Lloyd’s of London is reviewing all aspects of its business, including its centuries-old structure, to ensure it is cost-competitive and responsive to both clients and members, especially after Britain leaves the EU, industry sources said.

The review, coming after a 2-billion-pound ($2.64-billion) loss last year and the news in June that CEO Inga Beale will step down, goes to the core of the insurance institution’s hybrid personality, senior insurers and other officials in London’s financial services sector said.

Lloyd’s has been holding board and other internal meetings and separate discussions with broader market participants on the best way forward, the officials said. Precise details of the review have not been disclosed, they said.

“A strategic review is being worked on,” said one financial services source, asking not to be named because he was not authorized to discuss it. Another source, a senior executive at a firm that supplies services to Lloyd’s members, said he understood that included looking at its unique structure.

“The most fundamental question is, what does Lloyd’s actually want to be?” the executive said.

At present, Lloyd’s is both a marketplace for its 80-plus syndicated members — who insure commercial risk globally — and an umbrella body that sometimes acts like an insurer by getting deeply involved in members’ day-to-day practices.

It also regulates the members under the auspices of the UK government.

Asked whether Lloyd’s was conducting a strategic review, Chairman Bruce Carnegie-Brown told Reuters on Monday he would not use that term.

“To me a strategic review implies some kind of crisis, where you’ve got to put everything into a big hat and end up boiling the ocean. We are not interested in that. What I think we have is a series of improvements and ideas,” he said in a telephone interview.

He said Lloyd’s was looking at all aspects of the business, however – cost structure, technology, its role as a marketplace and a regulator, and how it mutualises risk. He said recommendations from an “annual strategy day” in June were presented to the board last week and a number of “workstreams” were being set up.

“I think what we need to do is to look at all aspects of what we do, to try to make sure everything we are doing is done better and turn it into more of an exercise to keep turning the stones over of the things that we do to figure out if we can make things more efficient,” he said.

Carnegie-Brown said he did not see Lloyd’s relinquishing its regulatory duties but said there were “whole aspects of regulation that we need to look at to make sure that we are not duplicating what is already done by other regulators.”


If Lloyd’s was a pure marketplace, member syndicates could be more innovative, accommodating short-term losses for future gains, industry sources said. Doing so would risk Lloyd’s losing the single-A credit rating that benefits all members, however.

“If it’s a marketplace, it’s for each party to come to the market, it’s for them to work out what they want to offer,” the senior executive said, while an insurer would incorporate the individual groups operating within it to form a company.

“I do not think it is being crystal clear which one it is, or wants to be.”

The UK government is keen that Britain, the world’s largest commercial insurance center, remains competitive in financial services after Brexit. Lloyd’s is setting up a subsidiary in Brussels to maintain access to Europe’s single market.

“Lloyd’s needs to ensure that London keeps its edge in insurance, which is vital for the wider financial future of London,” the financial services source said.

Lloyd’s started life in Edward Lloyd’s coffee house in 1688. The futuristic look of its 14-story headquarters in the City belies an emphasis on customs and tradition.

Most business is still conducted face to face. Underwriters and brokers use briefcases or suitcases to carry paperwork around the building; some marine insurers record the sinking of ships with quill pens. The requirement for men to wear ties was relaxed only recently.

The market was almost brought to its knees by asbestos-related claims in the 1990s, which wiped out many of its individual investors, known as “names.”

Members include small underwriters as well as listed UK firms like Beazley and Hiscox and units of global insurers, specializing in complex commercial risks such as marine, aviation and niche energy markets.

Julia Graham, deputy chief executive at insurance buyers’ association Airmic, said Lloyd’s has set up a working group with her client organization to discuss improving their relationship. She said Airmic regularly met Lloyd’s at board level but that a meeting this month was “a bit more intimate.”

“The main point is that they asked us,” she said. “Lloyd’s is still a leader. It’s important that it remains relevant.”


Last year’s two-billion-pound loss, the first in six years, followed a record year of insurancelosses from natural disasters globally. London also faces competition from rivals like Bermuda and Singapore.

Lloyd’s will be looking at ways to cut members’ costs, which have ballooned as a result of increasing regulatory and compliance paperwork and rising commissions from brokers, industry sources said. The high costs of operating from London and administrative expenses have also weighed, they said.

A new electronic processing system introduced by Beale, the first female chief executive of Lloyd’s, was unpopular with smaller brokers and underwriters.

“If you are pushing it through an electronic system, there will be little scope for enhancements or individual treatment, which is what a lot of people come to Lloyd’s for,” said industry veteran Andrew Bathurst, director of London and Dubai insurance broker PWS Gulf and a director of Mystic Capital.

Whether to continue implementing the new system at the current pace – 30 percent of all business this year rising to 80 percent next year – is likely to be part of the review, two insurance sources said.

Lloyd’s insurers have an expense ratio of 40 percent, according to ratings agency AM Best, which Paul Merrey, a partner specializing in insurance at KPMG, said is about 10 percentage points higher than competitors.

“The costs of operating are getting out of hand” due to increased regulation, said one senior underwriting source. He agreed the biggest question mark was over structure, however: “What is Lloyd’s? Is it a market or is it an insurer?”

Topics Carriers Legislation Excess Surplus Europe Lloyd's London