I took over Reg Brown's mantle as lead underwriter of syndicate 702 in July. Looking back, it seems that my time at the syndicate can best be summed up by the maxim “times change and we must change with them”.
When I joined syndicate 702 in 1981 it was one of five syndicates managed by the Octavian Group – a members and managing agency set up in the 1930s to represent the interests of three Names and manage a marine syndicate. Then, all of the syndicate's capacity was provided by individual Lloyd's Names, there was no inkling of the crisis of the early 1990s that was to threaten Lloyd's and change the market and my syndicate irrevocably.
I need not dwell on the circumstances that eventually forced Lloyd's to change. We all remember the spirals of loss and the flurry of litigation that led to reconstruction and renewal, the formation of Equitas and the introduction of limited liability and corporate capital into the Lloyd's market.
For an institution that had altered little in more than 200 years, the enforced modernisation was brutal and there were many casualties. However, now that the first painful steps have been truly taken, insurers operating within Lloyd's are in a unique position to lead the global market.
Lloyd's of London still commands respect worldwide and its reputation for talented and innovative underwriting is second to none. Lloyd's network of global licences establishes its truly international credentials. Its security rating is consistently high and syndicates operating within Lloyd's continue to attract high levels of corporate investment.
This last point has attracted adverse media comment, but corporate capital is here to stay. Five years ago it accounted for only 21% of the £10bn Lloyd's market, today it represents more than 77%. A report by Standard & Poor's concluded that “most of the new [investment] capacity is headed for Lloyd's” in the London market.
Surely we should welcome the fact that so many big businesses worldwide value our expertise and are prepared to invest in our product. Leaders in any industry require high levels of secure investment and funding, and this is what they get.
Of course, no insurer is immune to the downward trend in the insurance cycle that the market has endured for so long. However, rates are “bottoming-out” in many sectors, and in some cases, beginning to rise. The worst is over.
The trend for globalisation is universal – it has affected almost every business sector. In the past few years takeovers and mergers in the insurance industry alone have led to the disappearance of household names such as General Accident, Commercial Union, Guardian, London & Edinburgh, Provincial, Sedgwick and Bowring and Minet.
In this exciting climate, Lloyd's has a unique opportunity to retain its identity, build upon the skills and expertise for which it is famous and take advantage of international investment.
In February this year “Priorities for Growth”, the report of the Lloyd's Market Board, set out a three-year strategy for strengthening the Lloyd's franchise and concluded: “Managing agents and their investors face a choice over whether to locate their businesses within the Lloyd's market or outside it. It is the LMB's very explicit aim to make our market the trading centre of choice. We want the best businesses to choose to operate through a powerful Lloyd's franchise.”
Lloyd's has also been working with the International Underwriting Association and Lloyd's Insurance Brokers' Committee to produce proposals to make Lloyd's and the London market more attractive to investors, brokers and insureds by simplifying how business is placed and claims are dealt with. A process now commonly referred to as “dismantling the Victorian pipework”.
Continuing on the theme of modernisation, some syndicates, including my own, long ago identified limited broker accessibility as an obstacle to business development. To solve this problem from our own point of view we established our UK service company in 1990. In January 2001 Lloyd's will address the problem directly by allowing access to non-Lloyd's registered brokers for the first time.
A way must be found to reduce the “frictional costs” of acquiring and retaining business for insurer and broker alike. These initiatives, and the implementation of a comprehensive ecommerce strategy, hold the key.
I welcome the continuing moves towards modernisation and globalisation at Lloyd's. The syndicate that I have the honour of leading into the 21st century is very different from the syndicate I joined in 1981. The managing agency is now part of Markel Corporation, a US-based insurer established in the 1920s and listed on the New York Stock Exchange in 1997.
Today, syndicate 702 can rely upon funding and skilled resources undreamed of 20 years ago. At the same time, we continue to build on our traditional strengths: quality of underwriting, efficient service and a reputation for innovation.
If Lloyd's is to establish itself as a world leader for the provision of insurance, change is inevitable. If you want to succeed, embrace it.