It's all about trust

Inga Beale, CEO of Lloyd's of London, visited Warsaw in April and spoke to Michael Dembinski about how she sees the Polish market and how the world's oldest insurance market plans to deal with the effects of Brexit.

The economic progress so clearly visible across Warsaw does not leave visitors unmoved. "I am genuinely impressed, but I have to say the news about Poland not is leaking out to the UK, the fact that Polish economy is doing so well not talked about," says Inga Beale. "It is  terrific news.  It's incredibly positive – the insurance brokers I've talked to are so upbeat – I was pleasantly surprised – it's terrific that Poland is looking to be more independent, getting its own strength." On the insurance side? "The only thing is that life insurance is not tracking GDP growth, while non-life [car, home etc] is." This suggests a potential upside.”

Last year in Poland, Lloyds saw 25% growth, from €43m in 2016 to €57m. "We are seldom competing with local players. We complement or compete, we provide reinsurance expertise and a product label. We come in with a partnership mentality," says Ms Beale.

How does she see the Polish corporate landscape, with state-owned firms competing with multinational investors? "Yes, the state-owned firms are very dominant in the insurance space. They are confident and ambitious, but there are challenges, says Ms Beale. Can state-dominated companies thrive? "We met a French data analytics AI start-up. I asked them about what they're doing to attract investors. They said they have all the cash they need – government funding. This is not necessarily the right model. Start-up entrepreneurs learn through failure, through taking risks. Big state-owned businesses don't like surprises, they tend to limit innovative thought and crush ideas."

Nevertheless, Poland remains an interesting market for Lloyd's of London. "We are interested – very interested – in any economy that's growing. It's a market for new, specialist insurance. we're introducing new products. Cyber insurance, kidnap and ransom insurance, terrorism. Political risk insurance. We help companies de-risk investment," she says.

Putting this into a historical perspective – Lloyd's of London goes back over 330 years – Ms Beale (its first-ever female CEO), says "Our flows of revenues go hand in hand with developing economy. We see ourselves as enabling human progress, by insuring new inventions. In the 20th century, from the motor car to the satellite, we have been insuring new technologies." By doing so, Lloyd's insurance has created an atmosphere of trust around a new invention, that makes investors less wary of it.

"Lloyd's has paid out every valid claim in its history. In 1906, San Francisco was destroyed by the fire in the aftermath of the earthquake; many buildings had earthquake cover but were not covered for fire damage; Lloyd's paid out all the claims regardless, so cementing its reputation. Protecting that brand, based on trust. That trust is intrinsic. The contract is based on utmost good faith; the insured party reveals all the facts before the insurance is concluded."

"In today's sharing economy, ride-sharing for example, buying insurance from a brand like Lloyd's of London, helps start-ups go global quickly. Corporations won't sign up with an unknown company, but if they know it's insured with Lloyd's, it builds trust. New firms need support in different ways – a reputable insurers will do the due diligence. We offer innovative insurance covering product liability, general and recall, withdrawal from market, we do increasingly drone insurance, as well as insuring intellectual property."

Lloyd's carries out insurance and reinsurance business, it is a marketplace within which many financial backers (corporate and individual), grouped in syndicates, come together to pool and spread risk. The individual backers, traditionally known as 'names', now form just 10% of the cover available.

I ask about the biggest task facing Ms Beale as CEO. "It's turning a paper process electronic. Analogue to digital. It's still about wet-ink stamps and signatures; if 30 syndicates share the risk, a document will be signed and stamped and photocopied 30 times and then entered; this process needs to be digitised. Distributed ledger – blockchain – technology is ideal for this. When there are multiple parties involved, the policy holder should have money from a claim transferred quickly," she says.

AI in actuarial modelling? "We're a market where we don't price risk centrally. The modelling is done by the syndicates." Technology can be used in many ways; "in the maritime sector, certain sea routes are associated with greater risk; bad weather, piracy. A shorter route may save time and fuel, but using satellites we can assess risk and price premiums accordingly in real time."

The Lloyd's syndicates will collaborate or compete reflecting market needs. "Syndicates come together for capacity. The largest ones are big. A consortium of 57 syndicates can jointly provide $750 million cover for cyber insurance, for example."

How similar is the business environment in UK and Poland? “Regulators in both countries are extremely robust; they are very diligent in terms of policy holder protection, conflict of business, fair treatment and solvency. There is a tendency to 'gold-plate', or over-interpret – the letter of EU Directives into national regulations in both countries, while other European countries may be more lax.

I ask about Brexit and how it will affect Lloyd's of London. Ms Beale replies that EU27 business will be conducted through a new subsidiary in Brussels. "It will be licensed by mid-2018 and operational by January 2019. We won't wait for Brexit; we want to offer certainty and continuity. We will have capital in Brussels; third-party credit risk will be insured and reinsured back to the syndicates. We are giving certainty that we've got it under control. Brussels is close to London, the business language is English, the National Bank of Belgium has been accommodating. Lloyd's is reaching out more and more to the EU, to make the most of the opportunities in the EU. There will only be 40 staff in our Brussels office; the activity will continue in London as it has done."

"Cyber insurance, deep product-insurance expertise, global reach from London, the uniqueness of Lloyd's, the controls, admin policy; all of it will stay in London. Clients will have continuity and will experience no diminution of service or expertise as a result