Anthony Hilton: Insurance sector's survival strategy so different to banks' lack of leadership
Saturday 26 October 2013
Bronek Mosajada was born in South Africa of a father who was taken there as a child from wartime Poland. Today he is chief executive of Hiscox and on Wednesday over dinner in the Insurance Hall in the City he was installed as Master of the insurance livery company.
I was there to propose the toast to the livery company and in doing so could not but be struck by the contrast between the way insurance and banking have coped with their existential crises.
Around 20 years ago Lloyd's of London, the insurance market, was on the brink of collapse, overwhelmed by massive losses which resulted from insiders taking advantage of outsiders to use their capital to indulge in wildly irresponsible risk taking.
That is the similarity between then and now. The difference is that faced with a disaster which few outsiders thought it would get through, the insurance industry produced real leaders who had the courage, vision and determination to sort things out. They were open about what had gone wrong, they cleaned out the stables, they changed the culture and created the conditions from which a new, clean business could emerge.
As a result of what was known as "Reconstruction and Renewal", London today continues to be the world's international insurance market.
In contrast, the crisis in banking produced no new leaders prepared publicly to confront the sins of the past. Instead the old guard preferred to skulk in their tents and hope things would blow over so they could carry on much as before. It is only now, five years later and confronted with the total failure of their initial strategy, that banking has people in charge who do indeed understand the need for change. Unfortunately those years of denial have so embittered the public that their task will be immeasurable harder.
There is one slightly surreal postscript to this. For much of the crisis the only person willing to speak up for the banks was Angela Knight, once a junior minister in John Major's government but in recent times chief executive of the British Bankers' Association.
Arguably her "take no prisoners" style of defending the indefensible added to the public suspicions, but at least she had the courage to get out there. Anyway, she changed jobs last year moving to another trade association. She is now chief executive of Energy UK.
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