Following are excerpts from a CNBC interview with John Nelson, Chairman of LLoyd's, from the World Economic Forum 2017 with Geoff Cutmore and Steve Sedgwick.
GC: We look forward to Theresa May's speech which will be in the UK but obviously will have a big bearing on the conversations that take place here. Now overnight the message has been 'it's not going to be a what is it – a half in half out' deal on the EU. Would that be a positive message for Lloyd's of London?
JN: I think that the message that we want and others want is clarity. I think what we know is that the U.K. is leaving the EU, we need to be clear about that. The more guidance and direction we get now the better in terms of certainty. We at Lloyd's have our plans in place to go onshore in the EU with a subsidiary to allow the market to continue to operate. Whatever the outcome of the negotiations.
GC: So when do we hear the announcement as to the city that you chose as to your standby location?
JN: Well if I knew I wouldn't tell you. But what I will tell you is that in past years in Davos we've had governments talking to us particularly from the growth countries. The emerging growth countries. This year it's extraordinary how many invitations we've had to meet leaders of European countries.
GC: Why is it important to have this location on mainland Europe?
JN: Because by having a subsidiary in the EU we can then passport around the rest of the EU. So effectively it gives our insurers, our brokers, access to Lloyds throughout the EU as well as the rest of the world.
SS: So it's another problem that you don't need at the moment to the underwriting profits or losses. Most recently I know business under lot of pressure as well. I know a lot of force is going on whether it be regulation, whether it be competition from inside the EU, from outside the EU as well, it's another unknown that you don't need for 2017. Does it mean that business is under severe threat? What you haven't seen for a long while?
JN: Well, I would say there are lots of challenges and at the moment the market conditions are as tough in specialist underwriting, not just for us for everybody else as they've been for the last 15-20 years. So yes it is tough and that's driven of course by continuing low interest rates. The insurance industry is continuing to attract more and more capital into the industry creating more competition. We will say we benefited from slightly lighter catastrophe claims over the last few years than we've been used to. They picked up a bit in 2016 so it's going to be tough. But underwriting discipline is very important. Lloyd's I think is in very good shape for that. We have an enormously strong financial position. Our financial ratings have never been stronger. And of course part of the role of the corporation of Lloyds is to regulate the underwriters and that's what we do.
SS: Your business seems to be, and I'll be honest with you, I was a former floor man myself, not from Lloyds I was on the LIFFE floor, and you guys still with your slipcases and what have you, having you tottering off down to the Leadenhall, I beg your pardon, the place next to Leadanhall and, it's the Lamb isn't it – and basically it just seems anachronistic. Is Lloyd's just basically looking in the past for where it does business?
JN: Lloyd's as you most probably know, has put a huge effort into modernization, our so called target operating model, which is re-engineering the whole of the way we process our business is well underway. And during the course of 2016 we've hit all our targets so that we are actually now making very good progress. So it's true that the insurance industry, not just Lloyd's, the insurance industry, has been behind some of our other industries. I now think that we're really catching up. And then of course in terms of underwriting data analytics and all of that, I would say Lloyd's is is actually in very… is a modern market the way we measure risk and I think we are widely seen as one of the leaders.
GC: And just give us a line on Trump before we let you go here. This time last year I think we were all worrying about the state of the market. It was a very difficult start to the year. This year markets have been in a bull run and we're all looking forward to the inauguration at the end of week. But what kind of year do you think 2017 will pay for industry, particularly yours?
JN: Well in our case for Lloyd's 40 percent of our business is in the United States. We are the largest provider of specialist insurance in the United States we have double the market share of anybody else, so the U.S. economy is very very important to us. What we see in terms of the U.S. economy and the impact on our business. The signs I would say are optimistic. I think that if you look at the attitude of U.S. businessmen and that what Trump is saying in terms of trying to increase enterprise, deregulate a bit, some tax reforms and so on I think that's good for the U.S. economy it's all U.S. business I should say. And I think it's it will certainly be good for Lloyd's, the geopolitical stuff that's beyond my pay grade. I'm a businessman.
GC: Well I think we're all just struggling to work that one out. I mean it's only Tuesday and he's managed to upset CIA, the German chancellor….
GC: It's a long and growing list and not least the Chinese so it will be interesting to hear what Xi Jinping has to say. John it's been a pleasure. Thanks so much for joining us. Thank you. John Nelson the chairman of Lloyd's of London. Back to you.