David, thank you very much indeed for your kind words. I can tell you it is pretty daunting standing here in my second week as Chairman of Lloyd's, in front of 700 of our biggest customers.
When I was approached to do this job I did ask what the role required – there was a long pause on the other side of the table and eventually the fellow said: well – as Chairman of Lloyd's - you are there to influence things. Let me tell you I have failed. Because, knowing this dinner can be a lively affair, I asked politely if I could speak at the beginning of dinner, hoping to be able to enjoy a glass of wine over dinner. I did not succeed!
One thing I was also asked to do tonight was to ‘hug a broker’. There are 700 of you – but I wouldn’t recommend it. As the Daily Telegraph have already pointed out, as a three day a week Chairman - and with my surname - watch out for the half Nelson!
More seriously, let me just say what an honour it is to have been appointed Chairman of Lloyd’s. Perhaps I might just share a few early thoughts with you.
First of all, for Lloyd’s, you in this room are the most important people of the lot. You are our customers and you provide our business.
But the value of you the brokers goes beyond that. You have a history of innovating - as new risk opportunities arise – and that is a huge asset to Lloyd’s. We have the ability to understand risk in the most important economies in the world and to assess new types of risk. Equally importantly, we all - brokers and underwriters - have pride in our companies - and in Lloyd’s - and I see a great culture of loyalty, prudence and integrity. This leads to tens of thousands of trusted relationships which is absolutely central to the Lloyd’s market. Sadly I don’t see these qualities in other parts of the Financial Services industry. So Lloyd’s culture is a real differentiator - let’s hold onto those great values – it is absolutely fundamental.
As you know, the Corporation of Lloyd’s is both there to oversee the market and to be a market enabler, and a market promoter. And as a promoter, I regard one of the key roles of being Chairman as being to help you the brokers to secure new business for Lloyd’s. My door is open – and I am keen to help.
I don’t need to tell you that market conditions are – and are likely to remain – difficult for the underwriting industry. The world economy is in a very strange place at the moment. We haven’t been here before, and with no prospect of investment returns improving for some time, we may well find that the supply of capital remains strong as large investors look for additional returns in areas they have not before. This could mean that the insurance cycle may take more time to turn than historically – this may be excellent news for your customers in the short term. But pricing has to be right in the long term in order to preserve the covenant of the insurance industry – which is very much in your customers’ long term interest.
So it won’t surprise you, that given these market conditions, the oversight responsibility of Lloyd’s is at the top of my list of priorities. I believe that this is an area where Lloyd’s has made really good progress over the last ten years.
Linked to the performance management of Lloyd’s is outside regulation. There are big changes afoot with the restructuring of the FSA. I very much hope that this will provide opportunities for a more prudent and proportional regime. It will not be – and should not be - light touch.
But we have to be careful what we wish for on regulation. One of the main reasons why Lloyd’s - and London - are able to attract the business that we do - is because we are seen as a well regulated market. If we are to increase our footprint internationally, that will be one of the reasons why business will be attracted to Lloyd’s and to London. I hope that the broking community are able to demonstrate to their clients the additional value in terms of the security which the strong regulation of Lloyd’s will bring. This is characterised by a robust performance management structure and the introduction of Solvency II, which we are on track to introduce in January 2013.
The second priority is competitiveness. We have made great efforts and investment already in improving our processes. But it is work in progress. You can assume that I will be a keen promoter of market modernisation. We need your active co-operation and support for these programmes. Frankly - as a market - we are behind other industries on the process of modernisation. We must keep up momentum or this will begin to have a negative impact on our business.
The third area is the question of Lloyd’s long term strategy. We do plan to look at what the vision of Lloyd’s should be over the next 10-15 years. We need to have a longer term picture for Lloyd’s - it will be crucial in informing the decisions that we will have to make over the next few years. As well as talking to the market – we will also be talking to you – as our customers - to understand your own views. Fairly soon I would like to produce a statement we can all share and get behind.
This leads me to our international footprint to support that long term strategy. Huge efforts have been made in recent years on expanding the footprint, in order to diversify our business into the most important growing markets. A great deal has been done to push out Lloyd’s into - for example, Singapore, China, Brazil - to name but three. I applaud the efforts of my predecessor Peter Levene and our Chief Executive Richard Ward in leading the charge - but I now feel we need to think about which are the business models in these territories that will create the greatest value for Lloyd’s. It seems to me that pulling business in from those countries is as important as pushing Lloyd’s out to them. I would hope that during my tenure we will make a start in attracting capital and people from these growing markets into London.
This could mean that we end up with an underwriting market which is populated with individuals from all our key markets; which has the highest quality overseas carriers sitting on the same side of the table as us in Lloyd’s; and the opportunity to expand the network of corporate and personal relationships - on which Lloyd’s depends. If we can expand and internationalise the specialist underwriting market here in London, it will increase the business opportunities not only for the larger brokers but also the smaller specialist brokers on which Lloyd’s relies for so much valuable business.
Let me say one further word about Lloyd’s relationship with the broking community.
Larger brokers have been able to invest in global distribution in a way that the Lloyd’s market could not have done on its own. I would like to see Lloyd’s working ever more closely with all of you - the larger brokers and the increasingly global smaller and medium sized specialist brokers - frankly – in exploiting your distribution networks.
If we do, I believe this is a win-win, both for you and for Lloyd’s.
If there is one point I would single out this evening it is that we should aim for London EC3 to become the true worldwide hub for specialist insurance and reinsurance. We are in a strong starting position, but we should not be complacent about the level of competition we are certain to encounter. We will have to work with Government and regulators to make sure they understand the business opportunity for the UK - and then encourage them to create the right infrastructure and the right fiscal and prudential regulatory environment. And that will be an important part of my job.
Ladies and Gentlemen I am very grateful for being given the opportunity to say a few words right at the outset of my appointment. Having had 4 months to get to know Lloyd’s a little better, I have now arrived feeling that there is a tremendous opportunity for Lloyd’s – and indeed London - over the next decade or two. Crucial to that will be the working relationships between Lloyd’s and you the broking community - and I can assure you that is where much of my own effort will be concentrated.
Ladies and gentlemen I look forward to working very closely with you.
Thank you
