Ladies and Gentlemen,
It is a great pleasure to be back in the United States and to see so many familiar names and faces here tonight. Welcome to the third Lloyd’s New York City dinner.
Last year, when many of us met at this event, the Duke of York awarded the Lloyd’s gold medal to Captain Sullenberger. This was only the second time in 173 years that the medal and been awarded and I am sure that you will all recall why Captain Sullenberger deserved this honour, because he managed to land flight 1549 in the Hudson river with no loss of life, and avoiding a terrible calamity in the New York area.
Insurers rarely get the opportunity to celebrate the narrowly avoided disaster and I am glad that we took this opportunity last year, because this year has been somewhat different.
If 2009 was the year of the near miss, then in 2010 we have seen direct hits.
We have witnessed devastating earthquakes in Haiti, Chile and China resulting in considerable loss of life and livelihood. We have seen the eruption of a Volcano in Iceland grounding planes across Europe and, most recently, we have experienced the terrible environmental impact and the loss of life as a result of the explosion of the Deepwater oil rig.
So it seems the right time, to remind our US friends that Lloyd’s remains a true partner to American industry in managing its risks.
We have been writing business in the US for almost 130 years now and the US has become our largest market, accounting for over 40% of our business. Over that time, we have stood shoulder to shoulder with American industry in good times, but, given the nature of our work, more often in bad times. In 1906, when the San Francisco earthquake hit, around half of the population of that city found themselves homeless, most not simply from the earthquake but as a result of the subsequent fires sweeping through the city. And although it is estimated that around 90% of the buildings in San Francisco had fire insurance, many victims found that any fire damage resulting from an earthquake was excluded.
What Lloyd’s did next was to cement its reputation in the US.
When Cuthbert Heath, sitting in his office in London, sent a cable to his San Francisco agent which read “Pay all of our policy holders in full irrespective of the terms of their policies”.
In time, this proved a wise business decision, and Heath’s syndicates more than tripled their profits in the years after the earthquake.
But I believe that Heath was motivated as much by doing what is right as by profit. He saw his role to support industry.
We have never lost this ethos at Lloyd’s. We paid out when the Titanic sunk. We paid out enormous sums after the World Trade Center tragedy in this very city and we paid out again after hurricanes Katrina, Rita and Wilma rampaged through the Gulf states in 2005. This year, we paid out for our share of the loss of the Deepwater rig within days.
This is the role that we play to American industry. We help them to manage their losses. We provide them with security to grow and to develop their business. Because they know that they can rely on us.
It makes no difference to us whether our clients are American or British or Chinese. Because Lloyd’s is more than a great British Institution – although this remains a point of pride to us – we are also the place where the world comes to place its risks. We have moved far from our roots of insuring ships criss-crossing over the oceans at the start of the British Empire era. Our clients are now captains of industry in every corner of the globe.
The great economic triumph of the twentieth century was the globalisation of world trade. Wealth is shared, goods are traded, prices are brought down and people are escaping poverty because of this phenomena. But we are, perhaps, still playing catch up with how to manage and control global forces. We saw that during the financial crisis in 2008. We see it in the lack of urgent joined up international action to deal with climate change and energy security.
Globalisation brings great benefits. That is particularly evident for a company like Lloyd’s, where only around 20% of our business comes from the United Kingdom. To be global, we also have to think global. I probably spend as much time in meetings in New York, Beijing, Rio, Paris or Moscow as I do in my office in London. And when I am in London, many of my visitors are not British. The truth is that the world of the international business man or woman is one where the colour of their passport matters less and less and their acumen and competitive urge matters more and more.
I see this as an opportunity and not a threat. I stand here in New York, which along with London is the pre-eminent financial centre in the world. And I wonder if, and how, we will remain so? If the emergence of Singapore, or Shanghai, or even Moscow as another great financial centre is a threat to us, or is it an opportunity, to be able to trade capital and financial services in more venues? For whilst I firmly believe that China’s rise is inevitable, America’s decline is not.
Lloyd’s will be helping US industry to manage their risks throughout this century. Last year was a record year for Lloyd’s, and we were here applauding Captain Sullenberger. 2010 is more challenging, and we stand here looking at some of the biggest losses that we have seen in the first half of a year. But, as my partners from the insurance world well realise, this is the nature of insurance. We took the profits last year, and this year we must pay the losses. Because if globalisation provides great opportunity for international business, it also confers great responsibility. Returning to Cuthbert Heath, the Lloyd’s luminary during the San Francisco Earthquake, he told his staff at the time of the earthquake that the insurers’ job was “to get a man out of trouble. That’s what he’s paid you for.”
This is what I tell my colleagues in Lloyd’s and, I take great pleasure in repeating it to our friends and colleagues from the great American insurance companies. Particularly, as we contemplate not just the early losses in 2010, but also whilst we still feel the reverberations of the great financial crisis of 2008.
The economic uncertainties are with us still and the international community, and domestic governments, continue to grapple with what should be the role and responsibility of the global financial services industry and, in particular, the banking community.
I can think of no man better qualified to talk about these issues tonight than our guest speaker, Bob Diamond. Born in Concord, Massachusetts and an All State Linebacker, he is a great American export to the UK. And as President of Barclays PLC and Chief Executive of Barclay’s Capital since 1997, and despite his recent move back to the US, I could equally introduce him as a speaker from London to inform this New York audience. Although, as his sporting allegiances are split between Chelsea Football Club and the Red Sox, this may make him slightly more popular in London than in New York! Especially as he had the pleasure and privilege of presenting the premier league trophy to Chelsea himself this year – what a perceptive man he is! The fact is that Bob is equally at home in both cities and he understands the banking communities not just on both sides of the Atlantic, but also on both sides of the Pacific, courtesy of his time as head of Asian operations, based in Japan, for Credit Suisse First Boston.
Prior to that, Bob Diamond spent thirteen years at Morgan Stanley as Managing Director and Head of Fixed Income Trading.
Under his helm, Barclays Capital has grown to generate half of the group's underlying profits, and hit the headlines of both the Financial Times and the Wall Street Journal in the autumn of 2008, when it took over the Wall Street operations of Lehman Brothers. Barclays has also remained one of the few major banks which has not had recourse to the public purse, despite the highly challenging conditions for banking over the last few years and Bob has been a regular commentator on these extraordinary times in the British and US media.
Ladies and gentlemen, it is a great pleasure to introduce, as our Guest Speaker tonight, Robert E Diamond.
