Apart from immense damage, the fire also caused some embarrassment, since it had started in a building designed to house an ambitious market-style insurance community, a potential rival to Lloyd's of London. For an insurance centre to be consumed by one of the risks it is supposed to insure was unfortunate.
'I am extremely sorry to hear about the most unfortunate setback,' David Coleridge, the then chairman of Lloyd's, wrote in statesmanlike fashion to Victor Blake, chairman of the London Underwriting Centre, whose building was burned down. Lloyd's professionals were a little less respectful about the disaster.
Today, the London Underwriting Centre opens for business and the long faces at Lloyd's could become even longer, as the centre represents the biggest concentration of underwriting capacity to be established in recent years in the City.
The players in the new market are 22 subsidiaries of British and overseas insurance companies. They will operate out of 3 Minster Court, a nine-floor building near the Lloyd's market. Each floor is arranged around a 60-foot diameter atrium which contains a high speed escalator system.
The setting has been chosen in an effort to attract largely general insurance business in a market-like environment.
Underwriters from companies such as GRE (UK), Mercantile & General Reinsurance, Sun Alliance and London, Commercial Union, Eagle Star, Swiss Reinsurance and Zurich Re will be working alongside each other under the same roof.
According to Victor Blake, who started his career at Lloyd's and is now chairman of CNA International, part of the US-based CNA group, the concept had been talked about for years.
London's insurance community is housed largely in tall, inappropriate buildings erected after the war. Insurance brokers, bringing business to companies, had to spend many hours a day walking around the City to the various offices.
Brokers prefer to do 'one-stop' shopping. If they are unable to place business with one risk carrier they like to be in close proximity to another insurer so that the business can be completed. Moreover, when insurers work closely together they have access to more detailed information, which allows them to set more competitive prices and secure business that might otherwise be lost to them.
All this could not come at a worse time for Lloyd's itself, which is attempting to refinance itself just when the insurance world is beginning to climb out of its long recession.
Lloyd's hopes to attract new investors in the shape of companies, which would be expected to support the market from the beginning of this year. While much interest has been indicated, the level of support is not yet known and Lloyd's financial ability to accept risks may at best remain static, or fall as existing members continue to leave in the wake of huge losses.
'If the opening of the building coincides with an upward movement in premium rates, as it would seem to do,' says Mr Blake, 'and there is a greater use of companies because Lloyds unfortunately is unable to respond to the needs of customers, it is not unreasonable to anticipate that pounds 2.5bn of premiums which we indicate we are intending to accept will go up quite quickly.
'What we will write and what we are capable of underwriting are two different things.'
With Lloyd's still attempting to deal with internal problems caused by pounds 5.5bn worth of losses, the arrival of the London Underwriting Centre poses a serious competitive threat, particularly when buyers of insurance are looking towards markets offering sound financial security.Reuse content