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Levene warns against complacency

In a speech to the London Institute of Insurance last week, Lloyd’s chairman Lord Levene hammered home the importance of business process reform and sound underwriting as he warned that, despite the progress in turning the corporation around, complacency must not be allowed to set in.

Levene, who addressed a packed Lloyd’s library last Wednesday (3 November) – almost two years to the day since he took the post – covered many of his favourite topics, from the ills of US collateralisation to the Corporation’s recent AM Best upgrade and fundraising initiatives.

But it was reform that topped the bill, as he measured the success of LMP slip improvements, and challenged the market to follow through with other initiatives to improve efficiency and transparency.

The use of Kinnect, is not optional, said Levene, due to the integral part it plays in the success of business process reform. “It’s cost a lot of money and it will cost a lot more money before it’s finished. But it’s up and running,” he said.

We must continue to drive through this change,” he added. “What we’ve achieved so far has been in a very hard and favourable market. The real test as to whether we can avoid the disasters of the past is still to come. There is no future without it, so we’ve got to do it.

It’s not just about changing technology and rules, but also about changing behaviour. Are you just going to allow the London market to slip into oblivion in what is an increasingly competitive world? As I look around I do see evidence of change, but it’s up to you to pick it up and push it through,” he challenged the audience.

Levene highlighted the work done to date by the Franchise Performance Directorate, crediting Rolf Tolle and his team for playing a part in the recent results. Admitting that the role had generated a degree of “creative tension”, Levene said: “I want to emphasise the importance of (Tolle’s) and the Franchise Board’s work in the future of Lloyd’s.

Much has been achieved in the last two years in strengthening the Lloyd’s brand, said Levene, which he described as one of the strongest in the world.

Although Lloyd’s was in good shape and growing into better shape, it had a major image problem,” said the Lloyd’s chairman, comparing the corporation’s past PR problems to those confronted by Canary Wharf Ltd, the property development company he previously headed. The public perception was of an organisation awash with crippling problems, when in fact most of the problems had already been addressed.

Reflecting the progress in turning Lloyd’s reputation around, Levene pointed to press coverage of the corporation that has “turned through 180 degrees”, with its once biggest critic, The Daily Telegraph, championing the latest set of annual results.

The improved public image is mirrored behind the scenes through the development of strong links with government and regulators, said Levene. “Our relationships with those audiences are now in pretty good shape”.

These ties were strengthened with the high profile joint visit of UK Chancellor Gordon Brown and US Treasury Secretary John Snow earlier this year.

But Levene had further strong words in support of the campaign to change US regulatory requirements for 100 percent collateralisation of so-called alien reinsurers’ gross liabilities.

I believe (the requirement) is totally unjustified and I’m not interested in reducing it – I want it removed.” He added that, while he understands the need for reinsurers to provide security, “to do it on the basis of geographical location is totally unfair”.

Although Levene sees many challenges ahead – and opportunities with the opening up of China and expansion into Europe – there is one area unlikely to see change.

While the number of syndicates in the market in a decade is likely to be “rather less” than now, Levene said that he’s learned that the Lloyd’s model would not suit consolidation to a single syndicate, or a Lloyd’s Plc.

I now understand that this would not be a good idea. We have a great number of entrepreneurial individuals who fight on their own, and that’s what makes this market,” he concluded.

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