1. 1 Cohesion or Fragmentation - Where are we going in the London Market? John Charman President and CEO, Axis Capital Insurance Institute of London, 22 January 2003

2. 2 What makes up the London Market? Carriers –86 syndicates at Lloyd’s –117 companies at the IUA –39 marine P&I Clubs Brokers Service providers –Insurance - actuarial, loss adjusting, run-off, etc. –Professional - banking, accounting, legal, etc.

3. 3 Requirements for a successful international centre. Does London owe its position to accident or design? Political stability Geographical location Quality transportation Developed communication systems Highly qualified personnel Office space at competitive prices Multi-lingualism Stable legal and regulatory environment Liberal attitude by authorities Quality family life Appropriate time zone Strong foreign presence From study by Eric Herve-Bazin of AXA for FFSA

4. 4 What is different about the London Market? Good things? –People - experience –Long history - custom & practice & reputation –International, excess and surplus - niche –Infrastructure - broker-led and broker-fed Bad things? –People - introspective, “big fish, but small pond” –Long history - complacency & inertia & self-protectionism –International, excess and surplus - “bin-end” –Infrastructure - lack of technology, expensive

5. 5 Expensive “London is the most expensive city in the EU” Economist Intelligence Unit cost-of-living index, 18 Jan 2003 “The London Insurance Market has traditionally been seen as the world’s leading centre for insurance speciality risk. However, recent years have been marked by poor results and criticism about the efficiency of conducting business in London” “The London Insurance Market: Blueprint for the future” PricewaterhouseCoopers, Summer 2002

6. 6 Quotes from survey respondents –“Too many capital providers have been prepared to back poor underwriters” –“People are still the main distribution channel” –“Training in the market is awful” –“Underwriters do not have enough appreciation of return on capital” –“25% of costs come from data entry mistakes” –“Systems development is poor in the London Market compared to other financial sectors” What does this say about quality of management?

7. 7 London Market has become more cohesive Lloyd’s –fewer, larger syndicates –dominance of corporate capital Merger of ILU and LIRMA to form IUA Formation of Ins-sure by merging LPSO and LPC One regulatory environment under FSA … but has it become more competitive or efficient?

8. 8 Reinventing the London Market through technology... but history is against us Who said this, but more importantly, when and how often over the last 300 years? –Overall costs of processing and administering business in the London subscription market are too high –There are a significant number of duplicated activities across the market –Simplification of processes would also improve the speed and quality of transaction processing Since then we have (or haven’t) had EPS, WIN,... IUA, Lloyd’s and LMBC produced “London Market Principles 2001” … and where are we now in 2003?

9. 9 Key ingredients for success in the 21 st century Intellectual capital - overwhelming expertise Financial capital - clean, unencumbered, real Technology - high-tech trading platform Efficiency - outsourcing of all support services

10. 10 London Market - past, present and future? “Has London left changes too late?” Lloyd’s List, 20 Feb 1990 “The City of London’s dominance of the world insurance market is under threat from other countries and from electronic networks” FT 20 Nov 1995 “The London Market no longer has the luxury of treading in stagnant water - they need to swim fast and straight - but I am not even sure they are in the right pool” John Charman, 22 Jan 2003