Lloyd's of London has moved with the times to reassert itself as a major global insurance player, says new chairman Peter Levene.

As the world enters troubled and uncertain times, some of you may be wondering about the mood at Lloyd's. As chairman, I can sum it up in three words: confidence, confidence, confidence.

Of course, it has not always been so. In the 1980s and 1990s our powerful reputation faced severe tests. Disasters rolled in thick and fast. Newspaper articles at the time had a common theme: losses at Lloyd's; bankruptcies among Names; a market reeling; nightmare for Lloyd's.

Then the natural disasters, catastrophes and years of financial losses were compounded by one shattering man-made event, now known simply as

`September 11'. It was the biggest single loss in our history. Some said we were staring into the abyss and would break our historic pledge that we always pay valid claims.

Tribute to strength
Instead, we have now paid over $2.5bn of claims for September 111. This is a tribute to the powerful, commercial and financial strength of the Lloyd's market. And it has sent out a powerful message: Lloyd's is secure. Lloyd's is certainty in an uncertain world.

How have we achieved this? Lloyd's has tackled the difficult issues which led to the years of losses by developing and implementing franchise proposals - a radical reform and modernisation of the market.

Now we are in a good position to benefit from the strong trading environment. Far from losing out to new competitors, we have attracted new business. Direct premium has risen by 29%, reinsurance premium has risen by 25%2. Meanwhile, our capital base has not dwindled. Our capacity has increased to £14.4bn3 - a record in our history.

While the market cap of FTSE 250 has fallen by more than 30% since September 20014, the market capitalisation of Lloyd's UK-quoted businesses is around 50% higher5 today than it was then. As financial markets continue to suffer, Lloyd's is not simply a small beam of light - it's a beacon.

And these facts need to be set against the global nature of the Lloyd's marketplace: 96% of the FTSE 100 have policies at Lloyd's6, as do 93% of the Dow Jones7, the world's top ten banks, the world's top ten pharmaceutical companies and the world's top five petroleum refining companies8.

So the gloom has gone. The headlines are changing. To change perceptions, we had to change the way Lloyd's does business. This takes courage and foresight, but although Lloyd's is more than 300 years old, our history is one of constant change. Our reputation rests on our flexibility, ingenuity and entrepreneurial spirit. We are a genuine market where innovation sparkles, not an organisational behemoth that suffocates fresh thinking.

Let me sketch out three ways in which we have acted to raise standards:

  • Byzantine accounting practices are going. To many outsiders, viewing Lloyd's through its three-year accounting system was like looking through an out-of-focus camera. Transparency and focus breeds trust, which is essential to our industry. So we are moving to annual accounting;

  • second, we are going to be tougher on those businesses which trade in our market. Those businesses effectively use a franchise, the assets that underpin the Lloyd's brand - our name, reputation and network of international trading licences. In future, each underwriting business will sign an agreement to abide by a range of standards and guidelines, so that we can protect our brand. The franchise concept should inject more financial stability into the market, which in turn should result in sustained profitability in the long term. Where once Lloyd's could only take action after a syndicate had got into problems, now a Franchise Board will be able to take action before problems materialise and harm the financial performance of the market as a whole; and

  • our third change is that, over time, we intend to move away from unlimited liability, firstly by not admitting new unlimited liability members, and secondly by working to ensure that those members with unlimited liability do not lose out when they change to limited liability.

    In spite of the `good times', we are not, never have been, and never will be complacent. We have to continue to develop the financial flexibility and discipline to meet unforeseen and colossal challenges, and we have to understand what insurance does.

    Insurance rebuilds and enables. After a catastrophe, insurers foot the bill for rebuilding what has been destroyed. Meeting billions of dollars of claims arising from the attacks of September 11 means helping our friends in New York to re-build their lives and the dynamic area of Lower Manhattan.

    Process of progress
    Enabling means driving progress along. When people invest in a venture they often prefer not to be exposed to all the risks associated with it. If they lack that insurance, or it is insufficient, then the scale and number of investments is likely to fall over time.Today we can say with confidence that whatever the long-term challenges, Lloyd's is better placed than ever to respond. In an uncertain world, you can be certain of that.

    1. Office for September 11, January 2003.

    2. Xchanging Ins-sure services, January 2003.

    3. MSU (Member's Services Unit), January 2003.

    4. www.ft.com .

    5. Lloyd's market reporting and analysis, September 2002.

    6. FTSE 100 & Dow Jones IA/Fortune Global 500, Lloyd's Statistics, Nov. 2002

    7. Xchanging, 2003.

    8. FTSE 100 & Dow Jones IA/Fortune Global 500, Lloyd's Statistics, Nov. 2002.

    By Peter Levene
    Lord Levene of Portsoken replaced Sax Riley as the chairman of Lloyd's of London at the
    beginning of 2003.