Losses in the Lloyd's Market will be worse than forecasted for the year 2000, Names were told at the Association of Lloyd's Members' (ALM) annual meeting.
Andrew Moss, Lloyd's finance director, said the claims expectation for 2000 had improved compared with previous years, with fewer losses from catastrophes, although premium increases will not flow through until 2001.
While the cycle is still expected to take an upturn, the high incidence of bad debt has adversely affected the market. Lloyd's Names had previously been told that accounts would break even in 2000.
Chairman of Lloyd's, Sax Riley, said the market had seen “diabolical” losses in the past few years.
He announced plans to implement a ten-year game plan to improve profits, which will be put into place by the end of next year.
“To return to the uniqueness of Lloyd's, it has to market itself as a franchise,” he said. “Entrants need to operate under guidelines on profits and we have to work to make sure that there is the discipline in place to get rid of the people who are dragging the market down.”
An exit strategy will be put in place to ensure that firms that are performing badly can leave the market with ease. Riley added that Names should see dramatic improvement by 2003.
Losses in Lloyd's were £1.06bn in 1998 and £1.2bn in 1999, although this is expected to deteriorate.
David Shipley, underwriter for MAP syndicate 2791, said directors at the top had been guilty of “rogue management” – instructing underwriters badly and then firing them.
Underwriters needed to have more authority to “sit on their hands” and refuse bad risks, he added.
Shipley said that all underwriters had entrepreneurial spirit and wanted a cut of the business. By doing this, he said, companies could benefit by not having to pay underwriters enormous salaries.
“In order to build on our strengths at Lloyd's, we need to be good at writing unusual classes of business.”
“We are not good at selling the product and if we try to turn ourselves into mini Royal & Sunalliances, we will be genuinely irrelevant.”