This year began for Lloyd's with the positive news that the market's ability to accept premiums had risen by £1 billion to £11 billion – the largest year-on-year increase since 1993/4.
Capacity is in many ways a measure of the sentiment of the market's capital providers – although clearly other economic factors affect its movements. But in general terms, the more promising the market's prospects for the year in question, the more attractive the proposition of committing capital to Lloyd's becomes. Clearly 2001, with its improving rates across most sectors, is a year in which capital providers are showing markedly greater confidence than for some time.
Yet while the market's prospects are to a large extent in the hands of global economic and meteorological cycles, the effects of those cycles can be amplified or dampened by a range of factors closer to home. Operating a business at Lloyd's means leveraging the market's global franchise, its trading licences and brand. But it has traditionally also meant meeting a number of costs associated with the Lloyd's market's mutual nature – the central security fund, entry costs, costs resulting from the 1996 Reconstruction & Renewal (R&R) settlement, and the running of the Corporation of Lloyd's.
At the market level, we have been driving forward an agenda for the modernisation and increased competitiveness of Lloyd's. Technologies and processing systems which form the market's underlying infrastructure are being revamped, and the fixed costs for the market businesses are being reduced with the syndicated loan that helped to finance R&R due to be paid off by the end of this year, removing the burden created by the market's problems of the late 1980s and early 1990s.
The aim of this activity is clear to us: to create the best possible environment inside which the Lloyd's businesses can operate and compete with more conventional insurers and reinsurers. We may not be able to control the world's economic fortunes, but we can have a significant influence on the trading potential of Lloyd's businesses by crafting the right regulatory and fiscal framework. Setting and maintaining high standards in every aspect of what we do will be a critical priority in 2001.
During the coming year, there are a number of key projects that will contribute to the transformation of our environment. Probably the most significant of these is the LMP2001 initiative to modernise the entire London insurance market. Last December, the process of market participants being asked to sign up on a voluntary basis to the IUA/Lloyd's Forum's proposals began. These proposals are designed to re-engineer the way in which the market does business. Issues such as policy production, claims handling, slip design and premium payment all fall within its remit. This work will have the effect of bringing the market into line with the best insurers in the world, allowing it to function at the speed of the fastest rather than the present situation where it tends to be dragged back by the slowest. Going hand-in-hand with the modernisation of standards is the proposed joint venture to create a new single, unified service provider for the entire London market. The result will be a more customer-friendly London, retaining its existing business while attracting new clients and brokers from around the globe. Another major innovation at Lloyd's is the work to transform the lloyds.com website from a standard information site into a virtual trading portal for brokers. By registering with the site, intermediaries will be able to receive detailed information on cover available from the Lloyd's market, get quotes and transact business. The site will provide virtually instant access to Lloyd's for accredited brokers around the world, making the market an increasingly attractive option.
The new lloyds.com complements the opening up of broker access to the market announced last year. This means that from the beginning of this year, non-UK brokers have been able to apply for direct access to the market in a manner that has never been open to them before. Applications are already arriving, and the first new accredited brokers are expected to be appointed this spring. The move will make Lloyd's considerably more accessible.
These are examples of the type of activity now taking place at Lloyd's. There is a sense of gathering momentum about the market today as rates harden and the initiatives outlined above are implemented. Market sentiment is clearly on the turn, but we must also move the market itself – move it towards a more competitive, more customer-focused proposition. Our vision is of a market containing strong, well-managed increasingly independent businesses, operating to high standards, harnessing new technology and benefiting from a strong Lloyd's franchise to compete in the global insurance market. This year must – and will – see the Lloyd's market move forward.