A grand welcome?

Lloyd's of London may have an illustrious history but, in the not-too-distant future, more brokers could be seeing it as just another market competing alongside composites for commercial business, albeit of a more specialist nature.

Although no announcement has been made, market sources suggest that Lloyd's is planning to woo more brokers placing UK business; Lloyd's is currently conducting a review to examine market opportunities.

In July, a market spokeswoman gave sketchy details saying that the objective is to ensure Lloyd's achieves its ambitions in the insurance market in the aftermath of the financial crisis and goes beyond its three-year plan as introduced in 2005. The review is said to be examining Lloyd's product mix, distribution and geographic balance and should be completed by spring 2010.

Lloyd's has brought on board consultants Deloitte to assist with the review and a team is preparing a report. Deloitte partner Ian Clark, known for his extensive knowledge of the UK broker and insurance sector, is leading the team. He was unable to talk specifically about the review but said that market changes merited the work.

Clark comments: "Lloyd's UK business is around 23% but, while it would like to grow this, it is also interested in trading volumes. However, in recent years a number of brokers - such as Towergate, Jelf and Giles - have embarked on a buy-and-build strategy.

"It's a different market now and, beyond this, we have seen the rise of managing general agents such as Willis, Thistle with JLT and Giles with Ink. We are seeing central placement and block deals. Lloyd's already has strong relationships with national brokers but it may also now want to look at any scope that exists outside this."

Eric Galbraith, chief executive officer at the British Insurance Brokers' Association, says he is aware that work on the review is gathering pace but adds: "This is a sensitive issue. I think it is perhaps surprising that almost a quarter of Lloyd's business is UK-based but it is not doing much currently to build relationships with brokers that could grow this even more: outwardly, the emphasis is far more on the US and Middle East. I think, behind the scenes, it has seen the potential of the large consolidators and some of the bigger schemes brokers too."

Disinterest

Many smaller regional intermediaries have limited, if any, access to Lloyd's. While wholesale brokers such as Holman's do offer a route, many others see Lloyd's as being internationally focused and more interested in insuring against catastrophes and esoteric risks, such as Ken Dodd's teeth or the tongue of a coffee taster.

Lloyd's remains a paradox. On the one hand it may be seeking to do more business with UK brokers yet, on the other, it is often perceived as an unwelcoming place that shuns advances from smaller regional intermediaries even though, theoretically, they now have easier access to the market.

Some brokers may be unaware of changes resulting from the Regulatory Reform Order to the Lloyd's Act (1982) that, as part of a modernisation process, lifted a restriction on Lloyd's managing agents doing business with non-Lloyd's brokers.

Until the rule change, managing agents were allowed to do business only with Lloyd's brokers that had gone through a special Lloyd's admission process in addition to being authorised by the Financial Services Authority. The restriction, unique to Lloyd's, was felt to put the market at a competitive disadvantage.

Now, apparently, managing agents will be able to deal with any intermediary whether a Lloyd's broker or not, increasing the scope for new business to come to Lloyd's. The designation 'Lloyd's broker' will be retained, however, with Lloyd's still being able to set the standards for non-Lloyd's brokers wishing to do business in the market.

Lloyd's has arguably made no effort to communicate any changes with non-wholesale intermediaries - or about itself in any form. In years past, Lloyd's used to hold regional road shows, though these no longer take place.

So much for change, Stuart Reid, chief executive at Bluefin - a Lloyd's-accredited broker - has spoken out on behalf of the wider intermediary market, saying that a lot more could be done.

He remarks: "Access to Lloyd's remains very difficult and that is the fault of the market. Regional brokers are still widely viewed as outsiders; there are some who are out of touch there, who are in the times of spats and canes. Keeping out brokers with the right risks to place is antiquated practice that is bad for the industry and consumers.

"Lloyd's has battled to date to have a single, coherent plan and voice. The stronger voices from the more powerful syndicates within the market tended to dictate the direction of Lloyd's. The review should help Lloyd's move in a unified way."

Regulatory issue

Reid said that he has no issue with wholesale brokers and that Bluefin is actually a wholesaler, though he added that there were no brokers of sufficient size wanting to use Lloyd's directly that are uncertain of how to proceed. He comments: "Lloyd's has served the regional broker market poorly. Ultimately, there could be treating customers fairly issues if Lloyd's keeps its doors shut. Beyond this, Lloyd's is missing a trick by not doing more with UK brokers. Certainly, when the harder market comes, Lloyd's tends to come into its own [offering better value and flexibility]."

On the subject of wholesale brokers, Deloitte's Clark agrees that these are far from being a total solution: "There are some good businesses but I think they also have scope to modernise, make better use of technology and justify that they are adding value."

Andrew Holman, chief executive officer at wholesale broker Holman's, comments: "Changes that have taken place at Lloyd's are directed at the international rather than the UK regional market and they have come about as a result of anti-competitive issues - including from the European Union. Large brokers like Bluefin, that have sufficiently big accounts, will want to use Lloyd's direct, yet we find smaller brokers will still want to use a wholesaler because of the products that have been set up and the convenience. I don't see a threat from any proposed changes."

Paul Upton, chief underwriting officer at Evolution Underwriting, questions if Lloyd's will want to work with many smaller brokers: "This is still a place brokers need to visit - how many have a physical location in the City? Beyond this, underwriters are often focused on higher risk areas and, if these cannot be produced in sufficient volume, they won't be interested. Many brokers are already well served by existing providers."

Regional brokers

Camberford Law became a Lloyd's-accredited broker in 2004 and, as managing director David Ottewill says: "It was probably harder then than it is now. You need to talk to a lot of people and face up to intense scrutiny - it was extremely time consuming and Lloyd's is highly regulated.

"For us, it has been well worth it. We were able to find underwriters for some schemes that the composite market was not interested in. Being Lloyd's brokers has allowed us to grow and, as wholesalers ourselves, to do more business with smaller brokers. If any broker felt that it could produce sufficiently high volumes of a niche scheme and wanted to deal with Lloyd's directly then it could be beneficial."

Lloyd's was contacted directly to see if it could shed any light on its forthcoming plans. A spokeswoman said that regional brokers were not of interest to Lloyd's but, when contacted again, it was said that people tasked with helping brokers find out more about Lloyd's were either not allowed to speak to the press or were on holiday.

If Lloyd's is seeking to win more business from UK-focused brokers then it would seem to need to improve its communication strategy. Right now, it would seem that the doors to Lloyd's, when it comes to the regional broker, remain more closed than open.