LONDON -- U.K. insurers must develop a strategic vision of the new European insurance market -- including new products, distribution and customer needs -- that will arise from the introduction of the euro, an insurer executive said.

Ian Bates, group internal control manager for the United Kingdom's largest commercial insurer, London-based Royal & Sun Alliance P.L.C., said there are no set answers to how U.K. insurers should approach the single European currency.

Ultimately, it is up to individual insurers to make their own decisions on the euro, but "there are things you should be thinking about," he said.

"The time for complacency has passed, and the time for commercial reality is here," Mr. Bates said at a conference on "The Practical Implications of the Euro for the Insurance Industry," held in London last month.

Starting Jan. 1, 1999, 11 European countries will give customers the option of doing business in euros, he pointed out.

"Even though it will be a foreign currency until the United Kingdom joins, if the customer wants to do business in it, are you going to refuse?" Mr. Bates asked. The customer may find another insurer that will accept the euro, he added.

Mr. Bates said commercial reality also suggests it is "probable" the United Kingdom will join European Monetary Union in the "not-too-distant future."

The U.K. government so far has not committed to joining the European Monetary Union but will consider it in the future.

He said insurers can take either a reactive or a strategic approach to the United Kingdom's position on the euro.

The "knee jerk" approach is limited, Mr. Bates said. "It is based on waiting 'til it happens, then fixing it," he said. "There is no strategy involved."

The strategic approach is based on building a broad business strategy that incorporates the euro, Mr. Bates said.

U.K. insurers must "move away from a euro solution to a euro strategy" by developing some kind of vision for the future after U.K. entry into the euro, he said.

The first step will be for the insurance industry to develop internal systems to handle euro-denominated business, but Mr. Bates pointed out that the ultimate effects of the euro are unknown. The new currency may lead insurers to develop new products, distribution channels and information systems.

"What will the market be?" he asked. "What products, distribution and customers are likely after U.K. entry?"

Mr. Bates said there are no correct answers to these questions, except that there is likely to be more commonality and transparency across all European markets.

The answers depend on the structure of individual companies and how they want to be placed in certain markets, he said.

Royal & Sun Alliance is combining a reactive and strategic approach to the euro.

"We need to operate from Jan. 1, but that hasn't stopped us (from) thinking longer-term," Mr. Bates said.

He said RSA has initiated reactive work for Jan. 1 and will have the processes to transact in euros for European customers.

But the company also has initiated research into what effort will be required to convert existing U.K. systems to handle the United Kingdom joining the euro. RSA also has started "the visionary process to identify where we want to be after U.K. entry," Mr. Bates said.

He said details of RSA's euro programs are commercially sensitive, and he did not disclose them.

"Our approach is to try and stay ahead of the game," Mr. Bates said. "We are taking steps along the way now to get there, rather than lots of little steps later."

Lloyd's of London also is taking a proactive approach to the introduction of the euro. "Lloyd's will be ready," said Andrew Stalker, Lloyd's euro program manager.

He said Lloyd's is making "planning assumptions" based on the United Kingdom eventually joining the euro. That would mean all U.K. insurance contracts and accounting would be done in the new single currency.

However, the current focus is on the impact arising from the euro's initial introduction Jan. 1, 1999.

Lloyd's has adopted the euro as only its fourth claims payment currency. The others are sterling, U.S. dollars and Canadian dollars.

Mr. Stalker expects a switch to euro-denominated policies from two main areas: Eastern European policies, which now are mostly denominated in U.S. dollars; and multinationals such as Japanese exporters, which currently insure exports into Europe in U.S. dollars.

Mr. Stalker said Lloyd's adoption of the euro is a "signal to the market that we are serious about doing business in Europe."

He said that the euro's impact on the insurance industry will be client-driven. "If (buyers) come to us and our brokers and want to convert (to euros), we will be there to provide the service.'