Richard Ward, in his first major speech since becoming Lloyd’s CEO, opened the U.K.’s Chartered Insurance Institute’s (CII) annual conference in Glasgow yesterday Oct. 5 with a discussion of the “pivotal role of insurance in a volatile, uncertain and dangerous world.”
After reviewing Lloyd’s long and sometimes turbulent history, he told the audience that “it is palpably clear to me that the market’s fundamental strength lies in its human capital. The expertise and the speed of decision making is extraordinary.”
He noted: “There has always been a debate about whether underwriting is an art or a science. Well from my observations it’s a combination of both.” After relating his experience watching an underwriter conclude a particularly complex deal, he observed: “Lloyd’s is not, and never will be, a market of homogenised faceless companies, offering standard quotes and trading through a computer screen. It is a marketplace of skilled experts.” He did, however acknowledge the growing importance of using technology.
He also underlined the importance of the various reforms Lloyd’s has undertaken, notably the integration of a franchise system and the Franchise Performance Directorate. Ward pointed to the test caused by last year’s hurricane season as proving Lloyd’s increased preparedness and flexibility. “Hurricane Katrina was the biggest single natural catastrophe in Lloyd’s history with net claims of over 3 billion pounds [$5.66 billion] and yet the market emerged relatively unscathed with a 103 million pound [$195 million] loss. Compare that to 9/11 when we had claims of 2 billion pounds [$3.77 billion] and the market’s overall loss was 3 billion pounds.”
He reminded his audience that, “the development of a new 60 billion dollar Gulf of Mexico windstorm scenario last year was considered to be extreme but actually turned out to be quite prophetic in the light of Rita, Wilma and Katrina.”
Turning to more recent events, Ward noted: “Last week we reported a 1.35 billion pound [$2.54 billion] profit and a 20 percent increase in underwriting profit for the market. And we continued to outperform our major international peers with a combined ratio of 86 percent.” Lloyd’s has also seen the formation of five new syndicates with a combined 2 billion pounds [$3.77 billion] of new capital
Ward acknowledged that Lloyd’s had met the challenge from the U.K.’s Financial Service Authority to accomplish contract certainty. He agreed with FSA head John Tiner’s conclusion that “without modernisation, London’s position as the place to do business is by no means assured.” Lloyd’s faces a fiercely competitive situation, “with capital and expertise more mobile than ever. The development of insurance centres in Bermuda and Dublin has only served to demonstrate this. While we are not afraid of competition it is at our peril that we underestimate it.”
Ward also cited the progress Lloyd’s has made in moving to electronic processing, most recently the Electronic Claims Repository (ECF), “which means that brokers can send claims files to a number of underwriters simultaneously without having to carry paper files around the underwriting room.” An Accounting and Settlement Repository is also in development “which will enable documents relating to premium transactions to be transferred between market participants faster and with greater control than the current paper based processes. The first release has been tested and is on track to be launched shortly.”
The entire text of Ward’s speech may be obtained on the Lloyd’s Website at: www.lloyd’s.com.
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