Alastair Evans talks to the Market about his work as Lloyd’s Head of government affairs.

As Head of Government Affairs, Alastair Evans and his small team monitor the domestic and international debates that could impact the Lloyd’s market and how it does business. Working both publicly and behind the scenes he lobbies governments and organisations to ensure that Lloyd’s can trade as efficiently and effectively as possible in all the territories in which it operates. Evans, who trained as a lawyer, says that despite his 15 years in the role, it is an area which constantly throws up new challenges. And that the growing influence of the EU on insurance regulation has been the biggest change over that time.

Challenge to break down trade barriers

But while much progress is being made in terms of influencing the future direction of EU thinking on insurance, Evans is reflecting on the work to be done outside the EU, in light of the Sixth World Trade Organisation (WTO) Ministerial Conference in Hong Kong last December. He says that despite the fact that Lloyd’s trades in over 200 countries many national barriers to trading in insurance, reinsurance and intermediation remain, and these need to be broken down by the WTO.

The EU’s strategy in the current WTO trade round is to seek to dismantle many of these barriers. During the Hong Kong meeting the insurance sector’s primary aim was to try to ensure that the financial services receives at least the same level of attention from governments as other sectors such as agriculture, which has been dominating the WTO’s agenda recently. Although the overall outcome of the Hong Kong conference was modest, governments agreed a text on services which should be a useful springboard for the next stage of multilateral talks, potentially leading to a further opening of markets.

Hope on the collateral debate

One issue that Evans anticipates movement on is US reinsurance collateral. Currently in the US, alien reinsurers trading on a cross-border basis are required, under National Association of Insurance Commissioners (NAIC) rules, to post collateral equal to the full gross amount of their liabilities for the US risks they underwrite. This put them at a serious competitive disadvantage to domestic companies which are not subject to the same rules.

The European insurers’ body, the Comité Européan des Assurances (CEA), has been lobbying the EU for some time on this issue. The EU has accepted the CEA’s arguments and has identified the abolition of US reinsurance collateral as one of its priorities for the next five years. The adoption of the EU reinsurance directive in November 2005, which will remove completely collateral requirements for EU reinsurers across the 25 member states by 2008, will be a critical factor in the EU’s future dialogue with the US on the issue.

The abolition of US collateral is now firmly on the agenda in the US with the NAIC formally adopting a white paper in December. This sets out arguments for and against existing collateral requirements. The situation is expected to be resolved in 2006. One reform proposal being considered by the NAIC is to focus on factors such as the strength of individual reinsurers when assessing what, if any, their future collateral requirements should be; a proposal that would apply to both US and non-US reinsurers. Evans says this would be a much fairer system than the current discriminatory rules.

Progress within Europe

Most of Evans’ European lobbying work is done in association with other UK insurance groups such as the Association of British Insurers (ABI), through the British Insurers European Committee, and also in conjunction with other European insurers through the CEA. He says that while Lloyd’s is influential, presenting arguments in coalition with other organisations is generally more effective with the EU. On the great majority of issues our views coincide with those of the other European insurers and reinsurers.

Evans says that at the top of the EU financial services agenda at the moment are calls for a legislative pause in the EU, to allow the market to focus on the implementation and enforcement of those regulations already introduced and for greater attention to be paid to cost/benefit analysis before new legislative proposals are made. He is also closely monitoring the DG Competition and Internal Markets sectoral inquiry of business insurance.

Evans acknowledges that many would find his role frustrating due to the slow pace of international organisations’ decision making. However, he says that once issues begin to move, the speed at which they can be resolved can be startling. But he admits that a long-term perspective is required. “You’ve got to be optimistic,” he concedes, “vocal, persistent and sometimes patient”.