The New Broom At Lloyd's Of London

Around Lloyd's of London, David E. Coleridge always has been known as a go-getter. Back in the 1960s, as a rising young underwriter at the fabled insurance exchange, Coleridge drew a bead on his more senior colleagues by muscling into their business whenever they were out on vacation. Later on, Coleridge took over a sleepy underwriting agency, Sturge Holdings PLC, and turned it into Lloyd's largest member, quadrupling its profits and earning him stock now worth $32 million after it went public in 1985.

Now, the 58-year-old Coleridge, the Bombay-born son of a wealthy cotton broker and a descendant of the poet Samuel Taylor Coleridge, is assuming the biggest challenge of his career. On Jan. 1, the $350,000-a-year chairman of Sturge took on an additional role as Lloyd's chairman. His mission: pulling the 303-year-old exchange into profitability and keeping it No. 1 in the world of high-risk insurance where underwriters back risks such as tankers plying the Persian Gulf. Says Coleridge: "We are going to look at the whole way we operate."

WHISKY SNIFFER. This is not the first time that one of Lloyd's leaders has vowed to cure the exchange's ills. But this time around, Coleridge's admonitions are tinged with a new sense of urgency: For one thing, the syndicates of wealthy investors who provide insurance through Lloyd's--among them, tennis star Virginia Wade and novelist Jeffrey Archer--are barely breaking even (chart).

Lloyd's handled $13.3 billion worth of business in 1990--including a $1.5 million policy on the nose of the chief whisky sniffer at Scotland's Cardhu distillery. But Lloyd's profits have been hammered by inroads from other insurers, as well as by hefty disaster claims, including those from Hurricane Hugo, the San Francisco earthquake, and the Exxon Valdez oil spill. Adding to the malaise, the Lloyd's investors, or "names," who are liable down to their last penny for claims, are facing onerous payouts from mounting environmental and medical claims in the U. S., where the exchange does 40% of its business. As a result, names are leaving Lloyd's by the thousands.

To Coleridge, who has been a member of the ruling Council of Lloyd's for the past eight years, the liability rule is only one of the holdovers from Britain's colonial era that must be reviewed if the insurance exchange is to endure. "Lloyd's needs to come into the 21st century," he says.

Even before he became chairman, Coleridge was pushing for change, backing recent moves to abandon traditional lines of demarcation that limited syndicates to handling only one type of business--say, shipping--and to set up a reinsurance fund, its size yet undecided, for Lloyd's members. But Coleridge may consider other fundamental reforms, such as permitting corporations to invest alongside the names. He also wants to build Lloyd's business on the Continent, where it is barely represented, and cut its 2,000-person staff as well as automate its archaic claims settlement system.

IN THE SAME BOAT. Coleridge wants to see a wave of mergers among Lloyd's ranks to shrink its 401 syndicates down to about 150. The survivors would be able to take on bigger risks and provide broader services. He argues that would be the best way to enable Lloyd's to withstand competition from such insurers as Sun Alliance PLC or Travelers Corp., which have won business by offering more comprehensive service. "An international company that wants a single global program will go straight to a big insurer," says an executive at broker Willis Corroon PLC.

Many City of London observers deem Coleridge uniquely able to handle the necessary revamping. A lifelong insurance man who picked a brokerage house over college after graduating from Eton, Coleridge is "a pragmatist and realist," says London Stock Exchange CEO Peter Rawlins, a former Sturge executive. "He's the first chairman who has had responsibility for a commercial business." The insurance industry's business cycle could help out, too. As claims have soared, many large insurers have found themselves in the same boat as Lloyd's and also are retrenching.

If Coleridge's reforms click, Lloyd's could end up well-positioned for the rest of the 1990s and beyond. In fact, despite the gloomy news now, Coleridge, an avid collector of volumes by his literary forbear, is anything but downbeat. Like the storm-tossed seaman in The Rime of the Ancient Mariner, Lloyd's is also facing rough seas. But if Coleridge can unburden it from its old ways, he may be able to guide it through with a minimum of damage.

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