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Lloyd’s of London Recent History Until Now A Few Thoughts and Observations

Lloyd’s of London Recent History Until Now A Few Thoughts and Observations. June 2,3 Presentation by Mike Falcone . Agenda. Who am I? Lloyds 101 Comments on the Lloyds “Culture” Drivers for Change Movement to Corporate Capital Recent Trading Activity The Way Forward. Who am I?.

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Lloyd’s of London Recent History Until Now A Few Thoughts and Observations

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  1. Lloyd’s of LondonRecent History Until NowA Few Thoughts and Observations June 2,3 Presentation by Mike Falcone

  2. Agenda • Who am I? • Lloyds 101 • Comments on the Lloyds “Culture” • Drivers for Change • Movement to Corporate Capital • Recent Trading Activity • The Way Forward

  3. Who am I? • Travelers Insurance Company (1991 - 1996 • Standard US Actuarial Training Programme • Tillinghast London Office (1996 - 1999) • Actuarial Consultant hired in London to work on the Lloyds Recapitalization and Reconstruction (Equitas) • Crowe Syndicate Management at Lloyds of London (1999 - 2002) • Now Spectrum Run Off Services • A significant Lloyds / London market mess purchased by a Bermudian Reinsurer

  4. Lloyds 101 • What is Lloyds • Not an Insurance Company • Small Business Association • Lloyds has historically been very flexible. • Underwriting focused • Historically Lloyds has not been very disciplined or quantitative • Until recently - a PC actuarial profession did not exist • In some measure “created” by Equitas

  5. Lloyds 101 Managing Agents RISK CAPITAL Synd. 123 Individual Member Insured / Reinsured Lloyd’s Broker Members’ Agent / Lloyd’s Advisor Synd. 456 Synd. 789 Corporate Member Retail / Wholesale Brokers

  6. Lloyds 101Chain of security 2002 Premiums Trust Funds Capital held at Lloyds Members’ other declared assets Lloyd’s Central Fund £10,635m £7,324m £212m £323m* *supported by five year insurance programme (limit of £350m any one year) Plus £300m callable from PTFs Figures @ 31st December 2000

  7. Lloyds / London Market Culture • Lloyds • Underwriting Focused • Very close to the market • More Reinsurance (many arbitrage strategies) • Small Flexible entities • Historically very little quantitative support

  8. Some recent Drivers of Change Post Equitas • Move to Corporate Capital • Lumpier, more sophisticated Capital • Recent Trading Activity has been poor • Forecasting has been poor • Questions about Lloyds Security • Rating • Availability of Central Fund Reinsurance • Cash Flow Problems • Trust Funds, etc. • Difficulty in Rating new Capital • capacity grew in 2002

  9. Move to Corporate Capital Capacity Year of Account

  10. Recent Trading Results Profit/Loss (£m) Year of Account (2000+ Cal Yr)

  11. The Way Forward • Chairman’s Strategy Group • Bain Report • Elimination of Unlimited Liability Names • Movement toward Annual Accounting (2005) • Franchiser and Franchisee Relationship • Move away from the annual venture

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