The Approachable Market

The information requested for an account may be a lot, but it should prove to be nothing more than what is currently asked for by U.S. underwriters, he said. Over the last 12 to 24 months, he said, Lloyds has been requiring less information, considerably narrowing the gap between what is required by Lloyds and U.S. underwriters.

Still "a typical application is a lot more comprehensive than five or six years ago," he noted. "There is more emphasis on terrorism exposures, and insurers want more detail about aggregate exposure. They are looking for detail."

This emphasis on getting all the information, he continued, not only helps the broker understand the risk, but also puts the buyer in a position to control its reinsurance needs. He argued that a buyer who can hold down his reinsurance costs is in a better financial position to spend more on primary insurance needs.

"You [the buyer] are not wasting money for protection you dont really need," he noted.

The main reason for going to Lloyds remains the cataclysmic exposure that others are reluctant or unwilling to insure, noted Richard Kerr, chairman and CEO of the Dallas-based online wholesaler MarketScout, and himself a former underwriting name at Lloyds.

"If it is high limits and high risk, Lloyds is a good home," he said. "They are number one in creativity. If it is a unique risk, Lloyds is an excellent place to go to figure out a way to skin that cat. They will sit and listen to youhear your issue and work toward a solution."

Gone is that traditional, collegial atmosphere where brokering was done "on a cocktail napkin," he noted. Today, it is a professional, sophisticated place for placing risk.

"Over the last 10 years the underwriting skills have improved remarkably," he said.

There is a good chance anyone going to Lloyds will get their risk placed, he said, but it wont be cheap. "The odds are high that you will get a quote," observed Mr. Kerr. "You might not like it, but you'll get one."

John Eltham, business unit leader for special risks at Miller Insurance Services, Ltd., a privately held insurance brokerage firm in London, said Lloyds has "a specialists approach to risk.

"People come to London [to place] the very large and difficult commercial risks. And they equally come to London for the specialists response and service in connection with volume business," he said.

To get to the Lloyds underwriters, an agent has to go through a Lloyds broker who has built a personal relationship with those underwriters.

"My job as the London wholesale broker is to become an extension of the retail brokers representation of the risk. And I can do that job if I have met with the buyer with the retail broker and then I can generally represent that risk to the underwriter," Mr. Eltham explained. "I then sit with the underwriter and say, Heres the deal."

Lloyds is working to demystify itself, Mr. Eltham observed. Recently, there was a training session held in London for 15 U.S. brokers aimed at answering detailed questions about how it works.

"Lloyds itself, as a corporation, is spending a huge amount of time trying to make it as easy as possible to do business," he said.

"London can provide extremely good service," Mr. Eltham added. "It can be very responsive. The turnaround time from Lloyds can be extremely quick. Even if it is a no, the retail broker and client know their positions. I think that is very important factor in terms of delivering service."

Melanie Alexander, executive director of Gallagher U.K., another A.J. Gallagher subsidiary, which deals in program business for public entities, highlighted the personal approach to doing business at Lloyds, noting that the upshot of this approach is to provide a lot of flexibility and to tailor the underwriting to the clients risk.

The placement of the risk "is not done by e-mail or off a spreadsheet. It is done face to face," she said. "The advantage is that there is a concerted decision [between broker and underwriter] made to place the risk, instead of relying on an actuary.

"Dealing with London, you have a chance to broker the risk and educate the carrier with facts, and not be driven by what [an actuarial table says] the underwriting should be."

Speaking practically, Kurt Bingeman, president of Russell Bond & Co., Inc., a managing general agency in Buffalo, N.Y., noted that when working with Lloyds there is a time difference to deal with.

One major point he tries to drive home to his clients is that despite efficiency of the Lloyds market on brokered business, clients can not wait until the last minute to get a policy bound. "If you want this bound on a Friday afternoon, in London there is no one there until Monday," he noted.

Mr. Bingeman said he prefers having the pen for a syndicate when placing business at Lloyds. He noted that the timeliness of claims service becomes more suspect when business is placed among a group of syndicates.

"We push more binding authority to get claim service predetermined because we are disappointed in the claim service on the open market," he said. "For the most part, many times there is no difference from one market to the other" with respect to underwriting, he noted. "The differential is in claim service."

Reproduced from National Underwriter Edition, July 1, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.