Although Lloyd's is widely viewed as an institution wrought through long tradition, it continues to modernise, says Adrian Beeby.

People say that the City of London is split in half by Bishopsgate. To the west of it, business is predominantly banking and equities; to the east of it, insurance. One of the reasons for this is that Lloyd's of London has always been based in the east of the City, not far from its original home in Great Tower Street. This was where Edward Lloyd founded his coffee shop in the mid-1600s, when the first wave of these exotic premises swept through the capital with the same vigour for acquisitions that Starbucks demonstrates today.

The fact that Lloyd's has always existed within a relatively closely defined geographical area has created a focus for the insurance industry that we know today as the London insurance market - a community of underwriters, brokers and their associated service industries clustered around Lime Street and Leadenhall Street. Indeed, one only has to stand on Leadenhall Street at 11 o'clock in the morning to witness this market in full swing, as a line of brokers, weighted down by their slip cases, makes its way from Aldgate to the underwriting room at Lloyd's, perpetuating a daily ritual that has gone on for decades, if not centuries.

But underneath what some might see as the comforting façade of this daily ritual, important and far-reaching changes are already taking place - changes that will reshape Lloyd's for its 21st century incarnation. Many commentators will point to the proposals put forward by a strategy group led by Lloyd's Chairman Sax Riley as the most significant manifestation of these changes. But to do so would be to fail to grasp the important developments taking place in e-commerce, relationships with the broking community, service provision and Lloyd's role in the international insurance industry, among others. As experts in the Eastern art of feng shui point out, being weighted down by the past can be a dangerous thing. As an institution with over 300 years of history, Lloyd's is in more danger than most of running that risk - but it is a risk the market's senior management is all too aware of. And as the speed of technological advance increases, so the risk of being weighed down by history increases. That is why Lloyd's today is taking strategic action on a virtually unprecedented level to look to its future.

Take for example the concept of broking a risk. Broking has been an integral part of business at Lloyd's since the market's earliest days. And to broke a risk, one clearly needs brokers. But for hundreds of years, the inability to communicate large amounts of detailed information quickly over distance has meant that those brokers have had to be London-based. Today, the internet means 100 pages of detailed text and illustrations can be sent from the US to London in a matter of seconds. Voice messages, even fully realised video, can bridge the same gulfs. The necessity to be able to walk to the Lloyd's underwriting room in a few short moments is gone. But recognising the end of certain restrictions is not enough; management must then seek to comprehend the new possibilities and adapt. For Lloyd's, this meant in 2001 the introduction of rules allowing far wider access to international and non-London brokers than ever seen before. Although certain minimum standards of customer service, information technology and professional conduct must still be met to qualify for the title of Lloyd's broker, the geographical limitation is gone. Now, 21 new brokers have been admitted to the market from countries including the US, Canada, France and Luxembourg and, of course, the UK itself.

Steve Boucher, head of Lloyd's broker services unit believes this is just the start. He said: "Our aim was to provide wider access to the market for brokers who can meet a clear set of commercially-based standards, which are designed to promote high levels of professionalism, integrity and customer service. We've already begun to see evidence of new business in the Lloyd's market, some of which was previously placed in domestic markets."

Electronic transition
No one is pretending change on this scale can happen overnight. Granted, the procession of brokers down Leadenhall Street is still clearly visible, but what is not visible is the stream of electronic transmissions into the market via fax, e-mail and the internet. It is, we believe, this side of the scales that is tipping as a growing network of international brokers influence the market.

One of the ways this influence has been felt is through the new website launched by Lloyd's in 2001, . Allowing brokers from around the world access is a positive move, but without some method for them to communicate and orientate themselves in the admittedly complex world of the Lloyd's market, the access would be lacking in value. provides that means.

Having launched its original website in 1997, Lloyd's developed a rudimentary `search and find' facility called Market Finder, designed to provide brokers with basic information on managing agents and their products, split by risk type. The rapid growth of the internet's technological potential meant that by 2000, Lloyd's was considering a much more sophisticated version of Market Finder. But one of the issues it had to deal with was that the original was designed to provide information to a wide range of audiences including brokers, academics, journalists and members of the public right around the world. A sophisticated tool such as the revised Market Finder might seem out of place on a general site. The answer then, was to isolate Market Finder and use it as the core of a new site constructed for brokers and risk managers. Thus the new was born with the original site being re-christened and divorced from the new broker site.

Virtual details
Ashok Gupta, formerly CEO of CGNU's homebuyers' site,, was appointed chief executive of shortly before its launch in April 2001. The site allows registered insurance professional to input details of any risk for which they are seeking cover. The website then matches the risk with products available from the Lloyd's market and offers the user the opportunity to contact the syndicates involved via e-mail. Having made the connection, the parties can then chose to complete their transaction through any media they wish. At present, the site has over 5,000 registered users worldwide. Lloyd's is continuing to investigate how the site can be developed to provide further commercial advantages to the market.

The final year of the last century was particularly notable for the London insurance market in that it marked the beginning of a major cross-market initiative to bring change and modernisation to the daily working practices of every market company and employee. Historic rivals, Lloyd's and the International Underwriting Association joined together to form a steering group, the aim of which was to secure London's pre-eminent position in the insurance industry. Thus London Market Principles - now shortened to LMP - was born.

LMP's creation marked two great changes within Lloyd's - a recognition of the need to modernise at a very basic level, and of a growing co-operation with the company sector. The alliance has since been strengthened further by London brokers joining the work. Much of 2001 was taken up with a programme to secure the market's support for the reforms - the `hearts and minds' part of the work.

This year, on the other hand, will witness the significant introduction of new-style slips designed to increase the level of contractual agreement at the point of signing. The slips were introduced during February and will be used for business renewing on April 1. The level of take-up of the new slips will not be known till later this year, however Lloyd's is optimistic and continue to back the work fully.

At a structural level, significant changes have also taken place in Lloyd's this year. The market's capacity has grown to an all-time record of £12.3bn, boosted by confidence among capital providers that hard rates and reduced capacity in other markets will generate profits. Post-September 11 rates across the market have risen steeply - a phenomenon often seen after major global catastrophes. Across Lloyd's as a whole, rates are judged to have risen by around 80% compared with early 2001. But in certain classes of business - aviation, marine, and some property - increases have ranged from 100-300%.

In addition to changes in rates and capacity, the number of syndicates trading at Lloyds has fallen from 108 in 2001 to 86 in 2002. This reduction in numbers follows a long-term trend towards fewer, larger syndicates. Merging syndicates can produce substantial efficiency saving for major corporate backers of Lloyd's. While it should be expected that the number of syndicates will continue to drop, the number of underwriters in the market is likely to remain relatively stable.

Flexibility and adaptability
Just as the market is changing shape, the Corporation of Lloyd's - the organisation responsible for supporting the market - has adapted to the changing needs of the insurance industry. Gone is what was once described as the civil service model; in its place is a smaller, flexible, more business-focused Corporation able to fully leverage the Lloyd's brand and reputation. Corporation priorities now include strengthening Lloyd's international network of trading licences and encouraging higher standards of underwriting.

The Corporation is also working with the market to bring about changes to the Lloyd's Central Fund. In September last year, it was announced that the level of contributions made by market businesses to the Central Fund would be increased. The intention is to raise the level of the cash component of the Central Fund to over £700m by the end of 2003. A decision on whether Lloyd's will renew its reinsurance policy on the Central Fund when it expires at the end of 2003 will be taken before that point.

So these then are the key changes underway at Lloyd's. For an organisation whose reputation is heavily rooted in history, a tremendous amount of reform and modernisation is underway. Outwardly, many of those changes are invisible. The brokers still walk down Lime Street with their slip cases each morning, the market still moves to its own particular rhythms. But beneath these familiar scenes, fundamental changes to the market's organisation and business processes are beginning to take effect.

Lloyd's has a long and distinguished history. But the key to that history is constant change - change that continues to reshape Lloyd's and the London insurance marke.

By Adrian Beeby

Adrian Beeby is media relations manager at the Corporation of Lloyd's.