15 underwriters on that same risk, so it's photocopied10 or 15 times and it's entered 10 or 15 times. So just by that,you can see that it's not as efficient as it could be. So what wewanted to do was get the data electronically to the underwriters'system at the push of a button.

Hillebrand: Do you think there is a wayto make changes like that to traditional processes, while stillkeeping the spirit of Lloyd's?

Beale: Yes, and that's the idea. We were notabout taking away that negotiation, because that is so important.But it's just about transferring the data. So instead of theunderwriter taking a photocopy of a piece of paper and handing itoff to somebody to input it, he presses a button and it goes intothe system. And also we want to work on the claims processes. Ilook at how woefully we are behind in some sectors, if you ordersomething from Amazon, you get text messaged, the product isdelivered to your door. We need that for our policyholders. What wewant to do is be much more responsive. We need new technology or weare going to be left behind and potentially be "Uber-ized"ourselves. Someone else will come in and say "Why on earth do youdo it like that?" We have to think about banking. I can rememberthe days of sending a check and someday that money will leave ouraccount and go into someone else's. Nowadays, it happensimmediately, you are in control of it. So even the banking worldhas moved on far, far faster than the insurance world.

Hillebrand: What can you tell us aboutLloyd's global expansion plans?

Beale: This is really driven by the fact thatthe economic power by 2030 will be in the hands of a different setof nations. And that power is going to shift from the traditionalwest to these new economies. Growth and the future is going to comefrom new economies. So we are going after places like Brazil,Mexico, Columbia, looking at what we can do and how we can bringthe Lloyd's specialism to economies that are going to be needinginsurance. They are going to be getting more and moresophisticated, they are going to have big complex risks, and wewant to be able to go after markets like that. Same in Asia, withChina, Malyasia, Indonesia and now also Africa. Not SouthAfrica—that has always been a big market for Lloyd's, but some ofthose other sub-Saharan countries.

Hilebrand: What opportunities do yousee in those countries?

Beale: Lots of energy, business andinfrastructure development. You have the growing middle class,people buying insurance for the very first time. And they are notgoing to want any paper. Everything they do is mobile technology.They don't even have bank telling machines, they don't take cashout, they transfer everything with their phones and mobile devices.So if we don't modernize ourselves, we can't even think ofcompeting in some of these emerging markets.

Hillebrand: You started off as an underwriter, and nowyou are the CEO of Lloyd's of London. What have you learned thatyou can teach other women about pursuing a career ininsurance?

Beale: When I was at St. Joseph's University[in Philadelphia] and I saw how many women in the student groupwere studying risk management and insurance, it was still heavilybiased toward men. Today, fewer than 1% of female graduates want togo into insurance, it ranks below banking. So there is somethingabout insurance that is not appealing to them. Yet we do such avaluable service for societies, for business, governments andcountries, and we don't sell it enough. But it's afascinating business and behind almost every headlinearound the world. And we do such good things for society, but wedon't tell our story well enough, so we really need to get outthere and talk about it more, to appeal to people to come in.

Hillebrand: What have you learned at Lloyd's about whatit means to be a leader, and encouraging other women to beleaders?

Beale: We have launched Inclusions@Lloyds,which is about getting people to understand how beneficial it is tohave diversity and diverse thought, that you don't have the samehomogenous people around the table, because that won't drivemodernization or innovation. We have a charter that we put out, andwe have asked people to sign up—the syndicates and brokers—tocommit to supporting diversity and inclusion, and encouragingthem.

We want to be sure we reflect our customer base. Everybody wantsto deal with people that they can somehow relate to. Ninety percentof people working in the Lloyd's market are British, yet only 15%of the business we write is for the U.K. We need to reflect more ofthe business we write. No longer can we issue policies in English.If we are dealing with somebody in Spain, they want a Spanishlanguage policy, and we need people to speak the language. That iswhat is changing for Lloyd's. If you think about the markets wherewe have been so strong, English is the language.