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14 October 2015 Insurance

Never forget your roots

A close brush with death can change a person’s behaviour and long-term outlook. Studies have shown it makes them more able to live in the present but also often more risk-averse.

The same is true in the corporate world—companies often take much from adversity. It can make them stronger and more focused but also influence their strategy and outlook for many decades to come.

It is perhaps worth remembering this when pondering the strategic direction of Lloyd’s, not a corporate, indeed, but nevertheless a treasured institution bound by and very much part of the corporate world.

The market had its own near-death experience, of course, in the 1990s when the legacy of asbestos claims brought the market to its knees. Only an innovative solution and a run-off vehicle in the form of Equitas, subsequently acquired by Berkshire Hathaway, saved the historic market and allowed it any future at all.

Since then, chairmen and chief executives have come and gone. Each has had their own approach. Some have attempted—largely unsuccessfully—to drive modernisation; others have tweaked and adjusted the structures underpinning the institution to make it more financially secure and transparent, an approach which has been more of a success.

The tenure of Nick Prettejohn, who stepped down as Lloyd’s CEO in 2005 but who had worked in the market for a decade in different roles, was characterised by seeing through the Reconstruction and Renewal process. This set the tone for his other achievements, which included a new way of setting capital and handing regulatory authority over to the Financial Services Authority. He also introduced the franchise system in 2003, which was designed to make Lloyd’s more transparent, more efficient and ultimately more profitable.

Richard Ward picked up where Prettejohn left off. During his eight years as Lloyd’s CEO, he bedded in the franchise model, oversaw the introduction of electronic claims and took Lloyd’s to new heights of profitability and financial security. While Ward was the first boss in decades to not preside over or manage the direct aftermath of a crisis—the not insignificant 2008 financial crisis aside—he was clearly influenced by such events in his two main aims: restoring Lloyd’s tarnished reputation and modernising the market’s operating structures.

The efforts towards both were influenced by the shadow of the market’s failings in the 1990s. Ward was running the market some 15 years after the asbestos crisis yet still felt the need for conservatism and restoring faith in the brand. He knew Lloyd’s could not afford another mistake.

Time to move on

Time and the risk transfer industry move on. The appointment of Inga Beale as the market’s first female chief executive in its three-century history represents a line in the sand and a fresh start in more ways than one.

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