Max Taylor, chairman of Lloyd's, and Tim Carroll, his counterpart at the International Underwriting Association of London (IUA) went to the US last month – the first time the leaders of the two insurance giants had travelled abroad together. Their purpose was to promote London as a market for US insurance, but it was also the first tangible sign of the newly-announced co-operation between Lloyd's and IUA.
Georgia proved a good place to start presenting the new London United team.
Georgia – known as the home of Coca-Cola – but also the headquarters city of many global enterprises such as Delta Airlines and Home Depot – represents Lloyd's fifth largest US market after California, Texas, Florida and New York.
That translated to premium volume of about $65 million (£39m) last year.
Lloyd's has 30% of Georgia's surplus lines business – the cover which local insurers are unable or unwilling to provide – compared to an average of 18% in all states.
“Georgia is a very important market for us,” said Taylor, pointing out that the state is home to several leading international companies, and risks in all Lloyd's specialist areas, including aviation, energy, transportation, and non-marine property.
Carroll echoed the sentiment. “It is a key market, especially when you look at the way the state is growing, relative to the rest of the US. It is seeing strong growth in the industrial commerce sector, with companies such as Southern Power, (the largest generator in the US), Coca-Cola, and Lockheed located there.
“They are huge buyers in our market. Clearly London holds attractions for them.”
But Georgia is important for another reason – John Oxendine is the state's Insurance Commissioner.
Obviously that means he is an important man regarding London market business in Georgia but, of more interest to Taylor and Carroll, he was recently appointed chairman of the Special Insurance Issues Committee of the National Association of Insurance Commissioners (NAIC). In that position he has a senior role in the decision making which influences London insurers' presence in the US.
Lloyd's wrote about $4.1 billion (£2.5bn) of US business in 1998, including classes such as reinsurance and so-called “exempt lines” like aviation. In all, US business provided about a third of Lloyd's total worldwide gross premium income. About $1.3bn of that was surplus lines business, making Lloyd's the second most important surplus lines underwriter in America.
Meanwhile, the companies in the IUA wrote a similar amount of surplus lines business, bringing the total to some $2.6bn, or about ten per cent of London's total gross premium. The US is also an important buyer of reinsurance, ceding premiums well over $2bn (£1.2bn) to the London market, more than half of all US cessions to Europe, and well ahead of Germany, France, and Switzerland combined.
Thus the NAIC, made up of the insurance commissioners from each US state, is a key target for the message that London is united, secure, and efficient.
It has no legislative power, but develops influential “model laws” which many states adopt, and maintains a list – the White List – of foreign insurers that meet certain requirements. The list is used by many states to determine eligibility for writing local surplus lines business.
Oxendine's committee keeps watch on the activities of insurers doing business in states other than their home state or country, including those from London.
Since his appointment, he has called for a new task force to look at consumer protection issues related to those insurers, and for a special committee for reinsurance. So giving Oxendine a positive impression of the size, security, and strong ties of London's players to US commercial insurance buyers was a major goal for Taylor and Carroll.
However, the chairmen did not meet with Oxendine – who spoke at the IUA's International Regulation conference earlier this year – until late in their visit. First came a dinner with the Lord Mayor, hosted by the American Bar Association. Taylor described the event as “an excellent opportunity for both Tim and myself to meet people from the legal side, to promote the attractions of the London market”.
The following morning, the pair hosted a Lloyd's-sponsored breakfast at the Ritz-Carlton Hotel. The guests – risk managers from Atlanta's largest companies – were invited for an informal conversation, bouquets and brickbats included, of their relationship with London's insurers.
“They applauded our quick decision making, easy access to underwriting skills of the highest quality, and the long-term relationships we have built,” Taylor recalled.
“We were pleased to hear them voicing the significant attractions of Lloyd's and the London market.”
He said the risk managers were keen to point out improvements London could make in its service provision.
Neither Taylor nor Carroll are shy about admitting what the problems are. Nor are they likely to omit mentioning how they plan to eliminate them. “The concerns were very few, and they are familiar territory, such as delivery of documentation. We are very conscious that they require attention,” Taylor insisted.
“The main criticism was London's lack of transparency,” Carroll said. “A lot of the risk managers admitted that the way we do things is a mystery. And there was certainly a feeling that we could do a lot more to improve our claims process.”
He clarified that it is not the willingness to meet claims that is a concern. In fact, the Georgia risk managers are very impressed that in London, underwriting and claims departments are not disconnected.
Underwriters themselves often get involved in claims, which can be unusual in the US. But they feel the claims process could be streamlined, along with areas such as policy issue.
“The concerns are partly to do with the nature of the subscription market, but I wouldn't want to make excuses. Our initiative with the IUA is all about delivering a world-class service,” Taylor said.
Following a lunch with the Lord Mayor's party hosted by the Federal Reserve Bank of Georgia, Taylor, Carroll and the Lord Mayor attended a round-table discussion with Oxendine and about two dozen executives from local brokers, clients, and adjusters.
The guest list included such figures as the presidents of Lockheed-Martin and Georgia Power, and the heads of seven Georgia broking offices that produce business for the London market.
The discussion began with Y2K, Taylor reported. “We were very pleased to find that the London market is perceived to be quite constructive on the issue.”
Other topics included mergers and acquisitions in the insurance industry – a trend which the group agreed is unlikely to slow down. The Georgia visit may be followed by other marketing trips combining the heads of Lloyd's and the IUA.
“It was our first time together, and we felt it worked,” Carroll said.