The view of John Charman, (pic) Executive Chairman of Sompo International Holdings when he announced the firm’s departure from Lloyd’s should sound alarm bells.
“Our decision to focus our activities in London on a single company platform reflects the unique strength of Sompo’s global reach, brand, ratings and financial stability,” he said. In doing so he effectively said what a number of people across the industry have been saying for some time.
For over 300 years the Lloyd’s market has occupied a unique position within the industry.
The entrepreneurial syndicates, the ability to quickly create new covers and the face to face negotiation between broker and underwriter in such an open plan environment, could not be replicated.
Times have changed but the key attraction for those looking to enter the insurance sector was the speed with which you could create a syndicate, the immediate strong financial rating and immediate access to licences to underwrite across the globe.
Naturally there was a cost to joining the club and operating within Lloyd’s and current rule of thumb is that writing a piece of business in Lloyd’s adds 10% to the cost.
Lloyd’s CEO John Neal has been quick to recognise the additional costs of doing business and has said the work that the market is doing in its blueprint for the future is designed to reduce frictional costs and make the market the most technically advanced in the world.
However, Sompo International’s decision is far from a ringing endorsement. Indeed the comments around brand and financial strength go to the heart of Lloyd’s strength of offering.
If brand and financial strength are no longer proving their worth for Lloyd’s the hope has to be that their efforts to remove frictional costs and enhance speed and simplicity for risk placing will create new reasons why the Lloyd’s stamp is a must have.