Ladies and Gentlemen,
Adlai Stevenson famously said: “Flattery is all right, so long as you don’t inhale.” I will try not to.
Winston Churchill described us as two nations divided by a common language. This rather charming mutual incomprehension shows up in some strange places. Just before I left London last week, I was crossing over Leadenhall Street outside the Lloyd’s building. Waiting for the pedestrian lights to change an American lady beside me said: “Excuse me Sir, but what is that beeping sound?” I replied, “Madam, that is to enable the blind to know when the lights change.”
She looked at me with astonishment and said: “That is amazing – in The United States of America, the blind don’t drive at all.”
It is a great pleasure and honour to be with you at this reception tonight, and I would like to thank you all so much for supporting in such numbers the wonderful school which provides so much inspired talent for the Insurance Industry. And a special welcome to our guests this evening who have survived the latest delights which the airline industry has prepared, for those brave enough to make the Atlantic crossing.
The video presentation which you have seen, and for which I must express my thanks for the wonderful job done by Diane Ferenczi and her colleagues at Vibe Squad Productions, helped me to recall so many things in what, certainly to many people, must seem a rather unusual and hectic career. As you will have seen from the film, I spent the first part of my career totally immersed in the defence world. The defence industry together with our armed forces, share a common goal with the insurance industry which is to protect us against the most dangerous risks. So I am delighted that two people who have figured prominently in my career have agreed to be Co-Chairmen this evening.
First Nick Chabraja, the Chairman of General Dynamics. I have enjoyed a long and very happy relationship with General Dynamics, first as their customer when I was responsible for defence procurement in the UK Ministry of Defence, and subsequently – after a suitably respectable interval I would hasten to add – as Chairman of General Dynamics in the UK, a post which Nick Chabraja very kindly invited me to take on. Nick is a remarkable man. He did not grow up in the defence industry like I did, his previous career was as a lawyer. He then took over the running of General Dynamics, realised huge value for its shareholders to an extent which I am sure they never believed possible, and then rather than liquidate the balance which many people thought he would do, instead reinvented the company to make it into the huge success which it is today. He is a truly remarkable leader and someone whom I am proud to consider as a good friend.
The other Honorary Co-Chairman, who will be very well known to everyone in this room this evening, is Hank Greenberg. When I first joined Lloyd’s, and shortly afterwards visited New York, I sought to meet him. I was told that it was extremely difficult to find time for anyone to meet Mr Greenberg but they managed to squeeze me in for about a five minute meeting. Since then, however, I think we have found a lot of common ground, and I am also very proud to consider Hank as a good friend.
But I would like to say something tonight to this audience. Hank Greenberg built the largest and most successful insurance business in the world. He was then forced out of that business. It is not for me to dwell on that this evening, other than to say that my personal view is that it was a huge mistake. Throughout that very sorry saga, Hank has maintained enormous dignity and has now been totally vindicated. When, therefore, I was told of this wonderful award and was asked whom from the insurance industry I would like to present it to me, I said to St John’s University that I would like Hank to present it – was that alright? And I was delighted, but not surprised, to receive the response: “there is no one we would rather see as Co Chairman of this event than Hank Greenberg.”
Ladies and gentlemen, I am very proud to be honoured in this way by these two great American patriots.
I also want to thank colleagues like Joe Plumeri and Bob Hartwig who welcomed me into the insurance world, and the St John’s School of Risk Management.
Brandon, Donald, Ellen, Maureen. I am sure the whole audience would join me in thanking you for organising this splendid dinner.
But we owe St John’s much more than one evening. If there is one lesson which we must learn from the recent economic turmoil, it is the critical importance of educating tomorrow’s leaders in risk management. The funds raised tonight may well lead to a future Company President or CEO taking the right steps to avert a crisis in 20 or 30 years time.
And of course you would not expect me to forget Lloyd’s – a unique institution, which over its 322 year history, has proved that the secret of survival is the ability to adapt to change. When I joined Lloyd’s in 2002, what impressed me the most about the people was their ability to change – quite radically – how they operated. The last decade was, by any standards, an insurance challenge. The tragedy of the World Trade Centre followed by the unprecedented losses of Katrina, Rita and Wilma. To cap it all we ended the decade, battered and bruised by the worst global recession since 1929.
But miraculously, this was also the decade when Lloyd’s re-emerged, phoenix like, from what had seemed not so long ago to be an impossible situation, to become once again an icon of the industry. Richard Ward, the Lloyd’s CEO, is here this evening and I would like to thank him, and everyone in the Corporation and the Market, for their grit and determination in making this happen.
At this point in its history, Lloyd’s represents renewal. It has learned the lessons of its past. It has corrected weaknesses and, so, can face the future from a position of strength.
Standing here in January 2010, I believe that our recent history offers hope to those companies and corporations who have started the New Year fearing for their survival. And the story of Lloyd’s should reassure governments and regulators that root and branch reform can come from within. Financial service industries CAN be responsible and prudent risk managers.
I spent much of last year reminding regulators and the media that insurance did not create this crisis. That a one size fits all approach to financial services regulation is neither relevant, nor fair. The insurance industry has weathered 2009’s economic storm with a low casualty rate. But we cannot be complacent.
We have come out of the crisis and entered the unknown. There is confusion about the intention of regulators on both side of the Atlantic, and there are coninued question marks on the performance of investment portfolios.
The industry must address these issues promptly. We must demonstrate to regulators that we are capable of the highest levels of risk management. We must manage our capital prudently and, above all, we must improve our underwriting discipline. If returns on capital are lower, then profits from underwriting must be sustained.
Will the winner of this award in 2020 look at today’s turmoil as the stimulant which put professional standards back in the spotlight? When fierce competition caused us to be smart, to be innovative, and to respond to external pressures?
The central point is that the primary purpose of this industry is not to speculate with our capital. We are judged on our ability to help businesses and householders rebuild after a crisis. A first time home buyer who puts all his hard earned savings in a deposit on a new home has precisely the same motivation as a multinational investing in a pipeline or oil rig. They want security. They expect us to offset their risks.
No matter how tired we are after the financial turmoil of the last two years, we must look ahead. For all of us in this room, the one constant is change. I am a relative late comer to the insurance world. But I have found this industry to be an immensely rewarding challenge precisely because it is so difficult to predict where the next loss will come from or what the market turning event will be.
I accept this leadership award with great pride and humility. When I look at my past career - in the Defence Industry, in Government Service, at Canary Wharf or as Lord Mayor of London – one abiding lesson is the need to embrace change, to respond to what is happening outside our industry, our borders, even our own comfort zones.
But before I leave this stage, and this unforgettable evening, I want to thank someone who, has been a fixed point in a world of change – my wife Wendy. It is to Wendy who has steadfastly and lovingly put up with all the twists and turns that you saw in the film, she, together with my children and grandchildren to whom I owe the most gratitude. And I am delighted that the eldest of our 10 granchildren – AJ – born, bred and educated in New York City, is here tonight. It will be his generation in due course who will have responsibility for our future wellbeing.
Once again. Thank you all so much.
