AGENTS' GLOBAL MARKETPLACE

LONDON MARKET DEVELOPMENTS GIVE U.S. AGENTS GREATER INTERNATIONAL ACCESS

By Phil Zinkewicz

passport Up until the early 1980s the world of property/casualty insurance was a simpler place. The cyclicality of the business was predictable. Agents played their roles as providers of coverage for individuals and small mom and pop risks on the domestic front, while the large brokers looked after the large commercial lines and the international arena. Property/casualty insurers were mostly domestic-oriented, with exceptions such as American International Group and Chubb which were both domestic and international.

But the hard market of the middle of that decade changed things drastically. Company withdrawals from certain lines of business and a surge in prices gave new impetus to the captive movement and the transfer of business offshore gave the business of insurance a more international flavor. Today, a little more than a decade later, the word "global" is on almost everyone's lips. And, it's not just insurance companies that are going global. Agents as well, seeing their small and medium-sized commercial risks looking to expand overseas, are beginning to pay more attention to international insurance developments.

In the past, any discussion of international insurance markets had to begin and end with Lloyd's of London. The company market overseas was small and scattered and, therefore, virtually unapproachable. Such is not the case today.

Right now, the company market in London, otherwise known as the non-Lloyd's market, boasts premium writings that outpace Lloyd's of London in every line, except marine insurance. In addition, the company market has banded together and is represented by an industry association called the London Insurance and Reinsurance Market Association (LIRMA).

There are several reasons for the non-Lloyd's LIRMA companies' emergence as a challenge to Lloyd's. One is that Lloyd's has spent the last few years in a "restructuring" stage. The lawsuits by Names who were enraged over losses to the market during the late '80s and early '90s took up much of Lloyd's time. There were periods when Lloyd's leaders did not even know whether the market would survive. It was during these years that the non-Lloyd's market joined forces under one roof called the London Underwriting Centre, a structure nearby to and similar to Lloyd's in that it provides a central spot for non-Lloyd's companies and agents and brokers to congregate to do business.

While Lloyd's was picking up the pieces and trying to get its act together, the non-Lloyd's company market was plowing ahead writing new business. Also, the insurance buyers worldwide, who were concerned about the possible demise of Lloyd's, welcomed the new combined forces of the non-Lloyd's market and took advantage of the alternative capacity. Also, foreign insurance companies from Switzerland, Germany, Italy and other areas of Europe saw the union of non-Lloyd's companies and its central location as a means of tapping into Lloyd's business.

Finally, the rapidly increasing globalization of all industries worldwide gave rise to the need for producers in remote areas of the world to be able to approach a variety of underwriters easily and more cost efficiently.

According to Adrian Leonard, press officer for LIRMA: "The London Underwriting Centre is steadily gaining recognition as London's foremost underwriting center--the physical embodiment of a mature, sophisticated and resilient international marketplace. The combined capital and surplus of the LUC, whether or not actual residents, is about (pounds) 6 billion. It is estimated that gross annual premium income is more than (pounds) 1.5 billion."

There are several reasons why all of this is important to agents in the United States, First, as was already stated, many agents are seeing their clients in the U.S. expanding overseas. Lloyd's has traditionally been a market difficult for smaller agents to penetrate. The LIRMA market, because of its members' desires to continue to grow, might be more accessible to smaller excess lines risks.

Second, if only to let their clients know that they are capable of providing knowledgeable advice on international markets, agents must keep abreast of where those markets are growing, and LIRMA is certainly one. Moreover, Lloyd's has always maintained that the American insurance market has been important to them both for reinsurance and excess and surplus lines. Alien insurers have not had as easy access to the U.S. market because of regulatory barriers.

LIRMA, however, has established special committees to monitor the U.S. regulatory environment and to lobby for easier access for its member companies. It is not inconceivable that in years to come, LIRMA companies might have more of a presence in the United States, thus providing additional capacity and newer products for American exposures.

But the most important reason for agents to keep abreast of developments in foreign markets and interpret their applications here is that, with today's rapid changes in technologies, isolationism is self-defeating. It is no longer enough for agents to know only about personal lines and small commercial business and consider it their own personal territory. Major brokers are moving down the ladder in terms of the business they are willing to write, and for agents to compete they will have to begin moving up.

They need to learn more about Lloyd's and its new structure. They need to know about LIRMA and the offshore captive arena. And, they must develop this knowledge quickly or be left behind. With more and more companies experimenting with alternative marketing methods, agents need to expand their horizons.*