For the underwriters and brokers on the trading floors surrounding the vast atrium at the centre of the Lloyd’s of London insurance market, business is good.
The centuries-old institution — a marketplace of more than 50 insurers and hundreds of brokers selling policies covering everything from cyber attacks to hurricanes — has shaken off Covid disruption and a run of costly years for natural catastrophes to deliver its best underwriting performance since 2007.
Efforts by management to help some of the market’s underperforming insurers improve have contributed, alongside rising insurance prices. September’s announcement of former senior Treasury official Sir Charles Roxburgh as its next chair was well received.
Roxburgh said on his appointment that the market offered “valuable protection to its customers and healthy financial returns to members and investors”.
But the positive news belies unease among senior market figures about changes at the top of Lloyd’s in the midst of long-running problems with a crucial IT project, according to multiple people who talked to the Financial Times.
Some are keen for Roxburgh to start as soon as possible to tackle the challenges, even ahead of his formal start date in May.
A key frustration has been “Blueprint II”, a project to replace the market’s fragmented, decades-old back office systems. The IT upgrade was first set out in 2019 and refined the following year, but there have been repeated delays. An announcement in June scrapped a planned October launch.
“It has been promised and promised and promised, and not delivered, and now it is going to be 2025,” said one senior executive in the market. “People are very frustrated.”
Another complained of a lack of clarity about how the project was progressing. “It had not [been built] to the degree that everyone thought it had. This was something that in January they were telling us would launch in July.” A third said it was a “credibility issue” for Lloyd’s senior leadership.
Lloyd’s declined to comment for this article.
Lloyd’s has long struggled with the challenge of creating a common IT platform for the market. Currently, participants use a patchwork of sometimes aged systems, with different data standards and lots of manual tasks. Much of the trading is still face-to-face.
The initial goal is a common system with claims and policy data recorded in a standardised way for everyone to see. The bigger prize would be faster and more streamlined processes, connecting seamlessly to the platforms where policies are agreed and allowing automated settlement of the tens of billions of pounds of claims paid by the market every year.
But a lot of the work has been held up, executives say, by the difficulties of co-ordinating a single system for all of the market and by the complexity of some of the insurance and reinsurance policies.
Some senior market participants say the delays are harder to understand given the project had already been split into two stages: upgrading back office systems and standardising data first, and the more ambitious changes later.
The corporation that runs Lloyds “accepts responsibility for the delay, but is confident of delivery in 2025” said a person familiar with its position. The project is the responsibility of Velonetic, a joint venture between Lloyd’s and IT consultancy DXC. The person added that “market testing identified much greater complexity in the interactions between market and settlement systems causing delays”.
Lloyd’s chief operating officer Bob James was appointed boss of Velonetic this year, and the unit promised to provide more transparency and a “clear timeline”. DXC did not respond to requests for comment.
Others draw parallels with a previous attempt to digitise processes. In 2016, the Lloyd’s market started using Placing Platform Limited, a digital system for “placing, signing and closing” insurance contracts with other market participants.
Robert Iremonger, a risk consultant in the Lloyd’s market, said it was often not used as originally envisaged.
“Many of the underwriters still use paper slips in some instances and then the broker puts it on to PPL,” he said. “It is duplicating the workload.” PPL said roughly 70 per cent of contracts uploaded to the system had already been agreed in the market.
John Mason, the new chief executive of PPL, which is majority owned by Lloyd’s, said it was exploring how to encourage uptake, such as by providing data to traders to inform their underwriting.
In addition to frustration about the slow progress on Blueprint II, some senior people in the market also worry about strains at the top of the leadership of Lloyd’s Corporation, which oversees the wider Lloyd’s market.
It is in a handover period for its new chair, its interim COO George Marcotte started the job only this month and its chief of markets Patrick Tiernan is on temporary medical leave.
Chief executive John Neal has temporarily taken over Tiernan’s regulatory responsibility for overseeing the market performance of Lloyd’s insurers, adding to his existing regulatory and management responsibilities.
One insurance executive said the corporation’s reliance on Neal for a few key roles was an “operational risk”.
A person familiar with the corporation’s view highlighted the “strong bench of talent” beneath top executives that is helping to manage the situation.
Roxburgh’s job is likely to include the appointment of an eventual replacement for Neal, who was appointed in 2018 with no fixed term. Tiernan is a leading internal candidate, according to people familiar with the matter.
Roxburgh returns to the UK in February from the US, and is expected to start to shadow outgoing chair, Bruce Carnegie-Brown, shortly afterwards, according to people familiar with the plans.
Roxburgh is an “outstanding intellect with deep strategic understanding” of Lloyd’s, said industry veteran Michael Wade.
Lloyd’s, he added, faces big challenges including changes in technology. But its unique set-up, as a marketplace of highly skilled underwriters and brokers surrounded by an ecosystem of specialist consultants and lawyers, should see it through. “It’s strengths far outweigh its weaknesses.”
https://www.ft.com/content/37627a2a-4fd2-4bf4-be1a-44cad53f1572
