Making Lloyd’s an acceptable choice

Catlin, a Lloyd’s of London-based insurance company, successfully floated on the stock market this month. This caused grumbles among its sponsors that the share price was too low, but maybe they should have appreciated the miracle that it found buyers at all, given the reputation and record of Lloyd’s and many of those who do business there.

This is not Catlin’s fault, but it was only in 1995 that Lloyd’s was rescued from the effects of years of incompetence and fraud by a scheme known as Reconstruction and Renewal. Investors were promised that the businesses within Lloyd’s had learned their lesson. But many had not.

Within five years, incompetent underwriting and the blind pursuit of market share rather than profit had once again wiped out almost all the capital of Lloyd’s investors – even before 9/11. So the significance of Catlin’s debut lies in its confirmation that Lloyd’s has been rehabilitated.

It has to be one of the major financial PR achievements of recent times. Chief executive Nick Prettejohn promised better regulation and quality control, and backed it up by telling some businesses to pack up and go and warning others to improve or get out. He launched the biggest back-office automation project the UK insurance industry has seen.

On the strategic side, chairman Lord Levene began to campaign in the US for reform of their litigation laws. At home, Prettejohn warned the industry not to chase prices downwards, as it has when boom conditions have turned. The result is that the PR has persuaded people that the management of Lloyd’s is competent and the business is at last run on sensible principles. It has taken 300 years to get this far, and while there are still sceptics like me who think the real test will come when market conditions turn bad, no one should take away from Prettejohn and his consultants at College Hill Associates how far they have brought the market in a very short time.

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