As director of international markets for Lloyd’s of London, Jose Ribeiro has a lot of responsibilities. He took a brief time out, as he prepared for a trip to China, to tell the Insurance Journal a little bit about them.
His area of responsibility literally covers the world. Except for North America, which is the responsibility of his colleague Sean McGovern, he has overall responsibility for everything from China to the Czech Republic and beyond; or, in other terms, around 55 percent of Lloyd’s total business.
Lloyd’s overall strategy focuses “on access to markets,” Ribeiro said. “Our international strategy is closely linked to that plan.” He explained that there are “three pillars, which support that goal: 1) developing new licenses and offices; 2) developing distribution channels to serve them, and 3) promoting the Lloyd’s brand.
Access to Markets
How Ribeiro and his team handle the different areas depends on the location. Western Europe, including the UK and Ireland, are basically mature markets with a well established insurance industry, as are the U.S. and Canada. As Lloyd’s is an integral part of that industry, Ribeiro’s main focus is on areas of the world where Lloyd’s isn’t so well placed, and where there are opportunities for expansion.
“The world is changing; economic power is shifting, particularly in Asia,” he said “The increasing weight of the insurance markets [in Asia] makes them a priority.” The most prominent example is China. “We’ve established a platform there, which is 100 percent owned by Lloyd’s, for insurance and reinsurance.” Using this platform, which is supported by a local Chinese staff, risks are ceded to Lloyd’s., which in turn can be retroceded to London.
This gives Chinese insurance buyers flexibility and provides Lloyd’s with new sources of business. “There are currently six underwriting syndicates and 11 managing general agents doing business in China,” Ribeiro said. “We’ve gone from around $7 million [in turnover] at the beginning to $65 million.”
He stressed that one of the key factors in Lloyd’s success is the ability to offer more options than were available previously. “We filled the gap in China,” he said, explaining that business could well end up staying in the country, or ceded to Singapore [Lloyd’s main Asian hub], or eventually retroceded to London. It depends on the business, and the client’s choice.
Ribeiro contrasted the situation in China with the Russian insurance market, where Lloyd’s has a different strategy.
“We have a Russian office, but it’s mainly for market development.” At this stage, and in cooperation with the London Market Association, the goal is to gather information, assess the opportunities and pitfalls of the Russian market, rather than enter it directly, although that may eventually happen. Lloyd’s has opened a branch office there
The same situation, but for different reasons, applies to India. “It’s a very important market, but it’s also difficult because of the restrictions. We’re watching India to see how it develops,” he said. Lloyd’s currently writes only reinsurance on some selected business in the country.
The same strategy also applies to countries like Mexico and Turkey, which is now the world’s 15th largest economy. Lloyd’s is assessing their insurance markets. As an example, a delegation from London recently met Turkish brokers and reviewed Turkish insurance laws and regulations. “We see an opportunity there,” Ribeiro said; “its economy is growing fast, and it’s a bridge between Europe and Asia.”
Ribeiro also pointed out that huge differences exist in how insurance markets are operated throughout the world. Some countries welcome a foreign presence, especially for reinsurance, while others restrict their markets to local companies. Some impose relatively high collateral requirements, while others don’t. Many countries require foreign insurers to have a local partner, as China did until recently. “It depends on the local market,” he said.
Once Lloyd’s has established a presence in a particular market, the problem of establishing a distribution network must be addressed. Ribeiro explained that Lloyd’s is basically a broker market. It has close ties with the “big three” global brokers — Aon, Marsh and Willis [where he worked before joining Lloyd’s] — and works closely with international brokers such as JLT and Lockton, as well as with broker networks like Assurex Global and BrokersLink. he said 96 percent of Loyd’s premium volume comes through these brokers and that the top 30 Lloyd’s brokers are “fully integrated and well able to deal with international business.”
Those figures include the increasingly important role coverholders play in placing business at Lloyd’s. “Coverholders improve the [distribution] model,” Ribeiro said, as they are more efficient. As local brokers they are better placed to manage local conditions. Ribeiro estimated that between 30 and 33 percent of Lloyd’s business originates with coverholders. They may underwrite business directly for Lloyd’s syndicates; i.e. they “have the pen,” or they may submit business to Lloyd’s brokers or to wholesale brokers.
It’s a system that works well – where it exists. Ribeiro said that in countries such as the U.S. and Canada, as well as other former British colonies, notably Australia, New Zealand and Hong Kong, the role of coverholders is an important part of the distribution network. However, in many countries, notably elsewhere in Asia, it simply doesn’t exist.
One of his priorities is to increase the number of licenses Lloyd’s holds in various countries, which will also increase the availability of coverholder generated business.
The Lloyd’s Brand
His third pillar –promoting the brand- involves not only making Lloyd’s better known than it already is throughout the world, but also “protecting our biggest asset.” To do so “we work with local offices and regulators to manage and control abuses.”
Unauthorized use of the Lloyd’s brand isn’t the only problem. Ribeiro’s mandate also involves addressing customer complaints. These primarily involve claims payments, as keeping customers happy also serves to promote the brand.
“We need to assure that claims are paid quickly,” he said. “The Electronic Claims File [ECF] has been a success; 96 percent of claims now use it.”
Part of the process involves segmentation or breaking the claims down in to three groups, depending on the size and complexity involved. In addition only the leader [the syndicate that first wrote the risk] can approve a claim.
As far as Europe is concerned, Lloyd’s has no intention of “going head to head” with big local companies, such as Allianz in Germany, AXA in France, or Generali in Italy. “A number of European companies have managing general agents [i.e. they own or operate syndicates] at Lloyd’s.”
In other words, Lloyd’s doesn’t need to go to Europe for business, as a number of European companies have come to Lloyd’s, including recently a marine P&I Club. “They bring their expertise and [increase the number of] coverholders.”
Europe, however, as has become quite apparent recently, isn’t a single market. Ribeiro said that while the insurance industry in a number of countries is well integrated and modern, the situation in Eastern Europe, and parts of Southern Europe is less developed. These markets fall into the first category, where Lloyd’s is carrying out various stages of information gathering, with the aim of eventually establishing a presence. It has already done so in Poland in 2008, and already has coverholders there.”We’re currently looking at the Czech Republic, Hungary and Romania,” Ribeiro said.
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