Southampton, Bermuda–Lloyd's, after successfully surviving $5.25 billion in U.S. hurricane losses, is setting its sights on improving its efficiency, Lloyd's chairman said yesterday.
In an interview during the World Insurance Forum in Bermuda, Chairman Peter Levene said if Lloyd's had to pay out the $5.25 billion cost of Hurricanes Katrina, Wilma and Rita five or six years ago, "that would have been the end of the world."
But in 2005, Lloyd's people just "got on with things," he said. Lord Levene called Lloyd's absorption of such a huge cost without losing money a "fantastic" testament to the market reform process that has taken place over the last few years.
While the market won't make any money for 2005 either, "the fact that we could do that and get it right, and people haven't commented on it [is] sort of a backhanded compliment," he said.
The result proves that market participants are behaving responsibly now, he said, referring to a key goal of the market reform process that shaped Lord Levene's first term as chairman, which began in 2002.
Now in his second term, Lord Levene said that a three-year plan set out for Lloyd's seeks to make it the market of choice, which means market participants have to work smarter and more efficiently.
"This place is smart. This place works quickly," he said, referring to Bermuda.
While Lord Levene noted the efficiency and faster pace of the less complex Bermuda market several times during the interview, he dismissed talk of a competition between Lloyd's and Bermuda. The two markets "actually complement each other quite well," he said, noting that Bermuda is the third largest investor in Lloyd's, and that Lloyd's vehicles have been investing in Bermuda as well.
At Lloyd's, he said, the push toward greater efficiency will be the job of the next chief executive officer of Lloyd's. Nick Prettejohn, the prior CEO, left his position last year, and Lloyd's has set out on a search for the next CEO–a process which is nearly complete, according to Lord Levene.
"We should be making an announcement fairly soon," he said, noting that the person appointed will have to be tough enough to make changes "happen in a market, which is not the same as doing it all in one company."
"You've got to take people with you–to persuade them," he said. And the place the new CEO will need to take them to is into "the 21st Century," he said. Lloyd's needs to get out of "this culture of paper, and more paper, and more paper," and it needs to operate with "the modern tools that the rest of the financial services industry uses."
Lord Levene said he sees the elimination of one modern tool–the recent disconnect of Lloyd's Kinnect system–as a move toward efficiency. The system allowed brokers and underwriters to talk to one another electronically, but they no longer need Lloyd's to spend money on the system, he said. Brokers and underwriters have said they can buy such systems off the shelf.
"We're not in the software business," Lord Levene said, noting that Lloyd's was funding this system previously only because such systems were not available.
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