David Holmes looks back 20 years to the last International Reinsurance Seminar held in Scotland.
After a gap of 20 years the International Reinsurance Seminar returns to Scotland. In the two decades that have passed in the London market, the seminar itself and in particular the organisation running it have changed considerably. In many ways, the changes could hardly have been envisaged by the 300 delegates who gathered in Edinburgh in 1981.
In its day, the Edinburgh seminar was a watershed; it was the last to be held in a university environment. The numbers had outgrown the capacity a university could conveniently provide, and (perhaps more importantly) those attending generally wanted better accommodation than student rooms. At the previous seminars, the ambience of Cambridge had compensated for the spartan nature of the accommodation, but in Edinburgh most people chose to stay in the smart city centre hotels (in those days, most people brought their wives with them). But the bussing of delegates around the city proved rather a nuisance. There was also a local difficulty, in that the main conference hotel had not completed its redecorating programme in time, and at the last minute decanted some key people into one of the other hostelries.
On the way to Edinburgh, the Chairman had stopped off for the night at Harrogate, and there been ‘sold' the idea that a more traditional conference town (i.e. Harrogate) would be more suitable, and so it was. Since then, the seminar has been held in top-class hotels, which could provide the right accommodation and conference rooms, in various places in England, and venturing abroad first to Dublin, and then Stockholm. The numbers attending limited the choice of venue in the early days, and Gleneagles could certainly not have coped then.
Interestingly, it provides an echo of an important feature of the early seminars – the golf tournament, which was relegated from being a key feature in the middle of the seminar (while the rest of the delegates and their wives were taken by coach to a local stately home) to a pre-seminar afternoon, enjoyed by a very small number of delegates who could manage to sneak away from their offices early. Still, there is the valuable silver cup to be played for, and it has some famous names on it.
Another reflection of the early, university-based seminars is the importance given to participation, with everyone thrown into discussion groups and expected to contribute to debates on the subjects raised. Possibly not everyone enjoyed this challenge, but it was pursued with great enthusiasm by the industry leaders and distinguished the seminars from the many other conferences held over the years (designed, one suspected, primarily to make money). An organiser of one of these more commercial conferences once commented to me on how impressive it was that so many senior people in the reinsurance industry were prepared to give up their time, accept a certain degree of uncomfortable but endearing amateurishness, and take part with such commitment. It was always a worry that some people slipped off before the end, or preferred a walk along the promenade if the weather was fine, but this was nothing compared with the casual attitude of attendees elsewhere.
Looking down the list of people in Edinburgh in 1981, hardly any are still in executive positions in London or abroad (about a third were from overseas), although several are still active in consultancies, acting as expert witnesses or conducting arbitrations. The companies listed as being represented have an archaic ring, with only a few still operating independently, but the subjects discussed are still remarkably appropriate – the use of technology, security, reinsurance in developing countries, and the outlook for the next decade. Speakers were drawn from New York, Ottawa, Paris, New Jersey, Buenos Aires, Bangkok and Baghdad – yes, Baghdad!
It is remarkable that the concept of the seminar has survived several changes in the organisation running it, and continues to provide a focal point for considering international reinsurance issues every two years. Its creator, in 1973, was Julius Neave, who founded the Reinsurance Offices Association (ROA) in 1969, and was managing director of Mercantile and General Reinsurance Company Ltd until 1982. Those names were familiar to everyone in the London market for many years and might bring back memories, but they have long gone from the scene.
So much has changed in the last 15 years that for those of us who were involved in the days of the ROA it seems like a different age. Yet the reasons for its existence are equally valid today. It is also salutary to remember that it was Julius who was the instigator of the Policy Signing and Accounting Centre (PSAC), which merged with the ROA to become LIRMA, and subsequently became a partner in the London Processing Centre (LPC). His company was also a leading member, at that time, of the Institute of London Underwriters (ILU), so it must be a source of some satisfaction for him to see all these bodies coming together into one organisation, the International Underwriting Association of London (IUA). Not many people live to see their visions come true in their own lifetime.
Unfortunately, there is a downside to the predictions of the future. The papers and reports of 20 years ago are full of dire warnings about the need for profitability and reliable security. The ROA Chairman commented after the 1981 seminar: “In an era when competition is rife, when decisions are made for which there appears to be neither technical or commercial justification, when there are too many underwriters chasing a reducing amount of business, there is a strong chance that sooner or later, and probably sooner rather than later, someone will be unable to meet his obligations. I am not saying anything new, but from what was said at Edinburgh it is obvious that more and more people are worrying more and more about the question of security.”
Despite these and similar comments repeated at later seminars, there seemed to be little to disturb the London scene in the early 1980s. Remarkably, the Falklands War did not prevent the Argentinean reinsurers from continuing their membership of the ROA, a measure of the confidence of the international reinsurance network. As we now know, however, there were ominous rumblings in America over asbestos, and then a series of international disasters – some of them not so international, for those of us who remember waking up that fateful Friday morning in October 1987 to find trees down all around. The doom and gloom predicted earlier did not occur as soon as suggested, but it nevertheless had some drastic effects.
The London market has been transformed since that period. Many of the big names of the past, and even more of the little ones, have disappeared through mergers and run-offs, but there have also been many new entrants, and the total number of entities transacting business in London is not that different. The volume of business, too, has continued to grow, and there has been a huge effort to improve efficiency in the market bodies as well as the constituent members.
It is amusing to look at the way the market has evolved over the centuries, but there is also a serious aspect. The changes in society, the rise and fall of nations, the revolutions and counter-revolutions, increased expectations, and continuing worldwide problems have produced immense challenges to the world's insurance and reinsurance community. Yet it continues to provide the necessary service to the world. It is a far cry from those jolly days in the coffee shops dealing with marine insurance, and then the development of fire insurance companies with their colourful teams dashing through the streets, the explosive growth of the railways with inevitable accidents, leading to the most dominant business of all, motor insurance.
Where, now, are the thousands of ships which were the bread and butter business of past centuries? An indication of the scale of sea transport in the 19th century can be seen from the vast areas of docklands in all the world's major cities, many of them many miles from the sea. But the sea has become an attraction for residential development everywhere, presenting new challenges to the insurance industry – hurricanes coming ashore in the US are now much more devastating, and even in Britain coastal erosion and flooding have become more significant. Are there really more earthquakes than there used to be? Or is it that we hear about them more readily? And volcanoes?
Fortunately one widely predicted disaster, the Millennium Bug, did not materialise. With hindsight, all the effort to meet it may have been unnecessary. Or perhaps the preparation and warnings had their desired effect, and prevented widespread disruption. All that has faded in the light of the other Millennium disappointments, such as London's Millennium Dome and its wobbly bridge, but one worry which has grown up in recent years, the effects of global warming, has certainly not gone away.
Only four years ago, a learned professor from the US demonstrated to a seminar audience that the warming phenomenon was nothing new, since it had occurred in the past, long before mankind was around to influence things. Whether or not this is true, and whether or not we can change things by our use or non-use of fossil fuels and aerosols, there can be little doubt that there are climate changes happening around the world which will affect us all, not least the insurance and reinsurance business. Only a few years ago, climate change was being blamed for the exceptional droughts – now it is the cause of the exceptional floods. No doubt the snow will have cleared from Gleneagles enough to reassure delegates that the climate is not that bad, but something funny is happening to the weather and the need for insurance is increasingly obvious.
As long as there is a demand for the industry's services – natural disasters, accidents, the growth of litigation and property to protect, increased travel, longer lives with greater demand for healthcare – there should always be optimism for the future. In the past, complacency, inefficiency and foolish competition brought problems for reinsurers worldwide. With today's greater realism, improved technology and efficient systems the London market can afford to smile (or grimace) at the past, but look forward to the future with confidence.