Writing about London market reform reminds me of the famous sketch in the Monty Python film The Life of Brian in which the revolutionaries of the Judean People’s Front (or was it the People’s Front of Judea?) plot the overthrow of the imperial Roman oppressor and the foundation of an independent Israeli state in a radical, subversive meeting.
“What have the Romans ever done for us?” one taunts bitterly. Then follows a litany of all that is great about modern civilisation: roads, clean water, improved housing, education, economic growth, opportunities, public health, law and order, peace…
It turns out the Romans had a lot for which to be thanked.
Sometimes we forget how far the London market has come in its history. A loose collection of traders and merchants in an 18th century coffee shop have turned into a commercial ecosystem with global reach.
Bureaux, net settlement, claims agreements, common standard wordings, stack upon stack of esoteric insurance and reinsurance case law. None of this is to be sniffed at because none of it exists anywhere else in the world.
We also underestimate the pace of change in recent years.
When I left the market in 1999 I thought London was in a hopeless position.
Placing business was fine but I had consumed London’s second-rate service offering from the outside and I thought that unless it changed radically it had no chance of ever becoming the world’s market of choice. When I was working as a broker in Spain, London was very much the market of last resort – a dumping ground of treaty exclusions and loss-hit accounts that nobody else wanted.
However, it did have some new products that you couldn’t get elsewhere, so begrudgingly we sought these out. But because of the poor service the local market always had a long-term plan to reverse-engineer the business and eventually do it itself as soon as the big continental reinsurers got comfortable enough to give the proportional backing to do so.
As Yorkshire parlance tells us, where there’s muck, there’s brass.
Specialising in all the nasties that no-one else wants to touch is a perfectly legitimate way of making a living but it is not a compelling long-term business proposition. London seemed to be resigned to be at best the second, but more likely the third or last place you would send business by choice. Any underwriter will tell you that such a position doesn’t bode well for anti-selection.
Sometimes you have to go away for a while to see how fast things can change. When I came back as a reinsurance journalist in 2005, I couldn’t believe how much had been achieved. Lirma, the ILU and the LPSO had become XIS and all the disparate Lloyd’s sector trade bodies had become the LMA. The LMG had unified Lloyd’s, the LMA, the LMBC and the IUA, and was rising to the major challenge of contract certainty.
Suddenly London had a fighting chance. It finally had the structures it needed. Kinnect was a major setback for electronic placing but progress on the less sexy sides of accounting and settlement and electronic claims was steady. Then came new impetus in LM Tom and the mandating of PPL.
The next challenge is the true digitisation of the London Market. Digitisation up until now has been document-based. The next phase has to make London forget about the idea of documents entirely and become digitally native.
The efficiencies, insights and products that will flow from this revolution have immeasurable potential. London finally has a shot, not at being the only show in town or the last stop on the road, but at becoming the first choice and the best option for most commercial insurance.
If this is done right the prize will be to increase London’s addressable market from the mid-single digit hundreds of billions of dollars in GWP to the mid-single digit trillions.
So if anyone asks you what London market reform has ever done for us, just reply that it has brought the market to a point where a world-beating opportunity is staring it in the face.
Not bad for a few decades’ work.
Roll on Monday.