Lloyd’s Chairman, Deputy Comment on Reforms Consultation

Lloyd’s issued a bulletin yesterday commenting on the responses to its far-reaching reform proposals, indicating that their final form, which is scheduled to be voted on Sept. 12, will better reflect the consensus of its members.

Chairman Sax Riley noted that since last January there had been “two rounds of intensive consultation” that in his view had strengthened the original proposals and helped them evolve. “We now have a set of radical, yet sensible reforms which have stood up to rigorous examination – reforms that will improve profitability and transparency, and modernise the Lloyd’s market, while protecting the interests of our members.”

The announcement listed the following main points as being largely agreed upon:
— There is broad support from all sections of the market and membership for the creation of a Lloyd’s franchise.
— While some members oppose the introduction of annual accounting, Council believes there is clear support for the change to go ahead.
— As previously outlined, Council proposes that no new unlimited liability members will be accepted from 1 January 2003.
— The proposal to replace both Lloyd’s Market Board and Lloyd’s Regulatory Board with a new Franchise Board will go forward. However, in response to the consultation, Lloyd’s is proposing the formation of a new Compliance Committee to monitor the effectiveness of the delegation of authority from Council to the Franchise Board and to ensure members’ interests are protected. The Franchise Board will operate in accordance with principles laid down by Council.
–Lloyd’s has appointed a firm of reinsurance brokers to assist in closing 13 run-off years of account. If successful, this will allow 3,600 members of Lloyd’s who have only run-off years to cease membership once they have met any remaining liabilities. A further 4,700 members exposure to at least one run-off year will have been addressed by the closure of these years.

Riley indicated that, “during the consultation, we have listened carefully to the views of our members and the businesses operating in the market, and are pleased by the high level of support that’s evident. That support will, I’m confident, translate into a vote strongly in favour of implementation.”

Lloyd’s Deputy Chairman John Coldman, who heads broker Benfield Greig, supported Riley’s call for ratification of the proposals. Addressing a conference of Canadian brokers and intermediaries in Toronto, Coldman pointed out that it was in the best interests of Lloyd’s and its policyholders to unite behind the proposals and to put any lingering differences they may have behind them.

“While the world’s major insurance companies are able to have their debates in the privacy of a closed boardroom, we at Lloyd’s must do so in the full glare of public scrutiny,” Coldman told the delegates. “This is not necessarily a bad thing,” he continued, “–after all, we are seeking to encourage greater transparency — but it does mean that our disagreements are on show for the world to see, including our major competitors. We all know that a unified society is a stronger society. It is that unity of purpose and commitment that will propel the reformed Society of Lloyd’s into an even stronger business position.”