In his inaugural speech as Chairman of Lloyd’s of London, Lord Levene confirmed that the U.S. continues to be Lloyd’s largest single market accounting for approximately 40 percent of its business. He announced Thursday the volume of U.S. premium income underwritten by Lloyd’s rose 15 percent in 2002 to a new high of $8.2 billion(1).
Lord Levene pointed out that Lloyd’s is also the leading underwriter of surplus lines business in the U.S., which he remarked on as a ‘tremendous achievement’.
Addressing the Association of Professional Women in Insurance (APWI) in New York, Lord Levene centered on the unique relationship between the U.S. and European insurance industries. Levene argued that the European insurance sector plays a greater role in the U.S. than other comparable European financial services and manufacturing industries.
He said that if any event in the last 50 years had best illustrated the financial strength, security and resilience of European insurers and reinsurers, it was the terrorist attacks of Sept. 11.
“In the dark days that followed 9/11, the ability of many U.S. insurers to write terrorism and property cover almost collapsed,” Lord Levene said. “Not only were U.S. insurance businesses having to deal with their own personal shock they were grappling with a set of risks, aggregations and almost infinite possibilities. The Europeans were able to step in to fill the breach.
“Lloyd’s has the single largest loss of any insurer. To date, we have paid over $2.8 billion in claims, and we’ll ultimately sustain a net loss of $3.11 billion(2).”
Lord Levene went on to trace the history of the U.S./European relationship and highlighted a series of factors that he believes are beginning to change the nature of that relationship including globalisation and the growing unity of the European economy. The rise of e-commerce, he said, is another key factor:
“Electronic lines of communication have created a web of commercial transactions which are now binding global industries like our own together in a new and powerful way,” he remarked.
“It is a web that will only grow tighter and more all encompassing as the power of our technology and our imagination grows stronger. Lloyd’s is only too aware of this sea change, and is taking steps to ensure it is a major player in the coming revolution.”
He added that the recent reforms at Lloyd’s had been driven by the need to compete in a global market in which U.S. customer service standards are now the norm.
“While changes have taken place at the instigation of Lloyd’s itself, much of the impetus to reform has come from the need to maintain that interdependency with the U.S. industry,” Lord Levene said. “It is a factor that is pushing us down the road towards a new, modern, efficient and transparent Lloyd’s that is able to maximize the wealth of all its capital providers.”
He concluded by suggesting that Europe’s influence on the U.S. industry will grow because of changes now taking place, namely, the consolidation of the European Community, the introduction of the single European currency and the ability for European insurers to trade throughout the region.
According to Levene, globalization is driving the world’s commercial evolution, and insurers are already ahead of many other industries in this respect. Insurance, he added, is an industry founded on the concept of the many banding together to provide protection for the few.
“The insurance sector is a natural fit for globalization. In fact, ours was one of the first globalized industries – although when we began to take that route, the term hadn’t been invented,” he said.
“Globalization is a road down which everyone is having to go. But we in the insurance industry can take some comfort from the fact that it is a road down which we are already well advanced. The type of international relationship I have been speaking about today is a model for the coming globalization of other sectors and has positioned us well ahead of the chasing pack.”
(1) Lloyd’s is regulated by the Financial Services Authority.
(2) Office for Sept. 11, January 2003
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