Well, a very good morning to everybody – great to see so many here. Today is a most important day for Lloyd’s. We are launching our vision for Lloyd’s in 2025 - and I am absolutely delighted to welcome the Prime Minister, David Cameron - he has very kindly agreed to support this launch and he is going to speak to us in a few moments.
Let’s all remind ourselves of the importance of the UK insurance industry. We employ 350 thousand people, the London market employs 50 thousand people, we contribute 2.5% to GDP, and over £10bn in tax revenue to the Exchequer.
2011 was a particularly difficult year for the general insurance market. The Eurozone crisis, low investment rates, low-ish premium rates – and of course it was one of the biggest years for major worldwide catastrophes in living memory – New Zealand, Australia, Japan, Thailand and the US. But Lloyd’s emerged from all of this in robust financial shape – a tribute to the people in this room. Our capital level remains at record levels – our rating at A+ - and equally importantly our global reputation high.
2011 reinforced the service that Lloyd’s provides worldwide – and that is to be instrumental in rebuilding businesses and communities after catastrophes.
In looking ahead to the long term future, as your still relatively new Chairman, I have been concentrating on 3 main areas. Continuing to strengthen our supervision of underwriting; modernisation and cost reduction; and extremely importantly, our long term strategy – and that’s the purpose of today.
Vision 2025 lays out what the Lloyd’s market should aspire to be in 13 years time – you may say why 13 years, well the answer frankly is 2020 is too close and 2025 was the next round number!
This vision has been produced by the market itself – the managing agents - facilitated by us here at the Corporation, and I am pleased to say that we have had a remarkable degree of consensus. This vision will be dynamic and we will adjust it as the market and the circumstances change.
Our customers, the brokers are been extremely supportive of Vision 2025. They, of course, have been able to invest substantially in their overseas distribution networks. This is a huge potential asset for Lloyd’s and we are delighted that Aon - one of our most important customers - are moving their head office to London – in part, as they have made clear, to be closer to the Lloyd’s market. That is a true demonstration of confidence in our strategy.
The essence of this strategy is to make sure that Lloyd’s becomes the true global hub for specialist insurance and reinsurance. We are the only physical insurance market in the world, but the majority of our business comes from the English speaking world.
The challenge we have - is to grow the Lloyd’s footprint into developing countries. To support this, we want the capital base for Lloyd’s to be more diversified, with a greater contribution coming from the high quality insurers in those growth countries. We also want that capital to bring with it business franchise and high quality professional people. We must internationalise the Lloyd’s underwriting market in people terms, simply because it will expand the network of trusted relationships on which the Lloyd’s market is based.
We have a small number of powerful overseas hubs, particularly Singapore - and of course, the hub in Shanghai. We will build on these. But we also need to attract quality insurers to London.
I am pleased to say that the level of interest amongst those quality overseas insurers coming to Lloyd’s is high – and - at the end of last year we had some good news - with China Re - the largest reinsurance company in China announcing that it will be joining the Lloyd’s market alongside Catlin later this year.
We will be managing the entrance of these new providers carefully and steadily – so don‘t expect to see any kind of rapid revolution. This will be about quiet and confident progress over the medium term to turn Lloyd’s from a powerful international business into the global centre.
So - Prime Minister, the execution of this vision will be challenging and difficult – but its successful execution will be of great benefit to the economy of both the UK and London.
I believe that the tone you have set in the Coalition Government for our approach is right. You have made it clear that London and the UK is an open market – it should be open to attract good companies, good quality business and outstanding people. The competitiveness of our corporate tax regime is good. The economic policy that you are pursuing, to manage the UK deficit down and put the UK into a stronger sustainable financial position (painful as it is) is exactly right and it is sending the right message to overseas investors.
We have to be competitive as a country and as the City of London. In the insurance sector in particular, capital and business has great mobility and decisions can be taken in terms of placing that capital and business quickly. With the insurance cycle somewhere near the bottom, as the cycle turns, more capital will be attracted into the industry – and we want to make sure that that capital, and that business, is attracted to London.
You will be pleased to know Prime Minister, in order to execute this strategy, we are not in need of significant additional help from the government. We receive tremendous assistance from the Foreign Office, BIS, UKTI and the Treasury teams and we – as a market – really appreciate this. Please pass on our thanks.
But there is one serious ask I have – which is to do with regulation. We don’t want light touch regulation – we want firm, tough and prudential regulation. Good regulation attracts inward direct investment.
In recent times, the approach of the regulators to the insurance industry - both in the UK and Europe - has become exceptionally difficult and costly to handle and is in danger of deterring inward investment. We are hopeful that the transition of the regulation of this market to the PRA under the Bank of England will encourage a change in culture. We would, Prime Minister, very much like your support for this.
Vision 2025 is predicated on the existing strengths of Lloyd’s, and one of the most important is that we are here in London. We are in the right time zone. We have an excellent judicial system – so fundamental for the insurance industry. We definitely want to retain Lloyd’s in London. We firmly believe that continuing as a mutual, with the market supported by our central fund, is a huge strength. We have an unequalled international license network and above all we have a culture of integrity, and a market built on trusted relationships. In undertaking and placing complex insurance risks, this culture is fundamental - and the face to face negotiation which we can see all around us in the boxes in this Room will remain at the heart of Lloyd’s.
So, ladies and gentlemen, Vision 2025 is about the onward evolution of a 325 year old market - to capitalise on an era when vast business opportunities will emerge. South East Asia, China, Eastern Europe and Latin America all will become fundamental to our business. We have a huge opportunity to capitalise on this growth. This will benefit both Lloyd’s, the City of London and the UK.
Thank you very much.