Lloyd’s of London: the foot dragger


Optimistically-named rescue plans punctuate the recent history of Lloyd’s of London. The insurance market’s near collapse in the mid-1990s prompted a “reconstruction and renewal” strategy. The latest, “Blueprint One,” released on Monday, aims to reverse big losses of the past two years. It will not be the last PDF promising better days ahead.

For more than 300 years, Lloyd’s has fought off global competition. The member-owned financial marketplace, one of the last in the world, provides specialist cover that cannot be bought elsewhere. Recently, that long heritage has begun to look like a burden.

Isolated from trends within banks and corporate HQs, Lloyds has a last bastion of the City’s old, boorish schoolboy culture. Surveys have revealed widespread sexual harassment. Ending that is the top priority for John Neal, chief executive since October last year. It is also the first priority identified in Blueprint One.

The latest report focuses on a second consequence of entitlement among brokers and underwriters: high costs. Losses totalling £3bn in 2017 and 2018 were the result of large natural catastrophes and weak underwriting. These masked the market’s intrinsic inefficiencies.

Since the 1990s, institutional capital has replaced traditional “Names” – individuals who carried unlimited liability. Distribution has remained complex. An expenses-to-premium ratio of roughly 40 per cent is ten percentage points higher than at rivals such as Zurich Insurance.

Mr Neal’s plan is to turn Lloyd’s into an high-tech open source platform for insurance. That should bring the expense ratio down to around 30 per cent, he reckons. A further five percentage points could be knocked off within three years by pushing simpler business through cheaper systems.

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Fanciful? Possibly. Around half of Lloyd’s insurance is standard stuff, which should be easy to automate. But its key strength is specialist underwriting. That requires expensive face-to-face interaction.

The success of some of Lloyd’s-based businesses suggests the whole market should be able to up its game, even so. Since the global financial crisis, shares in listed Lloyd’s insurers Beazley, Lancashire Holdings, and Hiscox have bettered the European insurance sector.

All London’s other big member-owned markets are history. Lloyd’s will be too, unless members shape up.



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