19 May 2004, Toronto — Strong balance sheets are essential if insurers are to provide the stability, security and consistency that policyholders need, Lloyd’s Chairman, Lord Levene said today.
Speaking to Canadian business leaders at the Empire Club, Toronto, Canada, he said that customers often complained when they saw insurers making a profit. But against a backdrop of systemic under pricing and years of poor returns, insurers should not have to apologise for making a profit.
He called for an end to the volatility that has dogged the insurance industry and for:
- the insurance industry to take a more realistic approach to underwriting and communicating its actions to its customers;
- governments and consumer groups to develop more realistic expectations of the insurance industry and its pricing levels; and
- insurance companies to take a more realistic approach to the new risk environment.
All this was essential “to ensure a more stable and successful environment for all” he said.
“The impact of volatility on the insurance industrys customers and its investors alike is totally unacceptable. The customers themselves feel gouged. The investors cheated. In that context, I think it is fair and even necessary to ask: is profitability really such a dirty word in insurance?
“I believe that it shouldnt and mustnt be. The incessant volatility that we currently suffer can only be corrected by a large dose of realism. Not by rolling back prices unrealistically, defying the economics of investment and the changing risk environment. A sudden change in pricing policy will not result in improved relationships between customers and their insurers; or between consumers and their governments. It can only ultimately lead to another hard market cycle with double-digit rate increases further down the line.
“Pricing must remain firm. But if sense and economics are allowed to prevail, then we can avoid in the future the unpopular and unacceptable increases in premiums, and fluctuations in capacity, that we have witnessed recently.”
Lloyd’s web site: www.lloyds.com
Lloyd’s is the world’s leading insurance market with a capacity to accept insurance premiums of more than �14.9 billion in 2004. It is the world’s second largest commercial insurer and sixth largest reinsurance group. In 2004, 66 syndicates are underwriting insurance at Lloyd’s, covering all classes of business from more than 190 countries and territories worldwide.