Lloyd's, a 3 Year Plan

Yesterday Lloyd's of London issued its updated 3 year plan covering 2008-2010. On the heels of announcing 6-months results this fall of £1.8b in pre-tax profit, and with an influx of new capital providers (Goldman Sachs, Bank of America to name a few), and Lloyd's Managing Agents like Kiln fetching nice valuations in the M&A market (story here) you would assume that all is well.

The report details why there is major cause for concern.

First among these concerns is the soft market - see the chart of Advisen's premium index to the right. Insurance pricing continues to fall and with a benign claims environment, there is no sign of a reversal in this pricing trend (even in the face of mounting subprime losses sure to trigger D&O claims).

Lloyd's offers a unique platform for underwriting investment (carrot) and polices underwriting discipline to protect its Central Fund (stick). While total capacity will shrink slightly in 2008 at Lloyd's, underwriters are keeping their clients after years of fighting to win this business. Dave Bradford of Advisen wrote about this in "The Myth of Underwriting Discipline" in the latest edition of Insider Quarterly.

Second among concerns facing Lloyd's is the cost of doing business at Lloyd's both in terms of processing and taxation, with the report citing global competition as a threat.

Lloyd's is key to driving a change agenda for processing online versus by paper and will miss its goal to have all "in-scope" claims filed electronically by the end of 2007. Lloyd's currently processes 60% of "in-scope" claims files online.

The 3 year plan sets the goal of all claims to be filed electronically by the end of 2008, meaning that all claims will be "in-scope". Further, the goal is for all Accounting & Settlement to flow through the online repository by July 2008.

There are two ways from brokers and underwriters to achieve this goal:

1) re-keying and copying files to the repository web sites

2) having electronic filing be part of the regular workflow

Clearly the second option with the integration via ACORD messaging gateways is the preferred route and I hope Lloyd's will encourage more brokers and underwriters to sign up for Web Connectivity.

Last among the concerns I highlight is a need for better information. In a soft market where underwriters are tempted to relax their scutiny of the risk and chase the rates down to keep their business, tools like Advisen are more in need than ever.

According to the 3 year plan, the trading floor at Lloyd's is here to stay but much is said about Lloyd's "as an institution, not a place" and that access to this institution needs to be easier. Together with the dedicated staff at Web Connectivity, the Advisen London office works hard to help Lloyd's brokers and managing agents achieve these goals.