Hiscox: blue-blooded insurer taking Lloyd's into the modern era

Business Profile: Bronek Masojada, the South African reformer, faces a bumpy year as he pushes for change at the 316-year-old market

As the employees of Hiscox, insurer to the well-heeled and assorted European royals, troop back to work after the Christmas period, they might well be looking forward to an enforced bout of austerity the company practices in the workplace.

Hiscox's rule, probably unique among its competitors in what remains one of the booziest, old-fashion industries around, is that staff are not allowed to drink on the job.

If one of its insurance underwriters gets carried away with the Chateau Neuf du Pape at one of the many City dining clubs where insurance bods do much of their business and gossiping, "they might as well not come back to work, it is more honest," says Bronek Masojada, the wholesome-looking chief executive of Hiscox.

The policy was not actually introduced by Mr Masojada, a South African who joined the company in 1993 from the world of management consultancy.

Surprisingly Robert Hiscox, the company's patrician chairman, started informing employees as far back as 1980 that if they returned from lunch with a hint of booze on their breath they had better have signed a rollickingly good deal with a client.

The move was out of sync with the raging wine-bar culture in the City at the time and particularly marked Hiscox out from the clubbable atmosphere in the historic Lloyd's of London insurance market.

Hiscox, one of the largest players at Lloyd's, prides itself on still being much more modern than its rivals. Mr Masojada declares the company doesn't mind about the "sex, creed, race, or sexual orientation" of a prospective employee as long as they are top drawer.

The approach was a pull for Mr Masojada himself, who is not the typical chief executive in the world of insurance, least of all one which is also closely connected with Lloyd's. He says: "I don't have an old boy's network and we aim to develop Hiscox in a modern meritocratic environment."

Hiscox has managed to lure a rocket scientist for its aerospace division and employs an underwriter to formulate art insurance policies who exhibits his own work in his spare time.

Recruiting underwriters with specialist expertise has had considerable success. Hiscox has been one of the few success stories at Lloyd's when many others in the market have been almost underwater, due to dismal investment returns and a series of massive payouts of which the devastation caused by the terrorist attack of 11 September 2001 was the greatest.

Since 1991, Hiscox's Lloyd's business has delivered an average annual return of 4 per cent, compared with an average loss each year at Lloyd's overall of 6 per cent.

Hiscox's aim is to grow outside Lloyd's so that in time this part makes up at least 50 per cent of its business, up from a current level of 25 per cent today. The non-Lloyd's business includes insuring "quite a large proportion of the 1,000 richest people in the UK and several royal families in Europe," Mr Masojada says.

The company is thought to insure some of the extensive collection of art and other assets owned by our own royals. Mr Masojada won't comment on that, knowing as blue-blooded banks such as Cazenove do that clients prefer discretion. But he does add that for those casting around for insurance for the hired help, Hiscox offers "accidents to servants" cover. It can insure your racehorse and, if you feel at risk of being kidnapped and held to ransom, Hiscox has an policy to cover it.

Hiscox is also Europe's largest insurer of fine art. Mr Masojada conducts this interview in Hiscox's airy Art Café it has opened in the bottom of its building, a stone's throw from the Lloyd's building on Lime Street, where young British artists can exhibit their work.

Hiscox had its own extensive collection when it was a private company, until the mid-1990s, which included a work by Damien Hirst, and pieces by Francis Bacon and Frank Auerbach. It has sold off most of the expensive pieces, preferring to search for bargains among little-known artists.

The insurer believes it understands well "the dynamics of the art market". One perk for clients insuring pictures with Hiscox is that it automatically increases the valuation of pictures whose creators have just died because "there is an automatic uplift in the value of the painting," Mr Masojada says.

Less conventional works, such as a cow in formaldehyde, are quite tricky to insure. Mr Masojada points out: "It is much harder to understand the dynamic because you have to consider factors such as them decaying over time."

The company has taken on insuring some challenging projects, including a waterway carved into chalk. The policy was designed on the basis that the sculpture would last for two years, but actually disintegrated after two weeks. Apparently the Hiscox underwriter responsible remarked that at least "the policy was as solid as a rock".

Mr Masojada, who is also deputy chairman of Lloyd's, says Hiscox is still very much committed to maintaining its presence inside the organisation, despite the ongoing headaches that involves.

He has put his money where is mouth is – most of the £110.5m Hiscox raised in the market earlier this year has been ploughed into the Lloyd's side of the business, where Hiscox has enjoyed a 50 per cent hike in premium income this year.

Given his elevated place in the Lloyd's establishment, it is unsurprising that Mr Masojada thinks the 316-year-old market is on the up. "After 11 September when companies were crying out for additional cover, the rest of the insurance market did not want to take the risk. But Lloyd's increased its level of business by 50 per cent. It is that willingness to take a risk and entrepreneurialism which is unique in the world," he says.

Mr Masojada in his previous guise as a management consultant played a big part in the radical overhaul of Lloyd's in the early 1990s, and retains his reforming zeal. He is a big fan of a new board set up to monitor individual syndicates at Lloyd's with powers to block their decisions if it believes syndicates are taking on inappropriate amounts of risk.

The hope is the board will prevent a repeat of some of the big collapses of individual Lloyd's players in the past, which have required emergency capital from a central fund contributed to by all members of Lloyd's.

Mr Masojada says: "Over five years the move would have saved us £25m, for which I wouldn't have minded giving up, say, 5 per cent of our underwriting freedom," Mr Masojada says.

Many Lloyd's veterans are not convinced and are up in arms generally about a series of changes Mr Masojada and others want to push through to transform what has been a highly decentralised, some would add amateurish, organisation.

Mr Masojada argues that "all reforms at Lloyd's are resisted until 12 months after they are introduced". Even so, the signs are that Mr Masojada and other senior figures are in for another bumpy year at Lloyd's. He could probably do with a drink at the end of it.

BRONEK MASOJADA - CROSSING CONTINENTS

Age: 40

Salary package: £241,000

Education: Durban High School, South Africa, BSc in civil engineering in Durban, Rhodes scholar at Trinity college, Oxford.

Career history: Joined McKinsey & Company in 1989, working in Sydney, London and Tokyo, on manufacturing, consumer goods and financial services businesses. Advised Rowland Taskforce in 1991 which reformed Lloyd's of London. Joined Hiscox in 1993 as managing director, becoming chief executive in 2000. Appointed deputy chairman of Lloyd's in 2001.

Interests: Windsurfing and skiing with his five children at weekends and on holiday.