Daily briefing: Wednesday - Lloyd's plays it safe

Perhaps it was the Teutonic influence of former Franchise board director Rolf Tolle, but there’s something positively German about Lloyd’s of London.

Discipline, discipline, discipline is the mantra that comes out of those whirly 25-year-old towers on Lime Street.

Lloyd’s has just suffered its worst ever first-half year loss largely down to the unpredictable nature of catastrophes, yet it remains in remarkably good shape.

All claims were paid out, the central fund wasn’t even tapped and there hasn’t been a single loss on investments since the banking crisis in 2008. There’s not even any exposure to peripheral debt.

Out of the ashes

To understand how Lloyd’s has become such a robust business, you have to look back at how it emerged from the rubble of the asbestos fiasco in the 1980s.

Back then, the reputation of Lloyd’s was in tatters, and it only just survived by hiving off liabilities into run-off vehicle Equitas. But that disastrous period helped focus minds.

Names were largely replaced by corporate capital providers with far more realistic ambitions, and those individuals that fancied a punt had their losses capped.

Then came the franchise board, astutely led by Rolf Tolle. It rigorously checked business plans to ensure insurers could withstand the volatile nature of cat losses or the long-tail uncertainty of liability. It worked.

Stability over creativity

Some underwriters grumble that some of the competition has been taken out the marketplace.

It’s an arguable point, but even if it were deemed correct, that’s a small trade-off to pay for what has evolved: Lloyd’s is a robust marketplace and one of the most recognised and respected insurance brands in the world.

As the financial world enters an era of further financial instability and uncertainty, businesses will look for sound and trusted partners able to withstand unpredictable shocks.

At a time when trust in financial organisations is at its lowest since the 1930s, the reputation of Lloyd’s is stronger than ever.

A storm in a teacup

Talk about opportunism. Justice Minister Jonathan Djanogly is accused of advancing his own interests because he’s in charge of the Jackson Review and referral fees while having a stake in a Lloyd’s insurance firm. The accusation of conflict of interest comes from his opposite number, shadow justice spokesman Andrew Slaughter.

Come on, can Slaughter really be serious? The Lloyd’s firm probably doesn’t even work on private motor, and even if it did, it’s a far fetch to say Djanogly is advancing his own interests when the motor industry has been crying out for change for years.

Djanogly could play a Kafkaesque game of counter accusation by pointing out that the trade unions rake in cash from referrals and Slaughter is merely trying to protect his paymasters. It’s all so petty. Is it any wonder so many people are turned off by politics?