Lloyd's Market Reforms Draw Wide Support
By Lisa S. Howard, International Editor
NU Online News Service, Aug. 29, 11:26 a.m. EST, London?There is wide support from the Lloyd's market and membership for the creation of a Lloyd's franchise management system, a consultation exercise on market modernization has found.
"During the consultation, we have listened carefully to the views of our members and the business operating in the market, and are pleased by the high level of support that's evident," said Lloyd's Chairman Sax Riley in a statement released today. "That support will, I'm confident, translate into a vote strongly in favor of implementation." The 16,000 members of Lloyd's now have until Sept. 12 to vote on the proposals, when an extraordinary general meeting will be held.
Lloyd's received responses from 75 Lloyd's players, including third-party capital providers, managing agents and members' agents. From the responses, Lloyd's reached a number of conclusions, according to Mr. Riley.
? The membership of the market broadly supports the creation of a Lloyd's franchise system, designed to create and maintain "a commercial environment at Lloyd's in which the long-term return to all capital providers is maximized." In a letter sent by Mr. Riley to members, he reassured them that "the franchise is not about micro-managing individual businesses or second guessing day-to-day underwriting decisions."
? Some members oppose the introduction of annual accounting, but the Council of Lloyd's believes there is clear support for an end to the market's historic three-year accounting system. "If we are to continue to attract new capital, we have to improve our comparability [with competitors] and transparency," said Mr. Riley in his letter.
? The market will go ahead with proposals to restrict entry of new unlimited liability members after Jan. 1, 2003, although existing unlimited liability members will be permitted to continue trading.
? The proposal to replace both the Lloyd's Market Board and the Lloyd's Regulatory Board with a new Franchise Board will go forward.
Lloyd's said it has appointed an as-yet-unidentified reinsurance broker to assist in closing 13 run-off years of account. If successful, this will allow the resignation of 3,600 members of Lloyd's, which they are currently unable to do because they have run-off (or open) years. (When a year is left open, unlimited liability members must continue paying until all liabilities are met.) "?[T]he identification of reinsurers interested in indicating a price to reinsure these years has been completed," with quotes expected shortly, Mr. Riley said in his letter.
A.M. Best Company last week affirmed its financial strength rating of "A-minus" (Excellent) for the Lloyd's market, "with a stable outlook." See NationalUnderwriter.com/pandc/pchotnews.asp for more details on the Best's rating.
A summary of the results of the consultation are available on the Lloyd's Web site, at LloydsofLondon.com.
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