The London company market at last has one sole voice, the International Underwriting Association (IUA) of London. Tim Carroll explains the significance of the world's largest representative organisation for international insurers and reinsurers and sets out an agenda for the new millennium.
The landscape of the London insurance market has changed out of all recognition during the 1990s. The company sector, so long in the shadow of Lloyd's, has emerged as more than an equal partner in the new scheme of things. Seventy five per cent of London's treaty reinsurance, for example, is now written outside Lloyd's in the company sector. With corporate capital moving in to dominate Lloyd's - much of it from overseas - the distinction could soon become academic anyhow.
London's insurance sector is increasingly coming to resemble an international playing field, attracting all the world's top international companies - and that is where the International Underwriting Association of London (IUA) fits into the picture.
The IUA represents international insurance and reinsurance companies with an interest in the London market. The vast majority of our members, like my own company, are based outside the UK. North Americans and mainland Europeans are especially well represented, but the membership covers 40 different nationalities. In some ways, we are a microcosm of the industry worldwide.
These companies are in London because, despite the emergence of centres like Bermuda, this is where the world's premier international insurance marketplace happens to be. Since the 1970s, every major reinsurance group in the world has been attracted to London, which continues to draw several new arrivals every year.
Despite its importance and size, until recently this company market had a very low profile. In 1993, however, that started to change with the opening of the London Underwriting Centre (LUC), an impressive, high-tech building in the heart of the insurance district, purpose-built to meet the needs of underwriters and brokers.
The LUC has given companies a much needed physical presence in London, but the sector remained handicapped by being divided into two associations. At the start of this year that all changed when the International Underwriting Association of London (IUA) was formed. Previously, the marine market had been represented by the Institute of London Underwriters (ILU), while reinsurers and non-marine underwriters had looked to the London International Insurance and Reinsurance Market Association (LIRMA), itself the result of a merger in 1991.
Now, at last, we have the IUA as the sole voice for the company market in London. It is such a logical and desirable step that people are already asking why it took so long to come to fruition - it as at least 50 years since the idea of a single company market association was first discussed.
Indeed, the goodwill that exists towards the IUA, internationally as well as in London, has been quite overwhelming. Members, brokers, regulators, clients and almost anyone else with a stake in our industry want the IUA to succeed. Now, however, is not the time for the celebrations to begin. The IUA will be judged purely by what it achieves in the future, by what it does. We are determined to make a difference - and sooner rather than later.
So, what are our aims, and how do we hope to achieve them?
First, we will seek to provide the normal benefits that members would expect as efficiently and to as high a standard as we can. Current services include representation to regulators and legislators internationally, research, information, education and the promotion of good practice and support for the marine market through the former ILU-Lloyd's joint committees. These and our other activities will help members to remain competitive by meeting ever increasing customer expectations.
That, though, is only part of the story. The IUA exists to provide strategic leadership in the London market in a global context; this is where our decisions will probably have the greatest long-term impact. Our chief executive, Marie-Louise Rossi, has made it clear that the IUA will be, in her words, “uncompromisingly international”. All the world's major international insurance and reinsurance groups are among our members. Nine countries are represented on our ruling board of 16, drawn together by a joint desire to see the London market work as effectively as possible for their own companies.
Excitement and frustration
London, it has to be said, is both an exciting and a frustrating place for a reinsurer to be. Exciting, because there is nowhere else like it for the level of activity, depth of expertise or range of capital. That is why several of the world's reinsurers have recently either set up in the London market for the first time or increased their commitment to it.
Frustrating, though, because it is not working as well as it should. In a recent speech I described some of London's practices as archaic - and no one in the audience disagreed. Rectifying this state of affairs is right at the top of the IUA's agenda. Achieving the necessary changes will only happen if someone challenges the status quo - and that is what we intend to do.
Fortunately, the creation of the IUA comes at just the right time. The Lloyd's market is now led by Max Taylor, a former broker who sees the market through the eyes of its customers. He, too, is acutely aware of the need for change. The emerging IUA-Lloyd's axis provides the basis for preparing London for the 21st century.
To give an idea of the sort of issues we shall be tackling, it is ridiculous that there are separate wordings and procedures for the companies and Lloyd's. In co-operation with the Lloyd's Non-Marine Association, we have already made considerable progress towards the use of a shared wordings database and a common approach towards policy preparation. There is still a long way to go, however, before we have a seamless market in these respects.
The time taken to pay claims is another area. London market companies are exemplary in honouring all legitimate claims. Nonetheless, despite the success of the CLASS system for paying them electronically, it is not always as speedy a process as our customers would like. My target is to arrive at a London standard or benchmark, so that the vast majority of undisputed claims are met within an agreed, specified time.
Then there is the question of the processing bureaux. London is uniquely advantaged in that it has two bureaux for sharing backroom premium and claims processing facilities. The London Processing Centre (LPC), which is owned by the IUA, and the LPSO at Lloyd's save money and time, but many people are asking why we need both.
The LPC and LPSO are already working together to remove duplication and streamline the market. I am often asked, why not go further and actually merge the processing and claims operations of the two bureaux? Indeed, why not? This is an issue on which I have an open mind, but it will certainly be on the agenda.Finally, London must be at the forefront of electronic commerce. It is not for the IUA to instruct its members on what to do with IT, but we can help ensure that the appropriate infrastructure is in place. The IUA is working with Lloyd's and the brokers to promote convergence of the world's three major insurance networks, LIMNET, RINET and WIN. The US based network IVANS, although not formally part of the project, is also being closely involved. (See page 28 for more details.)If the convergence goes ahead, international insurance and reinsurance can start to catch up with other financial services industries. Cost effective cross-border trading will be promoted and we will take a big step towards a virtual insurance and reinsurance market. If it does not, on the other hand, bilateral solutions between brokers and their clients will be in place and the opportunity to develop a truly global network will have been lost.
Our vision, therefore, extends well beyond London to a world in which underwriters, brokers and clients have the ability to conduct business free from physical constraints. The whole reinsurance industry and all with an interest in its success will benefit.
Tim Carroll is chairman of the International Underwriting Association of London. He is also chief executive for UK non-life business at ERC Frankona in London. IUA contact details: tel: +44 (0) 171 4444; fax: +44 (0) 171 617 4440; e-mail: firstname.lastname@example.org