Lord Peter Levene, chairman of Lloyd’s, is leaving the company after nine years at the helm. He is the longest serving Lloyd’s chairman in 125 years and oversaw tremendous change at the international insurance firm.
He will end his tenure at Lloyd’s in mid-October, at which time the incoming chairman, John Nelson, the former chairman of Hammerson and deputy chairman of Kingfisher, will take the reins.
Before leaving Lloyd’s, Levene took some time to reflect on his years at Lloyd’s during the Reinsurance Rendezvous in Monte Carlo in September. In this exclusive interview with Insurance Journal’s Charles E. Boyle, Levene discusses how he managed great change at the London-based company, his views on the market, Lloyd’s plans in the U.S. market, and what’s to come.
Insurance Journal: In your time at Lloyd’s, you oversaw tremendous changes. How were you able to successfully manage those changes, which ultimately made Lloyd’s a much stronger company?
Lord Peter Levene: I didn’t initiate them. When I arrived, Lloyd’s was in the process of recovering from a black period, and they had already put together a group which certainly predated me, called the Chairman Strategy Group. The previous chairman had put together what was a revolutionary plan for Lloyd’s, which had taken two years to put together and argue through and get them all to agree to. And then it’s been my job to make sure it happened.
Basically what had happened before was you had 50 or 60 syndicates in a sort of loose configuration called Lloyd’s, who came together when they felt like it and didn’t when they didn’t feel like it.
The penny had dropped that a small number of those syndicates had some appalling results. This would have a very, very bad effect on the others … on their standing in the market, on the credit rating itself. Therefore, they had to get together and develop what is now known as the franchise system … the relationship, that coming together, is the Lloyd’s market.
… And getting all this locked, with a hell of a lot of prima donnas who run this to agree that they’ll all follow same path, was a very big issue with the monopolies, people in the European Commission at the outset.
In fact, when they said (that this was an attempt to set up a cartel), we said, “wait a minute, wait a minute, just come over to the Lloyd’s building and go inside.” You go into the room and you see the trading floor there. Anything less uncompetitive, you can’t imagine. Because you’ve got all these businesses here, shoulder to shoulder, competing with each other.
I very often compare it to a fruit and vegetable market. You go in and all the guys selling cauliflower are over there and all the ones selling strawberries are over here, but they all compete like hell. And why therefore do they want to be next door to each other? Because that’s where all the business is, and that’s where it goes.
I’ve stopped letting them give me speeches saying that Lloyd’s is the largest insurance market in the world. Well, no, it isn’t. It’s the only insurance market in the world. There isn’t another one.
IJ: The brokers are no longer required to be actually Lloyd’s brokers, correct?
Levene: Correct…. This was a revolutionary change that we made when the U.S. came in. Do you know how many have applied? It’s either nil or one. There was the most terrible row about this, that this was the end of civilization as we know it, and the brokers would challenge it. I don’t think anything happened.
IJ: Most of the business that goes into Lloyd’s comes from the U.S. A lot of it’s from wholesale brokers who have contacts in the Lloyd’s market. Or they go directly to an insurance company or a reinsurance company.
Levene: Yes. When they come through Lloyd’s, they know they have to come through a broker because that’s the way we operate.
IJ: But they continue to do this and it hasn’t caused a problem.
Levene: Nothing has changed. It’s worked perfectly well. And if they want to go direct to an insurance company and work through their sales staff that an insurance company has to pay, that’s fine. And if they want to come to Lloyd’s where, instead of paying our sales staff they’re paying a broker for doing the same job, that’s also fine.
IJ: They have a choice.
IJ: Does Lloyd’s have plans to enter into other lines in the United States?
Levene: Well, we’re always interested in other lines, if the market is there. But at the moment, 40-odd percent of our business comes from the United States, which is not, in absolute terms, an insignificant amount of business. I mean, it’s $17 billion or $18 billion. So even in American terms, that is a very big operation. So we’re not exactly scrapping around in the U.S. to find another few pennies to add to it.
We’re always looking for new business, but fortunately we have the enormous benefit of a long history of business in the U.S., which is by far our biggest market in the world. What we would like to see is, in an ideal world, we would like to see the absolute amount of business that we do in the U.S. — and by business I mean, profitable business. We’d like to see the absolute amount of business in the U.S. rise. We’d like to see that as a percentage of our overall business, fall. Because, you see, we have this wonderful business in the U.S., but our business in Europe, in comparison, is much smaller.
IJ: What are your views on the market now? Do you expect any change?
Levene: Yes, I can give you my precise views on that. I’ve been coming here (Reinsurance Rendezvous in Monte Carlo) for quite a long time now. And I’ve sat here and have had the identical discussion for at least the last five or six years, using the same words. So, that’s where we are. … But at the same time, you do get all these people coming back every year, so clearly they’re not all going bust.
IJ: No, they are not.
Levene: Any logical process would say that you’ve got to make up. Two years ago, Lloyd’s had an all-time, super-record year. Last year, it wasn’t as big, but it was still pretty spectacular. We had about two billion pounds’ profit. We aren’t going to make that much money this year, but that’s the way this market goes. … But what nobody says is, “Oh, is Lloyd’s going to be able to survive?” There’s not even an issue of that.
IJ: Everybody’s saying it’s an earnings event, not a capital event.
Levene: Yeah, I know. But look, at the start of this year, we all sat around in January. I remember us saying, “What do we think is going to happen this year? Well, the market’s lousy. The prices are lousy. What we really need is a big, market-turning event.” Then what happened? We had these huge earthquakes and tsunamis in Japan, and we had Australia, we had New Zealand … Well, there you are. There’s your event. You know what they said? “It’s not big enough.” So I don’t know what is big enough. What more do you want?
IJ: What are you going to do after you leave Lloyd’s?
Levene: Well, I’m chairman of a would-be new bank. We’ll see if that works. If it does, it’ll take up quite a lot of my time. If it doesn’t, I’ll think of something else to do.
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