Governor, Ambassador, Mayor Eduardo Paes, Secretary Levy, Maria Silva, distinguished guests, ladies and gentlemen. Good morning everyone, and a very warm welcome to Lloyd’s first conference in Brazil.
You hardly need me to tell you that we are living through difficult times. The most basic architecture and assumptions upon which our global financial system have been based are now under question. The rulebook on how to run an economy has been ripped up. The experts reviewing their forecasts ever downwards, and many measures of trade are falling at an alarming rate. Many experts now expect global GDP to contract in real terms in 20091.
Yet over the last few days, all I have heard here has been positive and optimistic – from both President Lula and Governor Cabral. This is not only refreshing, given what is happening in Europe and the USA, but also inspiring. Latin America now has the opportunity to help lead the world out of recession. Your financial institutions are free of contagion, liquid and well managed. The IMF expects few countries to outperform Brazil this year2. And as President Lula remarked at the WEF meeting on Wednesday, whereas twenty years ago the IMF ruled Brazil with a rod of iron, today ladies and gentlemen guess what, Brazil is now lending money to the IMF.
What a difference a couple of decades makes. As we at Lloyd´s know only too well.
All this comes on top of the fact that Brazil now represents Latin America’s largest market, the world’s fifth largest country in terms of population and the world's tenth-largest economy by GDP3. As I heard yesterday, the GDP of Rio is now larger than Chile and that of Sao Paulo is larger than Argentina.
These are indicators, of which we are fully aware at Lloyd’s, that the world is changing, and that a new world order is emerging. You don’t have to look any further than the recent G20 meeting in London for evidence of that when we saw both Brazil and China at the table. And - where are our two newest offices in the world – here in Rio and in Shanghai.
But what does this new world order mean for insurance? This morning I would like to discuss the impact on the insurance industry in general and for Brazil and in London in particular.
First, what does the emerging new world order mean for the insurance industry in general?
Financial services is, and always will be, a global business.
Right now, globalisation is a process which some have begun to question in light of the turmoil around us. However, it is very clear to us at Lloyd’s that globalisation is here to stay. And without it, would we now be in Rio?
Of all sectors, insurance and reinsurance is perhaps the most global. For that reason Lloyd’s believes that we must avoid creeping protectionism, a sentiment echoed clearly by the Brazilian Government, and continue to remove barriers to free trade.
Although regulation is an important consideration, what we need, as the world changes is much greater cooperation and mutual recognition between supervisors across all areas of financial services, from both the developed and developing world. Only by working together can we build the effective and efficient infrastructure that the insurance and reinsurance markets need in the new world order.
Second, what does the new world order mean for Brazil’s insurance market?
Looking beyond the current global gloom, there is no doubt in my mind that the future for Brazil’s insurance market is a bright one.
We learnt a long time ago at Lloyd’s that wherever you find people creating new products or building new businesses, you also need insurance.
The Brazilian insurance market is already the largest in Latin America, experiencing the highest absolute growth. Yet it remains relatively under-developed, with significant growth potential for the future.
Lloyd’s was therefore very pleased when the Brazilian reinsurance sector was opened up, exactly one year ago today, and when we became the first overseas reinsurer admitted under the new rules. We found the process a very smooth one thanks to the outstanding job accomplished by the regulator SUSEP under the leadership of Superintendent Armando Virgilio.
How the confidence and support of the Governor and SUSEP has been rewarded. I can tell you today and you will hear this in more detail later this morning, that Lloyd´s business in Brazil, in just 12 months has increased by 79% and our premium income last year amounted to over US$140 million.
Finally then, what does the new world order mean for Lloyd’s?
Lloyd’s has always been an international market. Our very earliest success depended upon our ability to insure the ships which set sail from the old world to explore the new world. Some 320 years later, we continue to insure the ships which ply the seas right across the globe and more modern forms of transport from aircraft to satellite launches.
Today our market is stronger than ever, with over 80 underwriting syndicates operating this year. Last month we published a market-wide profit of $2.7 billion and a combined ratio of 93% for 2008. This solid record has been achieved with considerable help from the Franchise Performance Directorate led so ably in London by Rolf Tolle. And I am delighted that his successor Tom Bolt, presently with Marlborough, has been able to join us here in Rio on his first visit to Brazil.
Meanwhile, Lloyd’s has always maintained a conservative investment strategy. The vast majority of our investments is held in cash, government bonds or highly rated corporate bonds.
Perhaps above all, Lloyd’s underwriters have retained a focus on traditional insurance and reinsurance products. Unlike other insurers, Lloyd’s underwriters have stuck to what they are good at, and have not sought to diversify into complex financial products and markets that they don’t understand.
On this first anniversary of the liberalisation of your reinsurance market, our work in Brazil has only just begun. Yesterday evening, Governor Cabral and I had the pleasure of formally opening Lloyd’s new, and first ever, office in Brazil.
Now that we have the framework of a licence and an office in place, we will continue to work at every level with insurers, intermediaries and businesses to establish how we can provide the best support to the Brazilian insurance market and its clients. Indeed, the fact that 25 individuals from the Lloyd’s market in London have travelled to join us here today only underlines our desire to get to know you better and our appetite for doing more business with you.
Ladies and gentlemen, I would now like to introduce a very special guest to you.
I first met Governor Sergio Cabral in 2007 and he and his team gave us total support in our discussions with the Brazilian regulator regarding Lloyd’s desire for a liberalised reinsurance market in Brazil.
During my discussions, I realised that I was dealing with a dynamic and very successful leader and it quickly became clear that the Governor, as one of the leading politicians in the country, is making a huge contribution to this nation’s development. I think that “the man to watch” may well be an understatement of Governor Cabral’s capabilities.
Last September, we were delighted that Governor Cabral was able to visit us in London and that he agreed to be the guest of honour and speaker at our annual London City Dinner. I also spent the day with him showing him some elements of London’s infrastructure – including our plans for transport and the Olympic Games. Today Rio is one of the last four cities in contention to host the 2016 Olympics – I know Governor that you and your colleagues are making enormous efforts to achieve and feel sure that everyone here wishes you success when the decision is announced in Copenhagen on October 2nd.
Governor, we are all extremely grateful for your generous support, once again, in hosting this event and lunch at your Palace today. And we are delighted that you were able to accept our invitation to be our keynote speaker this morning. We are greatly looking forward to hearing what you have to say.
Ladies and gentlemen, thank you very much.
1. 'Gathering gloom’, The Economist, 19 January 2009
2. ‘World Economic Outlook Update’, IMF, 28 January 2009
3. Brazil country briefing, Economist Intelligence Unit, as at March 2009
