The franchise board was put in place a year ago Chief executive Nick Prettejohn tells Elliot Lane how the market is responding.

Lloyd's chief executive Nick Prettejohn is unhappy with the composite market at the moment. "You could say I'm extremely sore about the composite market, Aviva in particular, after poaching my finance director," he says with a wry smile.Andrew Moss's departure from Lloyd's was a shock but not a surprise.Lloyd's has stolen a large of amount of business in recent years from the composite market, adds Prettejohn, so "it seems only fair to grab one of our team".It is obvious Prettejohn knew that Moss was ambitious and can only sing his praises for the work he has done.When Lloyd's posts its exceptional results in April, Moss will be sitting next to Prettejohn as the figures will be testament to their combined efforts. Prettejohn has worked hard in the past 12 months to initiate the market reforms. His defining speech at the CII where he stressed that the market must begin to understand that bottom line profitability was the only acceptable business strategy for the future is beginning to take hold.Prettejohn is pleased that the first year of the franchise board has moved from theory to practice. "It is all well and good having an idea, but making it work is a different game."Was he surprised how many of the business plans had to be rejected? "We didn't reject many at all. The issues surrounded GoshawK and Dex were that they had an irreconcilable strategy which was against the franchise board's objectives. Dex came to the conclusion it would not compromise so could not operate in the Lloyd's market."

Constructive processHe says the vast majority were good and constructive discussions between the franchise team and the individual businesses in the market."Sure, it did result in changes and modifications to some people's plans. There were arguments, but it was a constructive process where my phone was not in meltdown with people being terribly upset over what was going on."What the team learned was that it is about "compressing 60 odd businesses plans into a short space of time. We will not do it the same way this year."Prettejohn believes the franchise board's effectiveness lies in its unique position in the market. "We can sit in a rather advantaged position in the centre of Lloyd's and see the different business models in action."We can then benchmark the performance, look at the individual businesses and offer fact-based analysis to add value to its business."This is not about the imposition of prejudice or uninformed opinion, it is all about analytical discussion with individual businesses."In the case of managing agency Euclidian, Lloyd's gave an extension to the insurer so it could find an alternative capital provider. Will this paternalism prevail?"Inevitably in the Lloyd's system, with the annual cycle of capital renewal, there will always be situations when people's business reality does not coincide precisely with our timetable."It is then totally appropriate to have a pragmatic attitude, as long as people know that there are rules and they should not be ignored."Lloyd's relationship with the FSA suddenly seemed much closer last year because of the franchise board's swift actions. But Prettejohn is adamant the openness between the two has always been there. But while the FSA comes from what he calls a "classic perspective of the regulator" protecting the policyholder, Lloyd's is the "brand owner and franchise manager"."Our job is to act as custodian for the interests of the collective marketplace."We also have an overriding obligation to our policyholders, like the FSA. But we have the additional interest of protecting the individual businesses as well," he says.

People businessesHe is not an advocate of Rostrum chief executive Michael Wade's philosophy that Lloyd's managing agents should merge and in doing so will have more clout in the global financial marketplace."I come at it from two angles. First most mergers fail. And that is looking across the whole commercial business world, not just insurance. Merge at your peril."Second Lloyd's businesses, to use the old cliche, are people businesses. Mergers of people businesses are very difficult. Now I'm not saying it can't work, but I'm cautious that it can work. There is no inexorable logic that it will work."Prettejohn claims to be "agnostic" about the size of syndicates and that the overall capacity at Lloyd's should be fluid."There is no magical figure. Capacity should move within market trends. Historically some of the most successful companies have been those who were not afraid to cut capacity. On the other hand, if market conditions are favourable then the market can grow and take on more capacity. But it doesn't have to be a totemic figure like £15bn."

Market acceptanceHis agnostic view of capacity extends towards the Kinnect project. He is not exactly evangelical."Iain (Saville)and his team have done an excellent job at Kinnect. It is a proposition which now has a chance of working. Ashok Gupta (Kinnect's ex-chief executive) had a lot of vision to get it started from scratch but now the team has had the first live risk."But we should be under no illusions that we have a system that will not work if people fail to support it. We need people to back it for different classes of business and for different types of users. It has a long way to go."Kinnect's success is also entwined with the market's acceptance of the LMP slip. "Both systems are fundamentally linked by accounting and settlement. What we are doing is laying the pipework for this to happen."He says he is prepared to invest in Kinnect if "milestones are met".But if milestones are not met, and customers do not buy into the project, then future investment will be reviewed."Ultimately it must generate its own revenues. It cannot be subsidised for ever."