Will Tolle micromanage, asks Andy Cook

Last week was a big one for Lloyd's. Senior management gave its first public directions of the new year. First up was new franchise board director Rolf Tolle. The man dubbed "Mr Sqeaky Clean" fired warning shots across the bows of unprofitable underwriters. The messages was clear: if you don't make underwriting profits then you risk being sanctioned by the board.

Predictably, reaction was mixed. Publicly, managing agencies and active underwriters applauded the sentiment - after all, bad underwriters have dragged the reputation of the market along the bottom for too long now. But privately, the smaller agencies feared that Tolle would have no problems coming down hard on them. Would he be brave enough to antagonise Warren Buffet, who is reckoned to be the most powerful capital provider in Lloyd's now? Only time will tell.

Next up to the oche was Lloyd's chief executive Nick Prettejohn. If Tolle had ruffled some feathers, it seemed Prettejohn's brief was to smooth them back down. He said that Lloyd's is not interested in micromanagement. Well, if Lloyd's isn't interested in micromanagement, then how will Tolle and his colleagues be able to determine which specific lines are not making an underwriting profit and what measures can be made to turn the loss makers around?

Finally, it was the turn of Lord Levene. The US market was his focus. It is currently Lloyd's biggest market (accounting for 38% of the market's capital) and Levene sees its influence growing. A worry for UK brokers? Well obviously not those broking to the US, but for the remainder, will Lloyd's continue to be there to pick up the difficult risks?

A more pressing concern for Levene is the willingness of capital providers to stay in the market. Some are making (or thinking of making) a move to Gibraltar for lower solvency margins (see page 8) and others have withdrawn capital, like Ace, to write directly into the UK commercial market. At the moment, there are profits to be made at Lloyd's, but operating there under the franchise board will become more expensive, not less, and the hard market has only a year of two left in it.