On 20 November, the International Underwriting Association (IUA), Lloyd's and the Lloyd's Insurance Brokers' Committee launched one of the most radical plans for reform that the London market has ever seen. The aim of the programme, London Market Principles 2001 (LMP2001), is to create an efficient, transparent business framework in London.

Senior market practitioners, supported by specialist management consultants, have driven the changes in business practices that the plan promotes. IUA companies, Lloyd's managing agencies and brokers are now being asked to sign up in support. So far, there has been a good response, and we believe that backing will gain sufficient critical mass for the package to become widely established by next spring. Detailed manuals will be published by the end of the first quarter in 2001.

These reforms have sometimes been portrayed - wrongly - as “London fights back”. In practice, it is a rather more subtle and global picture. The London market is an international asset - the place where insurance-related expertise, customers, brokers and capital converge from all over the world to provide a unique meeting place and industry focus.

As a number of people have remarked, if such a place did not exist, someone would have to invent it. The vast majority of the participants - whether capital providers, brokers or customers - are from companies based outside the UK or whose ultimate parents are from overseas. All the world's top international insurers and reinsurers, for example, are active in London, and they all have a stake in seeing our reforms succeed; the benefits will be global in their spread.

So, what are we trying to achieve?

At its simplest, we wish to make London an attractive and efficient place for insurers, reinsurers, their customers and brokers and everyone else with a stake in global risk management. We are aware that the London way of doing things, which has grown up piecemeal over the past300 years, is in urgent need of reform.

To this end, the IUA-Lloyd's Forum was established in July 1999 and invited the broking community to join its discussions. Last May, one of the Forum's working parties produced a discussion paper setting out recommended reforms that went to the heart of the way business is conducted in the market. This was followed by probably the most thorough consultation process ever conducted in the London market, which produced hundreds of formal and informal responses. The overall sentiment could be summarised as strong support for the initial report's objectives, but concern about some of the details and about the timing.

The revised version appears at the time of writing to be winning acceptance. Crucially, LMP2001 allows individual participants to remain in full control of their business decisions - something of a challenge in a subscription market where so many risks are shared.

The key points are:

  • clarity at point of contract so all concerned - underwriter, broker and customer - know exactly who is responsible for doing what and by when;

  • a single underwriter responsible for the administration involved in a risk, instead of the current system where each participant is responsible for administering his or her own part of the risk;

  • a single underwriter - or a predetermined number of underwriters - responsible for managing the claims agreement process and administering claims;

  • a London Market Standards Agency to collect and publish market-wide aggregate data so that participants can benchmark their own performance according to certain criteria (e.g. speed to pay premiums and claims and to issue documentation); and

  • premiums to be paid by the agreed date with failure to do so, unless otherwise agreed, a breach of contract.

    In a separate but related development, the IUA and Lloyd's have signed a letter of intent with Xchanging to form a separate company. This will merge the existing back office bureaux - Lloyd's Policy Signing Office (LPSO) for the Lloyd's community and London Processing Centre (LPC) for IUA companies. It will develop new services and work towards migrating much of the process to secure, web-based technology. Another working party, meanwhile, is setting about the important if unglamorous task of creating a unified risk coding framework for the entire market, building on several years of cross-market work in this area.

    Our proposals for reform have only just been rolled out and it is, therefore, too early to declare them a success. The degree of support for reform from the diverse number of constituencies that collectively make up what we call the London market is, however, unprecedented in my experience. There is every reason to be optimistic - and the benefits could spread well beyond London.

    Marie-Louise Rossi is Chief Executive of the International Underwriting Association of London.