By Phil Zinkewicz
Lloyd's of London, out of necessity, has undergone drastic changes in the last ten years. During that time, all of its legal complications--that Lloyd's has finally put behind it--caused Lloyd's to re-examine many of its historical traditions. For example, some of the changes that have take place include: the dominance of corporate capital in the marketplace, replacing almost entirely the unlimited liability, individual investor system; outside regulation of the market, rather than the self-regulatory posture which resulted in an exclusive "old boys" club type of atmosphere; the admittance of captive insurance companies to the marketplace; and the merger of four Lloyd's market associations
under the banner of Lloyd's Market Association.
In that last category, Lloyd's combined under one roof the Lloyd's Underwriters' Association (LUA), Lloyd's Underwriters' Non-Marine Association (NMA), Lloyd's Aviation Underwriters' Association (LAUA) and the Lloyd's Underwriting Agents Association (LUAA). Under the agreement, the four associations will retain their professional identities and continue to perform the specialist technical work they have always done but, under the new LMA structure, they will have unified representation on matters of "strategic" importance. Translated that means Lloyd's underwriters will have better lobbying power when dealing with the Council on matters affecting the marketplace.
To agents and brokers in the United States, these changes may sound like nothing more than a sophisticated kind of alphabet soup. However, one change has taken place at Lloyd's that could have a profound effect on agents and brokers on this side of the Atlantic. Just a year ago, Lloyd's sent letters to all of its brokers and managing agents explaining the market's plan for updating its relationship with brokers and intermediaries. The purpose is to allow U.K. brokers not based in London and foreign and overseas brokers easier access to the Lloyd's marketplace.
According to the letter, U.K. brokers regulated by the General Insurance Standards Council (GISC) and able to satisfy a set of new Lloyd's accreditation standards will be able to access the market. The new Lloyd's accreditation standards are related to key areas seen as being central to the future of the London market, such as customer service and systems compatibility. Also, brokers based in Europe and other countries where Lloyd's-approved regulations exist, including the United States, will be able to access the market directly if they meet requirements equivalent to those being asked of U.K. brokers.
Prior to this, only brokers based in London and regulated by Lloyd's were allowed full access to the marketplace. With these new regulations, however, European and overseas brokers will be able to bypass the traditional Lloyd's broker and, in effect, become Lloyd's brokers themselves.
When the new rules were announced, then Chairman Max Taylor said: "Lloyd's has always been, and will continue to be, a broker market. The foundation of our success is the strength of the relationship we have with our existing London brokers. But research we've carried out tells us that Lloyd's would attract new customers if access were streamlined. Our aim is to create global access while maintaining the high standards our customers have come to expect from Lloyd's brokers. We also want to give Lloyd's-based businesses the freedom to select business partners based on commercial rather than regulatory criteria."
Grahame Chilton, chief executive officer of Benfield Greig Group, a broker based in Singapore, said that easier access for brokers to the Lloyd's market is a necessary move. "Distribution has become a key competitive issue in global financial services," he said. "In the insurance and reinsurance arenas, we are seeing multi-channel distribution systems becoming the norm right across the market from personal lines to reinsurance. Deregulation is opening up financial services markets all over the world, to the benefit of the customer, and therefore ultimately to the benefit of the market. Lloyd's reliance on a single distribution channel for most of its business put it out of step with many of its competitors."
Having said that, it is not surprising that Benfield Greig Asia and Benfield Greig Paris S.A. have become two of the six new brokers that have been admitted to Lloyd's of London. The other four include two U.K. brokers--Grosvenor Brokers (America), LLC, and BDB, Ltd.--SAIS (Societe Anonyme D'Intermediares Luxembourgeois) and Groupe Eyssautier of France. These brokers/intermediaries represent the first non-London-based group of producers to be accredited under the new rules for direct access to Lloyd's and have already begun operations.
In commenting on the development, Julian James, director of worldwide markets at Lloyd's, said: "In 2000, Lloyd's promised to simplify access to the market. Admittance of these brokers is the first part of this process. Each of these new brokers is well known and respected in its classes of business, and by entering Lloyd's these brokers can provide their customers with greater choice and flexibility. Lloyd's will continue to encourage brokers, both in the U.K. and overseas, to access the market and more brokers will be accredited over the coming months."
David Spiller, CRO of Benfield Greig, Ltd., said: "Benfield Greig has a track record of harnessing technology for the benefit of its customers and markets. We believe that there are circumstances where direct access to Lloyd's by our Singapore and Paris subsidiaries will deliver greater value more speedily to customers, not least in the streamlining of the business process. We have chosen these two offices as a first step and, if successful, may broaden this to other subsidiaries."
Paul-Eric Eyssautier, managing director of the newly accredited Group Eyssautier, said: "As an international marine broker, I felt the next logical step for us was to apply for either the ISO quality mark or Lloyd's access. I chose Lloyd's because the accreditation process was more practical and efficient, and the Lloyd's name counts for much more in the international marine community. Gaining accreditation to Lloyd's does count as a quality mark. It also allows us to become a fully international placing broker able to take advantage of the globalization of the insurance industry."
Since January 2001, when Lloyd's opened up to accreditation applications, there have been more than 200 expressions of interest from all over the world, according to Lloyd's spokespeople. The Lloyd's market currently has 128 brokers, now to be increased by six. However, how many more are likely to come on board is anybody's guess.
A spokesperson at Lloyd's said that some of the expressions of interest have come from the United States; and for agents here who want to access Lloyd's of London via an accredited Lloyd's broker, they might soon no longer have to contact London. They might be able to look just down the street. *