Looking forward in 2001, there are two particular areas where I would hope to see progress in the re/insurance world: the London Market Principles 2001 (LMP2001) programme and the European ‘passport' for reinsurance. Both initiatives will ultimately benefit customers of insurance and reinsurance internationally.
The first focuses on the service levels in the international market centred on London, recognising that in an age of global competition, we have to meet our customers' needs in the most efficient way possible. London cannot afford to lose out as a centre of expertise just because it has not adapted its traditional ways of doing business.
The second highlights the need to be able to trade in reinsurance across borders of the European Union. It is about customer choice – allowing the barriers that exist to come down so that clients can freely buy reinsurance from international companies.
Both initiatives saw considerable progress in the year 2000.
After the setting up of the IUA/Lloyd's Forum in 1999, the past year saw discussions continue with the brokers and formalise into a set of radical reform proposals which went to consultation to the market.
Consultation – widely, across all sections of the market – has been a vital part of the process. The emphasis has been – and will continue to be – on involving as many market practitioners as possible (some 160 participated in the working groups over the summer and beyond). This sort of ground-up approach, coupled with firm direction from the IUA/Lloyd's Forum and London Insurance Market Brokers Committee (previously the Lloyd's Insurance Brokers Committee), is, we believe, the best way of changing practices across the board.
I do not propose to go over the programme itself here, but would like to concentrate on two aspects of LMP2001.
The first is to stress the continuous nature of the reform process. There will be no Big Bang. Rather, companies which have signed up to the package will, we envisage, gradually roll-out the new way of conducting business. LMP2001 slips will appear around the market. Underwriters will clarify at point of contract the roles of the lead and followers. The claims agreement process will begin to get significantly more efficient.
The publications setting out in detail how implementation is achieved in placing, claims and systems changes were issued last month. We therefore expect 2001 to be the year that those changes start to be implemented and begin to be felt by London's insurance and reinsurance clients internationally.
The second aspect is sign-up. Again, we imagine this will be ongoing through the year. We always knew, when we published the reform plan in November last year, that companies would take longer than Lloyd's managing agencies to decide whether to sign the letter of intent. The companies' reporting structures are very different from those of the managing agencies, with the chain of command leading back to the parent company, often in a different jurisdiction.
In the London company market, GE Frankona, CNA Re and QBE were the three prominent international companies to sign up first, and they have been joined by several others. A large number of Lloyd's syndicates and brokers have also signed up.
By Easter, it would be good to look at the market overall and see the majority of participants committed to the spirit of LMP2001. By the end of the year, I would hope that participation would be
The impact of LMP2001, if it proves to be the success we all hope, will reverberate beyond London and into other international markets.
Last year saw major progress towards establishing a single market in reinsurance across the European Union. Discussions for a European reinsurance ‘passport' advanced between the British, French and German associations, under the umbrella of the Comité Européen des Assurances.
The IUA, and its predecessor LIRMA, has long campaigned for further liberalisation and the bringing down of barriers. The EU Third Non-Life Directive does not cover reinsurance. Whilst there is, of course, freedom to trade across European borders under the 1964 Reinsurance Directive, reinsurance remains differentially regulated across the EU member states, which is a distortion of competition in the single market.
In the longer term, if we can truly build a single market in Europe, we will also be in a position to look forward to mutual recognition with the US (and maybe the other two North American Free Trade Agreement countries') re/insurance companies and brokers. This may possibly happen under the Transatlantic Economic Partnership, in advance of the rest of the World Trade Organisation (WTO)/General Agreement in Trade and Services (GATS) members. It was promising that, despite the headlines decrying the failure of the WTO, the GATS talks continued during 2000. We also hope that a new European model for the regulation of reinsurance will inform the International Association of Insurance Supervisors in its work on international supervisory standards.
A final wish for 2001 would be for a comprehensive round of negotiations of the WTO. It is a big wish that on a global scale would complement the work that we are doing in London and Europe to ensure increased access and efficiency for the customer of international re/insurance.
Marie-Louise Rossi is chief executive of the International Underwriting Association in London.