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Trade barriers threaten recovery: Lloyd’s chief

Lloyd’s Chairman John Nelson has urged governments not to erect trade barriers around their economies, warning increased protectionism is threatening the global recovery.

The trend is responsible for cross-border capital flows falling to $US4.6 trillion ($5.06 trillion) in 2012 from $US11.8 trillion ($12.98 trillion) in 2007, he told the annual Lloyd’s City Dinner in London.

Governments worldwide have imposed three times as many protectionist measures as ones aimed at opening up their economies, he says.

Mr Nelson warns the global financial crisis has changed the nature of globalisation.

“The financial crises have, quite rightly, called into question the destructive ease with which capital, unbridled, uncontrolled and unregulated, moved across borders.

“But any discussion of this should take into account the benefits we have accrued from cross-border trade. Insurance is perhaps one of the best examples.

“We are, after all, the positive face of capital moving across borders – where international funds are used to absorb shocks that could otherwise destabilise local communities.”

Governments should carefully consider the benefits of free movement of capital, goods and services before erecting barriers, he says.

“Take Lloyd’s as an example. Twenty years ago almost all our capital came from the UK.

“Now our marketplace is truly international, with some of the world’s largest insurers – from Germany, France, Japan, the US, Australia and now China – participating in the market.”

Lloyd’s strategy is to continue internationalising, welcoming new market participants from high-growth countries such as Mexico, India and Brazil.

Mr Nelson says he will be “extremely sad” if Scotland, a financial services centre, leaves the UK after this week’s independence referendum. He argues the UK, City of London and Lloyd’s will best be served by Scotland staying in the union, and the UK staying in the European Union.

Insurance is a risky business in a world of growing political instability, but it improves global economic stability and promotes growth, Mr Nelson says.

Lloyd’s is “well placed” to lead the global industry in tackling emerging risks such as cyber crime, reputational damage, supply chain breakdown and climate change.