While numerous reform initiatives have failed or fizzled out over the years due to a combination of complexity and inertia, delegates here say this time the majority of London brokers and underwriters finally have accepted that carrying on business as usual is no longer a viable option.

Lloyd's Chief Executive Officer Nick Prettejohn kicked off the two-day conference by highlighting the link between underwriting excellence and process reform, adding that "data–and therefore data standards–are at the core of our market's future."

Mr. Prettejohn–who announced just before the forum that he will be leaving Lloyd's on Jan. 1 to become CEO of Prudential's U.K. insurance operations–used his keynote address to spell out the dangers of ignoring market reform. "There is a world outside, and we cannot assume that the world will continue to channel its capital and its risk into London, and into Lloyd's," he said.

While that warning has been issued many times before, one key difference is the threat of firm regulatory action against both underwriters and brokers who fail to adopt the new standards.

Indeed, players in the market must comply with the newly issued London Market Code of Practice on Contract Certainty (see details at www.lmp-reforms.com) by the end of 2006, or the Financial Services Authority will step in.

The FSA is the independent non-government body which under law sets policy for the U.K.'s financial services industry.

David Hough, executive director of the London Market Brokers Committee, warned that "the FSA won't take any prisoners on this issue, so companies need to act."

Among the unpleasant consequences of missing that end-of-2006 target are increased regulatory attention, capital loadings and restrictions on business.

However, few at the session believe that widespread use of such sanctions will prove necessary. Putting the carrot-and-stick approach in perspective, Mr. Prettejohn described it as "a commercial pint with a regulatory chaser."

For Mr. Prettejohn, the Code of Practice on Contract Certainty represents a major step forward, heralding a huge change in behavior and market practice expected to include faster policy issuance and claims payments, lower costs, and greater efficiency thanks to electronic data processing and document sharing.

Although on the face of it a simple step, Lloyd's Director of Operations Steve Quiddington told delegates that the introduction of a standardized slip for recording details of risks underwritten in the market is driving up the quality of data in London, adding that this is central to the whole reform and standards drive.

Moreover, Mr. Quiddington is confident that the level of engagement with business process reform is rising, noting that his team is monitoring 26 separate factors to assess the impact of the standard slip. He acknowledges that standards have a way to go in London, but said Lloyd's already plans to expand its monitoring process as part of the drive to achieve contract certainty.

Several delegates pointed out that the market has learned from previous failed initiatives. Among the lessons absorbed cited by delegates:

o Top-down reform without proper pilots and preparation is likely to fail.

o Reform is best tackled in bite-size chunks rather than sweeping programs.

o New electronic systems must at least match traditional paper processes, which have evolved over time and remain very robust.

Julian Adams, director of wholesale insurance at the FSA, said the organization is pleased with recent progress on standards.

However, he reminded forum attendees that "the real test is still to come" in the form of meeting the 2006 contract certainty deadline. In the meantime, the FSA will be keeping an eye on the use of new and emerging data standards through regular monitoring of companies in the market, he added.

In fact, many Europeans would like to see London use its influence to set the pace for the rest of the continent and take the lead in encouraging the spread of uniform standards. "If London market companies could be leaders through their branch offices and subsidiaries in Germany, Greece and Spain, etc., that would be a great benefit," said Converium CIO Peter Frei.

For an expanded version of this report see the National Underwriter Oct. 31 print edition.