LONDON--Seven years ago, Nick Prettejohn's elevation to the post of chief executive at Lloyd's of London attracted much publicity. His departure, at the end of last October, was a more low-key affair.
In the late 1990s, the venerable insurance market was struggling to restore its fortunes after several tempestuous years when its very survival at times looked doubtful. Today, Lloyd's is in better financial health and has strengthened its regulatory regime, jettisoned many of its more archaic practices and debuted on the international capital market.
The improvement was reflected in the fact that this time more media attention was given to the company Prettejohn is moving to than the institution he leaves behind. He is taking up the post of chief executive of U.K. operations at Prudential, the country's second-largest life insurer.
The Pru', as it is better known, has been through its own patch of turbulence. Its previous group chief executive, Jonathan Bloomer, was forced out last March after his plans for a $1.72 billion rights issue to fund growth ran into opposition. Lloyd's outgoing chief presumably relishes a new challenge and is moving on just as the market's return to profitability encounters a hiccup.
At the end of November, Lloyd's raised its loss estimate from Hurricane Katrina to $3.42 billion and said, on top of this, Rita was expected to cost $947 million and Wilma $855 million. The impact scuppered lingering hopes that the market might record a profit in 2005, it added.
Despite this, the organization's director of finance and risk management, Luke Savage, reassured that syndicates would be able to meet their liabilities without any major recourse to Lloyd's emergency Central Fund. Savage takes over as of January 1 as acting chief executive, until Prettejohn's permanent successor is in place.
Lloyd's enters 2006 with capacity to write around £14.7 billion of business, a 7 percent increase over last year. Pre-Katrina, the forecast had been for a 7 percent decline. However, as rates have ricocheted since the fall, syndicates have been able to tap more funds.
At the same time, the steady replacement of private capital by corporate capital of recent years appears to have halted. The traditional Names, the individual members of Lloyd's, may be greatly reduced in numbers but are providing a sizeable slug of the new money.
The new incumbent takes up his post just as the London market, which traditionally has been less adept than Bermuda or New York, is making itself more attractive to investors. Lloyd's has promised to launch a new three-year plan shortly to sharpen its competitive edge, as several of its insurers, such as Hiscox, Amlin, Kiln and Omega, plan expansion in Bermuda. Julian James, director of worldwide markets for Lloyd's, has already promised the plan will deliver "some very real and tangible benefits to market participants," in improving capital flexibility, the costs of doing business and business processing standards.
The market also got a fillip thanks to the recent visit to Britain of Chinese president Hu Jinato. Lloyd's, which set up a representative office in China in 2000, has won a licence to establish an onshore reinsurance operation in the country, enabling it to reinsure local currency business and gain full access to China's insurers.
January 1, 2006
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