Outlook: Riley's Lime Street reforms face stormy passage

Green's Bhs bonus; Ford travails  
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Nothing concentrates the mind on reform as much as a crisis, and Lloyd's of London, our centuries-old insurance market, is no exception. The scandals and crippling losses of the 1980s and early 1990s sparked a period of root-and-branch change, but many of the old ways and practices remained and it has taken the terrorist atrocities of 11 September to provide the catalyst for further reform. This massive insurance claim has shown the market in both its best and worst light. On the plus side, Lloyd's has survived the calamity, and despite widespread predictions of its final demise, the market will meet its £1.9bn liability with its solvency intact.

On the negative side, the sheer size of the claim has highlighted the downside of the insurance market's still archaic accounting practices and the difficulties of continuing with essentially three different classes of capital – corporate capital, limited liability partnerships of individuals and the traditional unlimited liability name, who is on the underwriting hook right down to his last cufflink.

This latter category is still important to the market, but it is a declining and occasionally troublesome asset. The great bulk of the capital is nowadays provided by companies. Sax Riley, the Lloyd's chairman, naturally wants to make the market as conducive to their needs as possible. Already there is evidence of capital leakage to apparently more competitive offshore insurance markets such as Bermuda, while reinsurance is becoming more and more the preserve of corporate giants such as Swiss Re. Mr Riley is determined to plug the hole before the dam bursts.

That means getting rid of both the "annual venture", under which underwriting syndicates are formed at the start of the year and then disbanded at the end, and the practice of accounting three years in arrears. Both these features belong quite literally to another century, since they owe their existence to the market's origins as a marine insurer. Capital for voyages would be raised on an annual basis, but it could be anything up to three years before your ship came home and you knew whether you had lost your shirt or made your fortune. If there was a no show after three years, it was safe to assume the ship had been lost and the insurers would be called on to pay up.

Today's insurance companies, all of which account on a rolling annual basis, find compliance with these rules both tiresome and costly. If the corporate members want to axe them, then the market has to respond. Unfortunately for Mr Riley, it's not quite so easy. Unbelievably after the way past losses impoverished a whole generation of Lloyd's names, there are still 2,500 of the blighters out there with unlimited liability, and a pretty bolshy lot they are too.

What's more, there are thousands more Lloyd's names who no longer underwrite but are still voting members because not all claims from bygone years have yet been settled. Corporate members provide 80 per cent of the capital, but they have less than 10 per cent of the vote.

If Lloyd's wants to get rid of the annual venture, it also means axing the remainder of the unlimited liability names, since unlimited liability cannot be carried from one underwriting year to the next. Mr Riley acknowledges he's going to have to compensate individual names for giving up their rights, but at this stage he won't say by how much, and many of them are already limbering up for a fight. These proposals are unlikely to be as difficult to get through as the last great reform, which involved real pain for many members, but nor will it be a walk in the park.

Green's Bhs bonus

"I don't care about all that shit." Philip Green is not a man known for fine words, and that was his characteristically robust response yesterday when asked how it felt to have made the fastest billion in British business history with the turnaround of Bhs. It's an easy thing to say when you are already minted. Even before the Bhs miracle, Mr Green was hardly short of a bob having made a fortune with the break-up of Sears and the buying and selling of other conglomerate cast-offs such as Olympus Sports and Shoe Express.

But then Mr Green plainly does care. Why else would he have stage-managed a week of laudatory press and TV coverage? Why else would he have formally announced his Christmas trading figures with all the fanfare and attention to legal detail of a FTSE100 stalwart? Whether it's respect, publicity or just more money he's after, Mr Green has succeeded in spades. Bhs, deemed a basket case only 18 months ago, is expected to make trebled profits of £92.5m this year. His achievement has gained more column inches than any other retailer this Christmas, including his old target, Marks & Spencer, and if Mr Green is gearing up for a float, then he could hardly have set about it more brilliantly.

Are things really as good as they seem? The profit growth looks impressive, but the sales growth is lower than most of his main high street rivals and at this stage the Bhs revival seems to be more down to cost-cutting than retail flair. It is at best questionable whether Bhs is worth the £1.2bn value some are putting on the business, since that would mean attributing a multiple of 18 to earnings, pretty fancy rating for a one-year showing.

Whether the stock market would really go for a Bhs float at all is doubtful. Mr Green has brought in top plc management in the form of Terry Green from Debenhams and Allan Leighton from Asda/Wal-Mart, but where were they yesterday when Mr Green the entrepreneur was grabbing all the headlines? History would suggest that Mr Green tends to do rather better out of selling his businesses than the people who buy them. No disrespect, but it generally pays to check your wallet after doing business with Mr Green.

Ford travails

The blue oval has been taking a battering of late and no one knows how hard it will be to revive Ford's fortunes better than the scion of the family, Bill, who wrestled back family control of the wheel last year.

A combination of uninspired model launches, desperate price cutting and tyre scandals, topped off by the removal of the chief executive and a whopping exceptional charge to pay for the departure of a further 35,000 employees, drove the world's second-biggest car maker into a $5.45bn loss last year.

Bill Ford's response is to get back to basics by tearing up the "cradle-to-grave" philosophy pioneered by Jac Nasser, which saw Ford stick its fingers into everything from car recycling centres to Kwik-Fit fitters. From now on the emphasis will be on making cars, not providing a complete motoring service.

Bill's famously green credentials have also taken a back seat to the higher priority of a return to profits. It was symbolic that when he announced last week's "revitalisation plan" for Ford, the chairman drove up in a GT40, the epitome of the all-American gas guzzler. But he has an awfully long road ahead. Ford has no new big model launches scheduled until 2004, the US economy remains in the doldrums and the United Auto Workers are unlikely to be the pushover that Bill Morris's Transport and General Workers' Union proved when Ford decided to shut Dagenham.