The market's vision for the future has not nailed down the key areas that need reform, says Andrew Cave
What's this: a three-year plan for the Lloyd's market? Until recently, such a concept might have been regarded as a comical oxymoron. After all, the market has not bothered with such plans for most of its 318-year history. And only 15 years ago, anyone who envisaged a 42-page document setting out the next 36 months for the organisation could have been accused of being an eternal optimist.
So Building the Optimal Platform must be regarded as rather an unusual animal. That in itself says much about Lloyd's. For there is little in this logical and methodical mission statement that would cause many ripples at most modern and efficient international businesses operating out of London.
Of course, Lloyd's is neither modern nor efficient, and perhaps that is the point. Despite the reforms of former chairman Sax Riley and the work of recently-departed chief executive Nick Prettejohn, the market is still riddled with ancient practices such as the annual venture, while expensive flops such as Kinnect have failed to finally take the market properly into the electronic age.
So a year's labour has gone into working out what Lloyd's is for and how to make sure it does what it's supposed to do. Lloyd's has found five clear benefits that the market possesses in theory: a clear and transparent performance framework; capital advantages; a secure highly-rated market; outstanding market access; and efficient business processes.
Like all mission statements, however, a lot of this is promise rather than reality. There are steps and deadlines to turn one into the other, but the small print shows how much work needs to be done.
Not less than 85% of the market's volume must achieve contract certainty by the end of this year. All the slips finally need to work under the same system too and accounting, settlement and claims handling need to improve.
There are carrots for good performers, who may not have to hold as much capital as poorer ones, and a pledge from Lloyd's to develop clear performance standards so all market participants know what they must do and what the penalties are for failing.
Then there's the nub of the whole exercise, a promise to pare down the market's expenses so the cost of doing business there is roughly the same as Bermuda, where Hiscox, Amlin, Catlin and Wellington are all expanding to exploit market conditions resulting from last year's $80bn hurricane bill.
Achieving this might involve some weighty assumptions about the value of mutuality and the benefits of Lloyd's subscription model and new franchise system. But the implication is clear.
Lloyd's has been a great survivor for more than three centuries, but it needs to transform itself again if it is to compete with global rivals that are not weighed down by the restrictions, historic inefficiencies and structural problems that hinder the London market.
In a global economy, insurance can be written anywhere. Lloyd's has a veritable heritage and strong position, but chairman Lord Levene is right: the market is now in the platform business. Lloyd's new chief executive will have much work to do to make sure it keeps and improves the one that it has. IT
' Andrew Cave is the former associate city editor of The Daily Telegraph