Underwriters must undergo behavioural change, Lloyd's chief warns
Lloyd's chief executive Nick Prettejohn blasted insurers and brokers for their failure to comply with the London Market Principles (LMP).
Speaking last week at the first FSA insurance sector conference, he said that only 22% of the LMP slips were "actually perfect".
He said: "There is nothing very technical about an LMP slip, it is about the inclination and discipline to agree a specified number of things and then record them."
He also warned that the Lloyd's and London market underwriters and brokers needed a major "behavioural" change if they were to meet the "demanding" deadline set by the FSA for contract certainty.
"The FSA has set us a demanding deadline to register meaningful achievement - the end of 2006. This means we have to demonstrate real progress by early 2005," he added. Prettejohn has earmarked a further £15m investment for the Kinnect project during 2005, which is claimed to be a significant tool for achieving contract certainty.
He added that he did not expect "Kinnect to make a profit for another few years" but hoped it would break even.
Lloyd's 2004 profit of £1.3bn (see box) was achieved against net claims of £1.2bn from the US hurricanes, an event year for natural catastrophes.
Lloyd's finance director Luke Savage said that its profits were £324m lower due to the recent arbitration settlement with Swiss Re and other insurers over the WTC claims dispute. Savage also said Lloyd's reduced the amount of reinsurance it bought in 2004 to £2.9bn from £4.1bn in 2003, retaining much of the losses itself.
Mazars partner Andrew Hubbard said: "Against the backdrop of the worst spate of hurricanes in decades and the Swiss Re dispute settlement, to produce this size of profit is exceptional. Lloyd's overall exposure to risk is much better managed, which is why it can retain certain losses and cut its reinsurance spend," he said.
Lloyd's has reduced its capacity by 10% for the 2005 account compared to 2004.
Prettejohn would not be drawn on what lines of business could see major rate deterioration during 2005 and 2006, but said that "big ticket property rates" had fallen over the past 12 months and would remain competitive.