Hiscox warns Lloyd's to modernise or see market die

The chairman of Hiscox, one of the UK's largest general insurers, launched a scathing attack on the Lloyd's of London market yesterday, claiming that unless it brought itself into the 21st century, it would wither away over the next few years as companies take their business elsewhere.

Speaking as his company announced its annual results, Robert Hiscox hit out at the numerous failed attempts to update the antiquated Lloyd's market over the past 15 years, highlighting that an increasing number of British companies, including Hiscox, are turning to Bermuda. Mr Hiscox said Bermuda has outgrown London in the reinsurance market, adding that it "resembles the Lloyd's of old in its entrepreneurial spirit, speed of reaction and swift sensible regulation".

He said: "In 1991, in the Rowland task force report on Lloyd's, the worst statistic for me was that Lloyd's underwriters paid brokers higher commissions than any other insurance company, but brokers made less money dealing with it than with any other insurance company. Fifteen years later, after three changes of chief executive and much talk of optimal platforms and a fortune spent on a scrapped IT system, the same statistic probably still applies."

Hiscox conducted a £170m rights issue last year to finance the creation of its Bermuda operations, while Amlin, a major Lloyd's underwriter, invested $1bn (£578m) in establishing a Bermudan business this year.

Mr Hiscox said as well as charging no taxes, and having more efficient systems, Bermuda is "deliciously smoothly and safely regulated". He said taxes and over-regulation in the UK were driving financial services companies out of the country. He added that the antiquated Lloyd's system, in which brokers have to queue to have a one-to-one negotiation with an underwriter, meant that many companies no longer dealt in London.

Lloyd's appointed Richard Ward, the former head of the International Petroleum Exchange, as its chief executive last week. Mr Hiscox said he hoped Mr Ward could repeat the modernisation which he undertook at the IPE, in the Lloyd's market. Mr Ward joins on 24 April, replacing Nick Prettejohn, who has become the head of Prudential's UK arm.

A spokesperson for Lloyd's said yesterday: "Much progress has been made in modernising the market.... But we are the first to accept more must be done."

Lloyd's recently announced a three-year project to update its systems, which Mr Ward will take control of next month.