LMP2001 is about to be implemented.Adrian Ballardie predicts support, but calls for flexibility and pragmatism.
Nearly two years after Tim Carroll of the IUA and Max Taylor of Lloyd's launched the IUA-Lloyd's Forum, we are about to witness the first fruits of the combined efforts to reform the London market. Some brokers are already using the so-called LMP2001 slip, the document that embodies and symbolises the Forum's attempts to sweep away the London market's ‘Victorian pipework'. The slip sets out, in accordance with the new London market principles, the terms of trade, processes and responsibilities associated with each risk.
The London Market Standards Agency (LMSA) is completing a pilot benchmarking project. It compares individual Lloyd's syndicates, company market insurers and reinsurers, and brokers according to specific service standards. Meanwhile, behind the scenes, systems are being adapted to accommodate the new processes.
All in all, the LMP2001 way of doing things will have been well and truly tested by the time we approach the year-end renewal season, when so much of the London market's business is conducted. That will be the moment of truth when we will be able to answer – or at least start to answer – the all-important question: are the reforms making the London market a more efficient, customer-friendly place to do business?
Much is being made of the fact that whereas Lloyd's and the broking community have overwhelmingly signed up to the principles of LMP2001, most IUA members have not yet done so. At the time of writing only eight companies, representing around 30% of the IUA membership's premium income in London, have formally signed the document.
This divergence can no longer be explained by the fact that most IUA members need time to consult their overseas parent companies or headquarters. There is a genuine difference in attitude, which has given the understandable but erroneous impression that our members do not back the current moves to modernise the market.
The IUA's Technical and Underwriting Executive Committee, which I chair, is a focal point for underwriters throughout the London company market. There is an overwhelming enthusiasm for the direction that the reform process is taking, and a desire to see it succeed. However, this positive attitude is tempered by a degree of doubt about the practicality of some aspects of the reforms.
In my view, this dilemma is equally in evidence at Lloyd's. The main difference has been that, in contrast to most IUA members, the majority of managing agencies have signed up to the principles of LMP 2001. Whatever the reasons for this difference –- whether they be cultural or a reflection of different commercial imperatives – the bottom line is not who signs a particular piece of paper, but what happens on the underwriting floor.
IUA members, including my own company, which have declined to issue a public statement of support will nonetheless try to make the reforms work. A number have indicated their willingness to allow their underwriters to participate on LMP2001 slips provided they retain control over their own business decisions. Many are enthusiastic to participate in the LMSA, recognising it as an agency that will encourage higher standards.
Conversely, those brokers and Lloyd's managing agencies that have signed up to LMP2001 must now show that doing so can be translated into something that makes a practical difference. The proof of the pudding will be in the eating, not in the way it is presented.
The IUA's Chairman Tim Carroll has shown leadership and vision in playing a vital role in getting the IUA-Lloyd's Forum up and running, and in persuading his company GE Frankona Re to be the the first to sign up to the LMP2001 document.
While few other companies have signed so far, the difference is largely one of emphasis rather than of principle. There remains a consensus for change. Given goodwill and flexibility on all sides, the result will be pragmatic, incremental improvements in the way we do business.
As Tim said in a magazine interview last year: “Even if the market doesn't deliver on every dot and comma in the document immediately, what we'll have in future will be far better than we have at present.”