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Despite a "technical hitch," the process of creating a single association to represent London's international insurance and reinsurance market is moving along.
Executives of the new association, to be called the International Underwriting Assn. of London, are confident the technicalities will be ironed out by September and that the new body will be fully operational by the start of next year.
The IUA is being created by the merger of the London International Insurance & Reinsurance Market Assn. and the Institute of London Underwriters.
The merger aims to provide more cohesive representation of the London international insurance and reinsurance market to government regulators, insurance buyers and brokers throughout the world.
The IUA will become the world's largest representative body for international insurers and reinsurers, with 110 ordinary members and 80 associates from 40 countries.
The merger originally was planned to be finalized by July and the new association officially launched at the start of 1999. However, the process was delayed in June when both the ILU and LIRMA adjourned extraordinary general meetings before voting on the merger (BI, June 29).
ILU members asked their association to first resolve questions regarding their liabilities for lease payments on the ILU's current London offices before they voted on the merger. LIRMA, in turn, adjourned its meeting until the ILU was ready to vote.
Marie-Louise Rossi, chief executive-designate of the IUA and project manager of the merger process, is adamant that the merger is "a done deal." She said the lease issue is only a "technical hitch," and she expects it to be resolved soon.
Both LIRMA and the ILU have taken unanimous informal votes in favor of the merger, and both associations should reconvene extraordinary general meetings in September to formally vote on the merger, according to Ms. Rossi.
She said the two associations will be run separately for the rest of the year, and that the IUA will be ready to start operating on schedule as a new entity from the start of next year.
In the meantime, all key appointments for the IUA have been made.
Tim Carroll, managing director of ERC Frankona (U.K.), the London-based subsidiary of Munich, Germany-based insurer Frankona Ruckversicherungs A.G., has been elected chairman-designate of the IUA. He has been deputy chairman of LIRMA since 1996.
Anthony Medniuk, managing director of the British Aviation Insurance Group, and Stephen Riley, managing director of Swiss Re UK Ltd., have been elected IUA deputy chairmen-designate.
Neither Ken Haddon, former LIRMA chairman, nor Stephen Redmond, former ILU chairman, sought election.
In total, LIRMA and ILU members have elected a 16-member board for the IUA. Ten of the new board members are former LIRMA board members, five are former ILU board members, and one is from outside the two associations.
Ms. Rossi, LIRMA's current chief executive officer, said the elections were based on merit and that there was no set ratio of how many people would be drawn from either organization.
She emphasized that LIRMA and the ILU are different organizations. LIRMA is a full trade association that represents companies' corporate interests, while the ILU is an institute of marine and aviation underwriters whose main focus is on research and technical matters, Ms. Rossi said.
She said about 30 companies are members of both LIRMA and the ILU.
"LIRMA has kept out of marine and aviation because there was another association (doing that)," Ms. Rossi said. The merger "is a logical step to bring cohesion and unity to the market."
Ms. Rossi said LIRMA represents a broader cross section of the London international insurance and reinsurance community and that, therefore, it is natural that it would have larger representation within the new IUA.
She said she believes that the election of a marine underwriter, Mr. Medniuk, as one of the new association's deputy chairmen should "help allay fears" of some marine underwriters that the ILU is simply being absorbed by the merger.
The cost of merging LIRMA and the ILU is estimated at L2 million ($3.3 million). Annual savings resulting from the merger are expected to be L1.5 million ($2.5 million).
But Ms. Rossi said the merger is about more than cost savings. "There will be some removal of duplication, there will be some cost savings, but that is not the driver (of the merger)," she observed. "The driver is to inject clarity into the way others outside the market see us -- whether they be regulators, customers or brokers."
Mr. Carroll, IUA chairman-designate, agreed that the IUA is about ensuring that the insurance expertise in London is easily accessible to the rest of the world so that it remains a leading marketplace.
"London continues to enjoy tremendous respect, but we must make ourselves more efficient, quicker and easier to understand for our customers," Mr. Carroll said.
The improved and more wide-spread use of technology throughout the London market will be a major focus of the new association.
The London Processing Center, which processes business on behalf of LIRMA and ILU members, will be a wholly owned subsidiary of the new association. LIRMA and the ILU now jointly own the center.
Ms. Rossi said the LPC is a very cost-effective service, and that single ownership will allow even greater streamlining and efficiency.
She believes a single ownership structure also will allow the IUA to more easily demonstrate the value the LPC represents to insurance and reinsurance company and finance directors.
The IUA also is strongly supporting the proposed merger of the three electronic data exchange networks servicing the international insurance and reinsurance industry: the Reinsurance & Insurance Network, the London Insurance Market Network, and the World Insurance Network (BI, May 4).
Mr. Haddon, who retired as chairman of LIRMA and also as CEO of AXA Reinsurance UK P.L.C. in June, said there is a need to make the London market operate more efficiently through the more widespread use of technology.
"There has been some resistance to technology in London," he said. "But Y2K and Euro currency issues have focused peoples' minds. The enthusiasm is now there."
Mr. Haddon said the main focus of the new association must be to reinforce the internationalism of the London market. "London has a trading market in place that no one else has," he said.
Ms. Rossi said Lloyd's of London is the historical reason why buyers came to the London market. But she said London is now essentially a marketplace of large international companies.
"London is becoming a virtual global market," she said. "Companies are run globally, and there are no limits on where capital can come from."
Ms. Rossi said London is internationally renowned for its insurance and reinsurance expertise and is still home to coverage for the unusual or hard-to-place risk. She said most large Bermudian, U.S. and European reinsurers have outlets in London.
Ms. Rossi said she believes the IUA will have no competition as an international trade association. Other associations, such as the Reinsurance Assn. of America and the Catastrophe Exchange in Bermuda, are more regionalized, Ms. Rossi said. "The IUA will be the only truly worldwide international insurance/reinsurance organization," she said. "Its membership is open right across the world."
Julian Philips, a consultant with the London-based risk management division of Tillinghast-Towers Perrin, believes the IUA is a very positive move for the London market's international position and reputation.
He said the merger should reinforce London's position as an international marketplace, as well as increase the general emphasis on improved efficiency and better customer service.