The Salvage Association's (SA) attempt to break even and eventually nudge into profit is welcome news. But its strategy to achieve profitability through expansion outside Lloyd's is not.
When the 300-year-old market withdrew its funding from the SA, the marine casualty operation struggled to keep afloat. British Maritime Technology subsequently acquired it and, a year on, the SA has cut back on its debts.
Now it hopes to eliminate its £1m deficit by opening more global offices and establishing itself in other markets.
Sadly, this has become a familiar tale. It appears the only way to make money in insurance is outside Lloyd's.
Large insurers like AXA and Groupama first illustrated this by withdrawing from the market. The past few months have seen an acceleration of this trend.
Some of Lloyd's largest participants are also turning to other insurance centres. In the past two months, Aon, Wellington and Goshawk have snubbed the market, preferring to invest their money in tax-free Bermuda.
Despite next year promising mammoth premium rises and an upturn in the cycle, Lloyd's capacity will only stand at £12.5bn. Prior to 11 September, syndicates were requesting massive pre-emptions, which would take the market up to £13bn, or possibly even £14bn.
Investing in Lloyd's is no longer such an attractive option. Numerous years of losses have tainted the market's image and it's no wonder capital providers are doubtful about its future.
It is now up to Lloyd's to prove all sceptics wrong. In many ways, 2002 represents a chance to attract new members, as well as to convince current participants it can be profitable.
Underwriters and brokers must endeavour to write and place good business, instead of taking on any risks. Lloyd's must show it is not a sinking ship, otherwise it may not get a second lifeline.
