A major reform initiative driven by new standards was the theme addressed by between 500 and 600 players gathering last week over the course of two days for the first ACORD Forum here. ACORD is the American insurance standards organization based in Pearl River, N.Y.–with offices in London–that has been facilitating the market's modernization efforts.

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 have finally accepted that carrying on business as usual is no longer a viable option.

Lloyd's Chief Executive Officer Nick Prettejohn kicked off the 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.

David Hough, executive director of the London Market Brokers Committee, underlined this new reality, warning 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, thanks to another break with the past–greater recognition of the strong commercial benefits of standards–few here believe that widespread use of such sanctions will prove necessary. Putting the balance between the carrot-and-stick approach in perspective, Mr. Prettejohn described it as "a commercial pint with a regulatory chaser."

The standards effort is part of a package of reforms that is expected to bring important benefits for clients, including:

o Faster policy issuance and claims payments.

o Lower costs.

o Greater efficiency thanks to electronic data processing and document sharing.

Many speakers and delegates here noted that much of the groundwork for reform has already been carried out. For example, after more than a decade of false starts on the road to reform, London is making good headway with the introduction of a standardized slip for recording details of risks underwritten in the market.

Although on the face of it a simple step, Lloyd's Director of Operations Steve Quiddington told delegates the standard slip is driving up the quality of data in London, adding that this is central to the whole reform and standards drive. "We see standards as key to market reform," he said. "They do drive change and they do provide early wins."

Moreover, Mr. Quiddington is confident the level of engagement with business process reform is rising, and noted 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.

An electronic survey of delegates conducted throughout the forum also showed an understanding that the key to successful reform is changing behavior, not simply introducing new technology, which only provides the tools to facilitate change.

Most players queried here, including U.K. regulators, appear to agree that the battle to convince underwriters and brokers of the wisdom of adopting marketwide standards has largely been won.

Julian Adams, director of wholesale insurance at the FSA, acknowledged in his presentation that "there are not many senior dissenting voices about the need for reform…and we are pleased with recent progress."

However, he reminded forum attendees "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, he added.

Defending London's sometimes slow progress on embracing standards, several speakers underlined the unique challenge of implementing reform in the world's only subscription insurance market.

Winning the support of 250 companies takes time, and both compromise and flexibility are essential to keep any reform project on track in such a complex market, speakers here agreed. As Simon Sperryn, chief executive of the Lloyd's Market Association, commented: "We are all stuck unless we move together."

Nonetheless, despite some concerns over the speed of change, speakers from the rest of Europe believe that–from their perspective at least–London is making reasonable headway on reform.

Scor Group Chief Information Officer Regis Delayat, for example, said his company has banished paper internally but is struggling to persuade brokers anywhere beyond the United States and the United Kingdom to move to electronic communication.

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.

Flag: Lessons Learned

Head: London Determined Not

To Repeat Past Mistakes

With regard to past failures of reform efforts, several delegates here pointed out that the London market has learned from its previous stalled initiatives. Among the lessons 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.

Quotebox, with Prettejohn mug:

"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."

Nick Prettejohn, Lloyd's CEO