Precise details of the review have not been disclosed, they said. “A strategic review is being worked on,” said one financial services source, asking not to be named because he was not authorised to discuss it. Another source, a senior executive at a firm that supplies services to Lloyd’s members, said he understood that included looking at its unique structure. “The most fundamental question is, what does Lloyd’s actually want to be?” the executive said. At present, Lloyd’s is both a marketplace for its 80-plus syndicated members and an umbrella body that sometimes acts like an insurer by getting deeply involved in members’ day-to-day practices.
It also regulates the members under the auspices of the UK government. Asked whether Lloyd’s was conducting a strategic review, Chairman Bruce Carnegie-Brown told Reuters on Monday he would not use that term. “To me a strategic review implies some kind of crisis, where you’ve got to put everything into a big hat and end up boiling the ocean. We are not interested in that. What I think we have is a series of improvements and ideas,” he said in a telephone interview. He said Lloyd’s was looking at all aspects of the business, however — cost structure, technology, its role as a marketplace and a regulator, and how it mutualises risk.
He said recommendations from an “annual strategy day” in June were presented to the board last week and a number of “workstreams” were being set up. “I think what we need to do is to look at all aspects of what we do, to try to make sure everything we are doing is done better and turn it into more of an exercise to keep turning the stones over of the things that we do to figure out if we can make things more efficient,” he said. Carnegie-Brown said he did not see Lloyd’s relinquishing its regulatory duties but said there were “whole aspects of regulation that we need to look at to make sure that we are not duplicating what is already done by other regulators”.
Lloyd’s was a pure marketplace, member syndicates could be more innovative, accommodating short-term losses for future gains, industry sources said. Doing so would risk Lloyd’s losing the single-A credit rating that benefits all members, however. “If it’s a marketplace, it’s for each party to come to the market, it’s for them to work out what they want to offer,” the senior executive said, while an insurer would incorporate the individual groups operating within it to form a company. “I do not think it is being crystal clear which one it is, or wants to be.” The UK government is keen that Britain, the world’s largest commercial insurance centre, remains competitive in financial services after Brexit.
Lloyd’s is setting up a subsidiary in Brussels to maintain access to Europe’s single market. “Lloyd’s needs to ensure that London keeps its edge in insurance, which is vital for the wider financial future of London,” the financial services source said. Lloyd’s started life in Edward Lloyd’s coffee house in 1688. The futuristic look of its 14-storey headquarters in the City belies an emphasis on customs and tradition. Most business is still conducted face to face. Underwriters and brokers use briefcases or suitcases to carry paperwork around the building; some marine insurers record the sinking of ships with quill pens.
The requirement for men to wear ties was relaxed only recently. The market was almost brought to its knees by asbestos-related claims in the 1990s, which wiped out many of its individual investors, known as “names”. Members include small underwriters as well as listed UK firms like Beazley and Hiscox and units of global insurers, specialising in complex commercial risks such as marine, aviation and niche energy markets. Julia Graham, deputy chief executive at insurance buyers’ association Airmic, said Lloyd’s has set up a working group with her client organisation to discuss improving their relationship. She said Airmic regularly met Lloyd’s at board level but that a meeting this month was “a bit more intimate”. “The main point is that they asked us,” she said. “Lloyd’s is still a leader. It’s important that it remains relevant.” Last year’s £2bn loss, the first in six years, followed a record year of insurance losses from natural disasters globally.
Sources and photo-credits: Reuters, Gulf Times