Outlook: Lloyd's of London

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The Independent Online
IT HAS taken Lloyd's of London 300 years to get where it is today, which is to say from a collection of individuals who met in a coffee shop to one of the biggest and certainly the most unique insurance markets in the world. Judging by the noises emanating from Lime Street yesterday, it could be another 300 years before Lloyd's takes the ultimate step and demutualises.

Demutualisation, of course, is in vogue now. Everybody from the AA to Liffe and the Stock Exchange is doing it so why not the Lloyd's insurance market? Well, for the simple reason that it is not clear whether it is mutually owned in the first place, and, even if it is, who owns what proportion of the business. The glib answer is that Lloyd's is owned by those who put up the capital to underwrite the insurance policies it issues - in other words, its members, be they individual Names or corporations.

But it is not quite that straightforward for the Lloyd's Society, which owns the market, is made up of a collection of members, managing agents, syndicates and the Corporation of Lloyd's.

Even if it were simple, what would Lloyd's actually be demutualising? Certainly not the actual business of underwriting or managing syndicates since this is already separately owned by a thousand and one private companies. In any event, how would you value a business that reports its profits (or, more recently, its losses) three years in arrears?

At best, what could be demutualised is the Corporation of Lloyd's which provides the physical infrastructure and the rules under which Lloyd's carries on its trade and of course the brand name.

But ownership of the Corporation is murky - even those who run Lloyd's are uncertain on the matter.

Furthermore, unlike the Stock Exchange, Lloyd's is not a collection of individual firms who happen to own a market which operates to allow trading to take place. What makes Lloyd's unique is its single chain of security whereby its capital of pounds 16bn sits in one pot and there is a single licence to trade and a single Lloyd's policy.

What is certainly on the agenda is modernisation. The new chief executive, Nick Prettejohn, and the chairman, Max Taylor, have set about this with gusto. They are keen to replace the labyrinth committee structure of Lloyd's with a smaller streamlined council operating like a board of directors. They are also looking at ways of allowing customers easier access to the market, rather than having to go through a Lloyd's broker.

But the idea that there are windfalls worth thousands of pounds to be had by carpetbagging Lloyd's and signing on as a Name, looks fanciful. Lloyd's has lost 85 per cent of its Names in the last decade and the number, now down to 4,500, is surely not about to swell.