LMA concerned about increasing capacity in softening market
Pressure is mounting on Lloyd’s to explain the thinking behind its recent admission strategy for new start-ups.
The Lloyd’s Market Association (LMA) has added its weight to calls for greater clarity on how new entrants are judged after speculation of unrest amongst senior industry figures.
David Gittings, chief executive of the LMA, said it would be “helpful” if the Franchise Board found a way of explaining its position.
“If people understood the way in which they are approaching this, hopefully the market would be more comfortable with what is happening,” he said.
The LMA’s underwriting committee and board recently met with Lloyd’s franchise performance director Rolf Tolle and the Franchise Board to discuss the “genuine concern” among members about increasing capacity in a softening market.
Gittings said: “Tolle is clearly trying to balance the concerns of the market, in terms of letting people through as rates soften, with the competition issue around this being a marketplace and it not being possible to restrict competition, for the benefit of those who happen to be participants.”
Lloyd’s recently insisted that meetings are regularly held with market chief executives where any concerns can be raised.
A Lloyd’s spokesman added: “Looking at what a new syndicate brings to the Lloyd's market is one of the many issues we consider as part of our rigorous admissions process.
“The standards for admission at Lloyd's are very high and we have a rigorous process for admitting new syndicates. Every applicant is reviewed on a number of criteria to ensure they have a realistic underwriting plan, a high quality underwriting and management team, and high quality capital.”
‘ Lloyd’s chief executive, Richard Ward, has written to the market with a warning to improve operational processes or face stringent measures.
In a letter to all chief executives, Ward repeated threats, made during a speech in May, that unless the use of systems, such as Electronic Claims Files (ECF) and the accounting and settlement (A&S) repository increased, the Franchise Board would take action.
Measures would include naming and shaming the worst performers, mandating the use of ECF and A&S and imposing capital loading on “unacceptably” poor performers.
Under Market Reform Group (MRG) targets, by the end of quarter three the take up of A&S and ECF should be 60%.
The market’s current use is 17% and 28.5% respectively.
2007 Lloyd's start-ups
* Pembrace Casualty Insurance Syndicate
* Ark Syndicate Management
* Montpellier Syndicate 5151
* Leinster Syndicate 4882 (yet to get approval)
* Mitsui Sumitomo Insurance