There's a new franchise performance director at Lloyd's and he says the market cannot afford to goof again. Rolf Tolle talks tough to Elliot Lane
Lloyd's new franchise performance director Rolf Tolle is a straight-talker. He has tough words for any underwriter who doubts his conviction to the job.
"If you try and duck and hide from me, I will smoke you out," he says.
From 1 March, he will resign from his role as chief underwriting officer of Faraday and officially take on the job that, allegedly, no one in the Lloyd's market wanted.
In fact, Tolle himself did not apply formally for the role. A number of senior figures were asked to put forward the names of people whom they felt would be capable and suitable.
"The first I knew was when a friend called and said "I have put your name forward'," Tolle admits. Is he still a friend? "Oh yes, he is still a friend. Though I don't know if that was a friendly act," Tolle adds with a smile.
He says a number of people were interviewed, but some shied away once they saw the brief.
"What people know is that the job is extremely challenging. It is a fantastic challenge. I think I have the experience necessary to make changes and make an impact. It is time to prepare for a more solid future. I don't think as Lloyd's we have the liberty of allowing ourselves to goof it up again," he says.
Thorny issues
Regulation at Lloyd's has always been fraught because of its political nature. The corporation often turned a blind eye to errant players in the market because it did not want to tarnish Lloyd's reputation.
Tolle, however, is ready to tackle the dichotomy of creating a Lloyd's market that is transparent, with a strong disciplinary programme but doing so without damaging its worldwide reputation.
But if the market is not receptive to the regime, will Tolle call on Canary Wharf and use the strong arm of the FSA?
"I don't think that will be necessary. I think like any market place, we will have excellent performers who have few issues to address, but also those practitioners who do have problems. My role should be to help those with problems from a macro-level. We may then have to interfere if things don't go in the right direction. And if we can't see an on-going sound proposition then we have to tell them they can't continue to trade."
His intention is to introduce the same business philosophy that Faraday has adopted. This is to focus on profitability, achieve target margins, introduce strict controls and keep tight checks of claims aggregation.
There have been some misconceptions about Faraday's situation, which Tolle wants to put straight.
"Faraday has had an excellent 2002 year - we will have outperformed the majority of the market in our opinion. Not just because our results are going to be excellent, but also because the company is fully reserved for the future."
D&O crisis
Faraday's results will be a pleasant surprise, recording a "substantial underwriting profit" across most of the classes of business with "double digit growth in absolute terms", he says.
"The claims severity in 2002 has been positive, namely no major storms or earthquakes, so property lines are doing well, and so is reinsurance. The casualty lines for 2002 are acceptable, though it will be compounded by the run-off of 2001 and prior years."
But Faraday has had to put its directors' and officers' (D&O) book into run-off and some high-profile underwriters have left or defected. What happened?
"We decided to put D&O into run-off predominantly because we could not get the return from that line of business that we could get in other lines. Results were appalling for many years."
But wouldn't Faraday have had better information as lead underwriter? "Yes, but I think it was a misjudgment by all the market, not just Lloyd's or us. Everyone misjudged the exposure that one took. In 1997 the policy form was widened and we gave coverage to clients on a longer term basis. Everyone did that. In the end all carriers made the same mistake."
And the underwriters?
"We have lost some underwriters because they may have felt that an underwriting policy driven by underwriting profit and discipline is so far off the old style of underwriting that they decided to find other homes to go to," he explains.
In his Insurance Institute of London lecture two weeks ago, Tolle made it clear that syndicates that did not achieve "bottom line profitability" should worry in the future. Would he apply the some rigour to Faraday's syndicates?
"No doubt whatsoever. I would cut any line of business at Faraday that is not making bottom line profit. In my speech I highlighted that, from my own experience, no business has ever been killed by expenses. But I have seen many companies killed by concentrating on premium income."
Past is behind us
Last week, Axis Specialty chief executive and former deputy chairman of Lloyd's John Charman attacked Lloyd's new franchise structure, claiming it was only "window dressing" and should be dismissed by underwriters.
Tolle's retort is simple. "OK, he doesn't like it. But what is his alternative? He doesn't seem to have one. Let's give this a concept a chance. It is about building a decent market, based on sound ethics. It is not going to be black and white. Life is about dealing with dark greys and light greys.
"So I say to the market - let's get together and agree on what is right and what is wrong. And put the stupidities of the past behind us."
Personal profile
NAME:
Rolf Albert Wilhelm Tolle
EMPLOYMENT HISTORY
Oct 2001 - to present Faraday Underwriting (formerly D P Mann ) Chief underwriting officer
Sept 1990 - Sept 2001 Europa ReChief executive
Aug 1987 - Sept 1990 Polaris Chief executive
Apr 1975 - July 1987 Storebrand Christiania General Head of reinsurance
DATE OF BIRTH:
25/12/1947
MARITAL STATUS:
Married
QUALIFICATIONS:
Dip. Pol. Free University of Berlin (F.U)
Interests:
"I love reading. I am a very good bridge player. I think I'm a better player than Omar Sharif - he spends too much time watching ladies. I'm happily married so I'm more interested in playing serious cards. "
Tolle's views:
On Faraday's ongoing performance: "We are well capitalised. Our business model doesn't require any further capital raising and we are fully reserved for the 2003 account and into 2004. We have addressed many of the issues that would affect these years and took steps much earlier than many others."
On Lord Levene: "He will be a breath of fresh air for Lloyd's.
He, like me, is a straight-talker. He calls a spade a spade. I look forward to working with him."
On Lloyd's regulation: "It doesn't matter if you are a big managing agency or just a small syndicate - I will expect you to accept the new business philosophy. If you don't then we will have an issue."
On rumours that Nick Prettejohn may stand down this year as Lloyd's chief executive: "I have no idea. He is a good guy. I can't really see him not being around."
