LONDON -- Easier access for international policyholders and greater cost-efficiency are among the goals of proposed sweeping changes at Lloyd's of London.

The Lloyd's Market Board report issued earlier this month outlines Lloyd's response to the increased competitiveness of the global insurance market and pinpoints where Lloyd's would like to be in three years (BI, Feb. 8).

The document identifies two main priorities. The first is for the LMB to create an attractive trading environment; the second is to support profitable growth.

Reducing costs figures highly in the moves to improve Lloyd's operating environment. Among a number of cost-cutting measures, the LMB states it will pay off the nearly L300 million ($490.1 million) loan it took from a number of banks to help pay for its reconstruction and renewal program. This is currently being paid for by a 1.1% levy on all premiums collected by Lloyd's; that levy will end in 2001.

Tough market conditions and consequent falling premium volume could reduce the amount raised, said Andrew Duguid, Lloyd's director of strategic planning, though it would be offset by recoveries of names' unpaid R&R debts. Ultimately, Lloyd's could extend the loan period, he said.

Lloyd's brokers also are helping to fund R&R. The L40 million ($65.3 million) balance of their contribution will be paid by June next year.

As part of the cost-cutting exercises, membership fees will fall next year to 0.25% of capacity.

More radical are proposals to change the compliance requirements demanded of market participants. The LMB will support efforts by the Lloyd's Regulatory Board to reduce the cost and complexity of Lloyd's regulations, states the report.

LRB issued its 1999 plan earlier this year, outlining proposed changes, including a two-tier structure of regulation depending on whether agencies are owned by their capacity providers. The LMB proposes to restructure the risk-based capital system -- in which more capacity is provided to syndicates that underwrite riskier business -- to "cope with a largely (integrated Lloyd's vehicle) market," states the LMB report.

Nevertheless, the report disagrees with the view of stock analysts and others that Lloyd's will evolve into a bourse of fewer but larger businesses. "We foresee at least 50 underwriting businesses operating within Lloyd's and possibly a considerably larger number," the report says. At the beginning of this year, Lloyd's had 139 syndicates and about 5,000 corporate and individual investors.

As the number of corporate ILVs grows, the cost of transacting business in the market will decrease, according to the report. In addition, Lloyd's may change its three-year accounting system to annual accounting, though the market hopes to maintain its diverse capital base, the LMB said.

At the same time, the LMB predicts that continuing consolidation within syndicates and agencies -- already well under way -- will reduce market costs. Consolidation and changing market practices could prompt Lloyd's to restructure its physical underwriting environment, states the report.

"This is probably stretching beyond the three-year period (of the report)," said Mr. Duguid, but the LMB is looking at a number of questions, including the basis of Lloyd's trading in the next century -- whether it continues as a face-to-face market or converts to electronic trading, and whether the businesses operating as Lloyd's participants would prefer to operate from a trading floor or from offices that can give them more privacy, he said.

Brokers may prefer to have the London market concentrated under one roof, said Mr. Duguid, and Lloyd's will be discussing this issue with the International Underwriting Assn. of London to get "a collective view of what we need in the future" to suit the clients and brokers, he said.

Brokers also figure highly in the second area of "Priorities for Growth": supporting profitable growth.

The document makes it clear that Lloyd's wishes to overturn "divestment," a provision of the Lloyd's Act 1982 that bars brokers from directly owning agencies. That won't happen soon, said Mr. Duguid, because of the time and complexity required to change the Lloyd's Act, but Lloyd's would like to see divestment removed.

Other parts of the Act, such as agency law underpinning Lloyd's relationships or the status of Lloyd's brokers, could be changed at the same time, said Mr. Duguid, but he said the market does not want to see the Act entirely revoked. "The Act is an important basis for our franchise," he said.

Outside the Act but governed by Lloyd's internal regulations is the requirement that Lloyd's brokers be physically located near the market. The LMB document proposes giving access to brokers farther afield, including overseas.

By increasing broker access to the market, Lloyd's would make it easier for overseas buyers to place business there.

"We intend to reach agreement with Lloyd's brokers that access to Lloyd's should be expanded," states the document. As the new General Insurance Standards Council, which is expected to regulate U.K. brokers, takes shape, "we expect to agree to arrangements for suitable levels of access for all those brokers regulated by it. We also expect to agree to extend access to overseas brokers who are properly regulated and meet Lloyd's standards."

While Lloyd's is moving to provide alternative risk transfer mechanisms, such as captives, the market also hopes to increase its range of business by broadening broker access. In return, Lloyd's will improve its payment and processing systems, agreeing to service standards for policy issuing and claims handling, Mr. Duguid said.

"I am totally committed to restoring growth to the Lloyd's market," Lloyd's Chairman Max Taylor said at the launch of the document. "We shall achieve growth through the expansion of the businesses that are already here and by welcoming many new companies to Lloyd's as the natural home for talent and innovation.'