Lloyd’s Market

Lloyd’s Chairman Lord Levene with
newly-appointed Chief Executive Richard Ward.

New chief charged with improving market efficiency, moving the market to the next level

By Charles E. Boyle

In an announcement that surprised no one in London’s tight knit insurance community, Lloyd’s revealed that its selection committee had chosen Richard Ward, former head of the London-based International Petroleum Exchange (IPE), as its new CEO.

The appointment of an outsider was widely expected, as Lloyd’s Chairman, Lord Peter Levene, who likewise had no background in insurance before Lloyd’s, had indicated that he preferred someone from outside to replace Nick Prettejohn as CEO. Reports in the trade press and in the mass circulation Daily Telegraph had singled out Ward as the leading candidate and confirmed Levene’s desire for a non-Lloyd’s CEO.

Lloyd’s began the search following Prettejohn’s resignation last December, when he left to take over Prudential U.K. operations. Although Ward’s expertise doesn’t include any actual insurance experience, he has a strong financial background and proven leadership skills. He will need them.

Announcing the appointment, Levene commented: “I am delighted that Richard has agreed to join Lloyd’s at such a critical time for the market. Lloyd’s has made huge progress in recent years and is in good shape but we are clear there is still much to do to improve the market’s efficiency and move to the next level.”

Levene also pointedly noted that “at the IPE, he won consensus among market participants with often divergent interests. Those skills will be invaluable in his new role, where the key task is to provide the market with an efficient, modern platform. Senior market executives were centrally involved in the recruitment process, and have no doubt that Richard will make a significant positive impact on Lloyd’s.”

Despite an estimated $5 billion hit from the fall hurricanes, Lloyd’s is in the midst of a mini-boom with underwriting capacity for 2006 in excess of $26 billion; however, it faces a number of internal problems. The Financial Services Authority (FSA), the U.K.’s financial markets and insurance regulator, has set Dec. 31 as a deadline for completing “contract certainty”-measures that will change the way underwriting has been done at Lloyd’s since time immemorial. The demise of Kinnect-Lloyd’s electronic platform-which would have helped with FSA compliance, has left a vacuum on the information technology front. Lloyd’s brokers and underwriters still use massive amounts of paper (about four tons a day on average) to transact their business-a situation which everybody, starting with Levene, recognizes must change.

There also appears to be a growing-if seldom acknowledged-split between Lloyd’s traditional companies and the larger Syndicate operators, who now have substantial interests outside of the Lloyd’s structure.

In a recent article in London’s Evening Standard, columnist Anthony Hilton dubbed them the “Gang of Six,” and charged that they were “driving policy to suit their agenda.” Although he didn’t identify them, it’s common knowledge that the six companies with significant operations outside of Lloyd’s are Amlin, Beazley, Catlin, Hiscox, Kiln and Wellington. It would seem somewhat predictable that their business plans and Lloyd’s strictures might come into conflict. In fact Lloyd’s three-year Strategic Plan, which aims to make it the “platform of choice,” would seem to be aimed as much at keeping the larger lions from straying too far from the London pride, as it is at getting new players into the market.

That’s understandable. Since 1994 Lloyd’s has accepted corporate capital to back its Syndicates. This has brought in a lot more money, which now accounts for around 90 percent of capacity. But in addition to the “Gang of Six,” which are all public companies, there’s a significant U.S./Bermuda presence featuring some heavyweights-AIG, Berkshire Hathaway, XL, ACE, Liberty Mutual and Markel among them. These companies too have their own agenda, of which Lloyd’s is only a part.

In short, what Lloyd’s needs isn’t an insurance type-it already has plenty of those-but a ringmaster-someone who can get all the lions jumping through the same hoop. In that situation Ward appears to be an ideal candidate. His accomplishments in his six years as the CEO of IPE speak for themselves. He led the rebranding of the IPE as ICE Futures and capped his tenure with a successful listing of the company’s shares on the New York Stock Exchange in November 2005. Along the way Ward successfully implemented the type of processing technology that Lloyd’s still dreams of, despite strong opposition from many of the IPE’s old line members.

Interestingly, Lloyd’s press bulletin announcing Ward’s appointment included ringing endorsements from two of the “Gang of Six” most prominent leaders.

Bronek Masojada, deputy chairman of Lloyd’s and Hiscox CEO, noted: “Lloyd’s task is to create a compelling platform for insurers, in the face of increasing competition for the business. That needs skilled and determined leadership. Richard has proved he has the skills to get complicated things done in a complex financial market. He is clearly someone not easily satisfied with the status quo, but with the proven ability to lead from the front to achieve necessary change.”

Charles Philipps, a member of Lloyd’s Council and Amlin’s CEO, said: “Richard has the drive and vision to grip the task of providing Lloyd’s franchisees with an outstanding platform, while looking to the future. That is no small task: it means making sure the Corporation of Lloyd’s raises its game, to deliver an excellent service to franchisees, with complete openness and transparency.”