New chairman of the City Property Association , Bill Gloyn tells of his plans to bring the worlds of insurance and commercial property closer together and his flood fears for the City.
It’s no coincidence that Bill Gloyn was appointed chairman of the City Property Association (CPA) in the year that the commercial property industry squares up to its biggest risk in more than a decade, as values tumble. Following in the footsteps of property giants such as Mike Hussey, managing director of Land Securities, Gloyn, Aon’s chairman of real estate, Europe, was the first representative of the insurance industry to be appointed to the post, at the end of April.
Gloyn, who says being awarded this post is the highlight of his career so far, believes the insurance industry should have a greater profile in the world of commercial property. In his role as chair of the association representing City landlords and occupiers, he also plans to lobby London’s mayor and other public organisations over the vital issues of transport, security and flooding – all risks that property owners and insurers share.
“The general council took the conscious decision that it was a particularly good time for someone of my background to come along and do something different,” says the bearded Gloyn proudly at Aon’s Devonshire Square headquarters. “It was considered the right time for a man who has focused most of his working life on the risks surrounding commercial property to take the helm with a view to highlighting some of the big issues that are facing the business and attempting to garner some solutions.” Though Gloyn, in his friendly, avuncular manner, freely admits: “Some of the problems facing the world economy at the moment may be beyond me to solve.”
So putting the economy to one side, what does Gloyn hope to achieve? First up is transport. “Any major financial centre is critically dependent on its transport system and most of us who travel in and out of London know that its transport is not the best – indeed, it could sometimes be called the worst,” he says. This is more than a nuisance – it is a major risk which the capital must manage. Gloyn continues: “We have enormous numbers of people from around the world working in London because they like being in London. If just two or three of those organisations decide this is not where they want to be, then that starts to have an impact.”
Allied to transport are ongoing concerns about security which, since 9/11, has been at the top of the City’s list of worries. But those attacks were many years ago now, and the security measures that were put in place at the time are beginning to look outdated, as are those left over from the days of the IRA. “It has been a long time since there was a public re-examination of some of those security issues,” says Gloyn, who like any good risk manager believes that talking about risk at the earliest opportunity is the best way of mitigating it. “If you try to avoid the risk, you can reduce it,” he adds.
But these two issues, important as they are, pale next to Gloyn’s passionate advocacy of the need for better flood defences. The former risk manager, who arranged the insurance for the development of Canary Wharf, has already written to the new mayor, Boris Johnson, pleading for his help in convincing the government to improve the capital’s flood defences. He has made quite a name for himself in property circles with his outspoken views.
“A serious flood in London could destroy the City,” insists Gloyn repeatedly. “That’s not just me scaremongering – that’s looking at the thing realistically.” So what should be done? Gloyn believes that all the information available to the government on flood risk should be immediately shared with business leaders. “Someone somewhere knows the answers,” he says. “For example, what is the expected life span of the Thames barrier? And we don’t just want some PR, spin doctor answer, but some real facts. That’s the classic risk management cycle – first of all, you need to understand the risk. The second step is to reduce or remove it, and the third is to transfer it to someone else – which is where insurance comes in.”
“A serious flood in London could destroy the City. Thatâ€™s not just me scaremongering â€“ thatâ€™s looking at it realistically
But perhaps not for much longer, in this instance. The insurance industry is currently renegotiating its agreement with the government over the provision of insurance for homes in flood prone areas. It has threatened to withdraw cover unless the government stumps up the extra millions needed to improve flood defences. Gloyn warns that this could lead to banks foreclosing on mortgages for uninsured homes, and eventually leave people homeless.
And, while the agreement with the government does not cover insurance for commercial property, it is likely to influence it. So the CPA, with Gloyn at the head, has been furiously lobbying for action. “We wrote to the government in the lead up to last year’s Comprehensive Spending Review demanding more money and the government effectively came back with a very negative response,” he recalls. “I have written to Michael Pitt [who is conducting a review of flood management on behalf of the government] suggesting that more has got to be done – not just spending more money, but actually looking at the whole risk more seriously with a more analytical mind and trying to come up with some solutions.”
Turning to the state of the economy, Gloyn admits that there are limits to the protection insurance can offer. Could insurers develop a product that would offset the risk of a crash in the value of a building? Probably not, he thinks. “The response from any realistic underwriter would be, if I wanted to take the business risk of commercial property, I should be a commercial property owner or developer.”
However there is one important insurance aspect to be considered – the adequacy of business interruption (BI) cover. If a tenant moves out and the owner is not able to re-let the building at the same rent because the market has gone down, will his BI cover it? “It all comes back to the need to focus the attention of commercial property people a bit more on insurance.”
That’s not always an easy thing to do. In his characteristically jokey manner, Gloyn acknowledges that the warnings of insurers are not always welcomed. “I don’t get invited to parties because no one wants to talk about risk over a gin and tonic,” he chuckles. “Property people don’t want to talk about risk because the road to property development is strewn with an awful lot of carcasses.”
Which comes back to Gloyn’s ultimate purpose in taking the chair of the CPA. “I’ve had lots of highlights in my career but the presidency of the CPA is the absolute pinnacle,” he says. “To have melded in such a visible way the worlds of insurance and commercial property is for me a matter of immense personal satisfaction and I hope I can help both businesses work more closely together.”