Brit chief calls for lighter regulation as he warns that Bermuda could be more attractive to start-up companies than London
The temptation to locate new business offshore will increase unless the London market makes vital changes, Brit chief executive Dane Douetil has warned.
Speaking at a lecture in the Lloyd's old library, Douetil said that post-9/11, Brit made the strategic decision to stay based in London and as a result experienced both steady and profitable growth. But he warned that if the decision were to be made today "it would be far more marginal".
He said that London had an "excellent underwriting and broking skills base" and that having Lloyd's at the centre gave it "innovation and strength".
But he said London faced problems as a centre for business, with far tighter FSA regulation than its Bermuda counterpart, tax difference and a greater cost of doing business.
Bermuda on the other hand, which has raised $10bn in new capital post 9/11, had a far better tax regime and a more flexible regulatory regime, said Douetil. It was also a convenient location for the US, the world's largest insurance market.
But, as with London, there were disadvantages to placing business in Bermuda. Douetil said that geographically, it was a small island that was "full to capacity". He highlighted the difficulty in obtaining working permits and quality personnel since the market had already poached the best the island had to offer.
Douetil said that growth in London had been slower than Bermuda and argued that in order to close the gap, there had to be a focus on regulatory issues.
He insisted that regulation must be lighter and that Lloyd's should not "duplicate what is happening at the FSA."
In what appeared to be an implied criticism of the troubled connectivity platform, Kinnect, he said that Lloyd's needed to "stop investing in technology and work on the standards it sets".
He added that the expense ratio of the London market needed to be reduced, that current acquisition costs were too high and that "processing business should not be a competitive advantage".
Douetil emphasised that to make London stronger, the spotlight must shift to contract certainty.
He said: "Let's make contract certainty the centre of the London market. Let's sell it as an advantage to the client. Make it a virtue and enhance London over other world markets."
Douetil also called for tax breaks to encourage insurers to set up in the UK and not offshore.
"If I set up offshore, I can do so for 25% of the cost of in the UK. However, if I fail, the UK market picks up the tab under the compensation scheme.
"If people passport in they should have an adequate compensation scheme in their own country."