Lloyd’s of London and the Bermuda insurance market have many common interests and should focus more on growing the size of the insurance market for mutual benefit than on competing against each other.

That is the view of Bruce Carnegie-Brown, the chairman of Lloyd’s, who spoke to an audience of industry leaders at a briefing in Hamilton yesterday.

Lloyd’s is the oldest insurance market in the world. Today, about 35 per cent of its capital comes from Bermuda, creating a strong link between the two markets.

At the Lloyd’s Market Briefing, organised with the Association of Bermuda Insurers and Reinsurers, Mr Carnegie-Brown said: “I come here in a spirit of partnership from London. There are some people who focus on competition and market share between the two markets.

“I would much rather focus on us all growing the whole marketplace of insurance in a profitable way and I’m very confident that both Lloyd’s and Bermuda have a great future.

“We are the two pre-eminent centres for the type of insurance that we do and there are more things that unite us than separate us,” he said.

Fiona Luck, a Bermuda insurance market veteran and former senior executive at XL Capital, is on the Lloyd’s Franchise Board, having joined a year ago. Albert Benchimol, chief executive officer of Axis Capital Holdings and chairman of Abir, last December joined the Lloyd’s Council as an external member.

“Having their global and Bermudian perspectives around the table is enormously helpful,” Mr Carnegie-Brown said.

Mr Benchimol introduced the Lloyd’s chairman to an attentive audience at O’Hara House, home of the Bermudian offices of Axa XL.

With ten days to go before Britain is due to leave the European Union, much uncertainty remains about what Brexit will look like — or even if it will happen at all.

Mr Carnegie-Brown said: “I think Lloyd’s has Brexit-proofed its future, even though we don’t know what that future will look like.”

The market set up a subsidiary in Brussels for the purpose of dealing with all business from the European Economic Area. The Belgian capital beat out rivals including Paris, Dublin, Frankfurt and Malta.

“We chose Brussels because we wanted a serious regulator,” Mr Carnegie-Brown said. He added that Paris’s insistence that all documentation should be in the French language had counted against it, because of the extra expense that would have entailed.

“Also we did not want the suggestion that we were going to some tax haven with a regulatory light environment, which might have been the case if we’d gone to a place like Malta,” Mr Carnegie-Brown added. “We wanted to be at the heart of Europe and very good communications with London.”

He warned of the dangers of growing protectionism around the world. There were signs that the tendency of financial regulators to ring-fence capital in the banking industry was also touching the insurance industry.

Mr Carnegie-Brown said that “if capital is not allowed to move freely to the point of need then the insurance model breaks down”, something that he tried to get across to regulators.

Applying protectionist measures to the insurance industry did not make sense. The economies of countries who fell victim to a catastrophe would benefit more from claims being paid from outside the country than inside, he stated.

“We need to be advocates of avoiding protectionism,” he added.

There was still much scope for the industry to “grow the size of the pie”, he added.

“We at Lloyd’s did an underinsurance report and found there was about $163 billion in premium not paid to the insurance industry because of underinsurance,” Mr Carnegie-Brown said. “We need to look at why that is.”

He said there were five tests of a market: trust, relevance, speed, accuracy and efficiency.

The industry needed to do a better job of giving confidence to policyholders that it would honour their policies in a timely manner.

He added that the industry had been too slow to adapt to the changing risk landscape and was thus losing relevance with clients.

“I speak to risk managers who tell me that of their top ten risks, only three are catered to by the insurance industry,” he said.

The industry was also struggling to provide products for the insurance of intangible assets, which made up the majority of value creation around the world and would continue to do so, he added.

He advocated more automation. “Many people are concerned about how this level of automation will affect their jobs,” Mr Carnegie-Brown said.

“I actually think the market will grow much more quickly if we do this and our job opportunities will be in much more interesting areas.”

Inefficiency was still a major issue, reflected in the industry’s high frictional costs.

“Our purpose is to pay claims to our customer,” he said. “If we’re only paying 55 and 60 cents on the dollar to our customers year in and year out, they figure out it’s not a very good deal and they take their business somewhere else, into a captive, for example.

“We have to take some of the friction points out of our industry, so we can afford to pay higher claims and deliver better value.”

He referred to the Lloyd’s Decile 10 initiative, designed to improve the market’s profitability, by requiring underwriters to focus on the weakest 10 per cent of their business. However, he said the long-term focus was not to lose weaker business, but to do what was necessary to make it profitable.

“If we keep cutting out unprofitable business from the market — business that would be profitable of we halved the expense ratio we have today — then we’re on a hiding to nothing,” he said.

He conceded that Lloyd’s had not been a leader in innovation, but it was striving to improve things. At the end of this month, 40 per cent of Lloyd’s risks will be placed electronically, he said.

“It’s quite a clunky system and there’s quite a bit of resistance to it because it forces people to do things differently,” Mr Carnegie-Brown added. The aim was to make continuous improvements over time, he said.

Jon Hancock, the Lloyd’s performance director, gave a rundown on the market’s reform efforts. He stressed that no class of business had been closed at Lloyd’s and there was no lack of capacity. In fact, new business growth was very strong, coming in at a rate of about £600 million ($795 million) per month, he added.

While the Decile 10 focus meant that some business would leave Lloyd’s, the process would serve to bolster underwriting discipline, Mr Hancock said.