News...
More Jaws
than Jaws 2 ?
15/05/2008
POST Magazine,
View From The Top
Andrew Holman,
Chief Executive,
Holman's
The strapline for Jaws 2 says it all really - "Just when you thought it was safe to go back in the water ...". To a generation that had been scared witless by its predecessor, Jaws, the strapline alone put off swimmers even if the movie itself was rather disappointing - more rubber teeth than ivory ones.
Lloyd's brokers can be forgiven for empathising with a stunned public in 1978 when Jaws 2 was released. They have already been scared half to death by the Financial Services Authority, Eliot Spitzer, and latterly Neelie Kroes' investigation into the subscription market. And now, just as they have stopped having nightmares, the Treasury has released its own terror movie - Proposals for a Legislative Reform Order to amend the Lloyd's Act. Perhaps a more apt title would have been "Lloyd's - Just when you thought you could plan for the future ...".
While the majority of the proposals are relatively innocuous, there are two significant ones. First, there is the proposal to do away with the much derided 'divestment' provisions, which preclude Lloyd's brokers from having any sort of ownership in any of the underwriting activities at Lloyd's (and vice versa). The proposal to ditch this has almost universal support.
However, the most controversial Treasury proposal is the removal of the restrictions on placing business into Lloyd's via a Lloyd's broker. A few years ago many of the larger brokers were pushing hard for this change, as it allowed their overseas subsidiary offices to deal directly with syndicates - thus saving them brokerage that they would otherwise have to pay to their London office.
Latterly, however, it has rather belatedly dawned on them that, rather than their overseas subsidiaries saving modest amounts of brokerage, they would instead be opening themselves up to competition from a raft of foreign competitors if Chinese, Singaporean and Middle Eastern brokers deal directly with the overseas offices that Lloyd's itself has set up. With the pitiful margins that many international wholesalers are making due to the dollar exchange rate and soft market, the effect of the Treasury's proposals will be to make many Lloyd's brokers exposed to takeover from managing agents on the one hand and foreign competitors on the other.
Turkeys don't usually vote for Christmas, but in this case I fear they may have. And unlike in 1978, this time the teeth may well turn out to be real.
