That's niche broker Besso talking... Andy Cook went to meet the company's management team
Question: which broker in the Insurance Times top 50 has quadrupled its business over the past five years and increased profits ten-fold over the same period to 24.9% of turnover in 2001? The answer is: Besso.
Besso is a niche business. It is a wholesale broker that specialises in North American property and casualty. It reported a 2001 turnover of £16.6m and pre-tax profit of £5m.
The company has a colourful past. A Lloyd's broker since 1967, it was owned by Joseph Besso, who left the firm to his sister. In 1985, Besso Limited chief executive Colin Marshall, Besso Holdings chief executive Colin Bird, financial director Andrew Whiting and a couple of colleagues acquired the company.
In 1990, Besso hit a problem. It worked closely with the Weaver Group and its demise forced Besso to look for a merger.
"We were lucky enough to be approached by Jardines," says Bird. Besso continued to trade as a separate entity within Jardines and in 1994, the managers started negotiation to buy out. And in 1995, they succeeded.
As a London-based Lloyd's broker, Besso relies heavily on the Lime Street market for its capital - although Bermuda is also a significant source. And it is Lloyd's future that concerns Bird, Marshall and Whiting the most.
"We are concerned about the dynamics of the institution [Lloyd's] changing and the fact that the underwriter is almost a thing of the past," says Bird.
"Their ability to underwrite without referring to a committee is almost gone... it makes working out what people are going to do very difficult" he adds.
"It makes the personal relationship side very difficult, because you can't have the same strength of individual relationship when you go and negotiate with a guy, knowing that he's going to commit to a risk on that day. But then he says, `Oh I hear what you're saying, thanks very much, I like doing business with you, I'll be back in two weeks,' and you'll know whether you can do this or not. And then it goes through three layers of bureaucracy and they come back and say: `Sorry we're not in that class anymore.'"
Not about Names
He adds: "I can see the reasons because very quick underwriting reaction has often been poor. But there needs to be some middle ground involved in this. They're causing a link in the chain to stretch to the point where we are losing our ability to be competitive."
The dilution of underwriters' power is not caused by the demise of Names, says Bird. "I think it's the structure of the syndicate, it's whether the syndicate has set itself out to leave the power of the pen with the underwriter or if it has set itself up to be a underwriting by committee; you can find that from a Names' point of view or a corporate one."
So Besso must be worried that the tough new regulatory regime laid out in the last instalment of the Tiner report and the new franchise structure will further weaken the underwriters' power.
Bird adds: "We applaud and support efforts to maintain Lloyd's premier position. But Lloyd's needs to be competitive.
"It is so difficult now to get a binding authority approval from a Lloyds underwriter because of layers and layers of paperwork and approval to the extent that they'll probably just turn round in the end and say it's not worth the aggravation. But binding authorities are a historically significant part of the Lloyd's book of business."
One of the toughest challenges facing Besso is moving to electronic systems. Andrew Whiting says: "The audit trails are good anyway now, but it's just paper and there are serious inefficiencies."
And moving to electronic trading has been difficult. Marshall says: "Xchanging has been a disappointment. They seem to have this belief they are delivering and have delivered everything they've been asked and they don't accept criticism. But there are queries about speed of processing, there is inconsistency in files being agreed and files being thrown out for queries. And the claims situation is that there are times when we are forced to fund the claim. Because it's not possible for us to say to a client, well the Lloyd's system has lost it."
But it's not all doom and gloom.
"Rates are rocketing, particularly in the catastrophe areas, if you live in Florida or California or Texas where you're likely to be blown away or earthquaked away, those rates have really gone up. London has responded to it very well, there have been significant players, the Wellington syndicate for instance has been a significant player in the primary catastrophe area, and they've taken business from lots of other people."
Can Besso sustain its impressive growth? Yes, but only if capacity can support these rising rates.
London EC3N 2LY
Colin Bird - executive chairman
Colin Marshall - chief executive
Andrew Whiting - finance director
Richard Goward - executive director
Howard Green - executive director
What Besso does
US property and casualty
Alternative risk transfer
Lloyd's 60% of capacity
London Market 40% of capacity
Bermuda is an increasing source