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Greater transparency, means greater trust


Andrew Kendrick is chairman of the Lloyd's Market Association, the body which represents managing agents at Lloyd's of London. Mr. Kendrick is chairman and chief executive officer of ACE European Group, a unit of ACE Ltd., and is based in London. He is also a member of the board of the International Underwriting Association, which represents London company market insurers, and a non-executive member of the Lloyd's franchise board. He spoke to BIE about the challenges facing the LMA.

Q. What is the LMA's current stance on the disclosure of broker commissions?

A. [The issue is] still hanging in the balance. We are not in deadlock, but nothing new has happened. The major brokers, who have had the 'Spitzer treatment', are arguably better placed to be transparent [than smaller brokers are].

It would be good to have Financial Services Authority clarity on this issue. I don't think we'll get further on this issue without intervention.

The greater the transparency, the greater the trust you inject into the relationship.

Q. How is progress towards the FSA's deadline of contract certainty by January 1, 2007?

A. Progress is going very well, as evidenced by the most recent statistics. [Judging from] feedback, it appears that the FSA is pretty happy with where both sets of markets [the Lloyd's and London company market] have got.

The general view from brokers and insurers is that we have done a pretty good job to date, but there is still a bit of a way to go. We are on target to achieve our goals; there's been a significant amount of progress. This is something the market has sorted--it is a good example of a collaborative effort. It has given the insurers and brokers anexample of something that we can do together where there is mutual benefit in the outcome.

The difficult area concerns legacy issues--the old policies. That is an issue that is outstanding, but there will be a lot of effort in the next couple of months--there is a great deal of enthusiasm behind that.

Q. How can Lloyd's ensure it stays competitive, compared with other jurisdictions?

A. There is a study under way that is comparing Lloyd's against other platforms--Bermuda is an obvious example. We are very interested in ensuring that we remain competitive. We haven't completed [the study] yet. But, for example, Bermuda is a more "facilitative" regulatory environment, it is becoming more robust, but the real reason [it is attractive] is the tax.

Maybe some Lloyd's companies would prefer their new competitors to be in, say, Bermuda, than Lloyd's, because a lot of business that comes to Lloyd's never goes to Bermuda.

Lloyd's is always going to be disappointed if established participants go to Bermuda, because it [appears to] reflect badly on Lloyd's. But I think that is unfair to inveigle Lloyd's into that debate, because it reflects on the United Kingdom [tax environment], not Lloyd's. Lord Levene [chairman of Lloyd's] is involved in the debate.

Q. Are there any other areas of focus for the LMA currently?

A. We, the LMA, wanted to have a much closer working relationship and communication with the Lloyd's franchise board. That relationship has only strengthened and we have a clear vision about where we want to take Lloyd's. We have been sharing and providing common goals, and the franchisor has been giving us a heads-up on things they do.

Outstanding issues include the electronic claims file. It is out there. That's an LMA success and we expect that to be more and more fully utilized towards the end of this year and the start of 2007. And we are pretty much on target for the wordings repository, which will help towards contract certainty goals.