12 minute read
Talking and listening
Talking and listening
A new committee set up to facilitate communication between Lloyd’s and its local agents couldn’t have come at a better time
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By John Deex
Before Lloyd’s launched its future strategy Blueprint One, it embarked on the largest consultation exercise the 334-year-old institution has ever seen.
As the London-based corporation considers the crucial next steps in its evolution, communicating with the various parts of its broader marketplace has never been so important.
In the spirit of continuing that theme, a new Asia Pacific steering group has been established to create closer connections between Lloyd’s and managing agents in this region.
The Lloyd’s Asia Pacific Market Strategy Group is chaired by Singapore-based Canopius Asia Pacific Chief Executive Mark Newman, with committee members Alex Dugand, Regional Managing Director for Tokio Marine Kiln, and Christian Stobbs, Managing Director Asia for Markel International.
The trio visited Australia in February to get the work of the committee – which is comparable to London’s Lloyd’s Market Association – rolling.
“We’re an elected group representing service companies, underwriting divisions and managing agencies with boots on the ground throughout Asia Pacific,” Mr Newman tells Insurance News.
“It’s a group designed to represent the interests of all the managing agencies, to protect and promote their interests, and to make sure that we are aligned in common purpose and interest with the corporation of Lloyd’s.”
Mr Newman says there was previously “a bit of a gap” between the priorities and strategies of the individual managing agencies, different countries within the region, and the corporation of Lloyd’s.
“Knitting together” and aligning the interests of all stakeholders is crucial in the light of Blueprint One.
“One of the key objectives is actively participating in and working closely with Lloyd’s to shape that Blueprint and the strategy in this region, because it may be different from North America, Europe and the London market,” he says.
“There will be no greater tragedy than if the Blueprint at Lloyd’s is rolled out and the managing agencies and service companies don’t agree with it, haven’t had any input or commitment into it and it is completely misaligned. It would fail.
“One of the biggest responsibilities that we have is to bridge that gap and make sure that we are helping the corporation to bring along all the managing agencies represented in the region in terms of communication, contribution to its design and just making it come to life.
“It’s about winning hearts and minds.”
Mr Stobbs agrees that the group has a fundamental role in implementing the Blueprint as it works with Lloyd’s during an “incredibly important and exciting year”.
The implementation will need to be carried out with the needs of Asia Pacific firmly in mind, he says.
“This group can help gather that consensus and gather input from the market to ensure that we are supporting Lloyd’s in this increasingly important part of the world.
“We’re out and about trying to understand from the stakeholders, the brokers, the managing agents and service companies, what the needs and challenges are that we need to represent as Lloyd’s has this very important period ahead setting out its future.
Group effort: from left, Chris Mackinnon, Christian Stobbs, Mark Newman, Alex Dugand and Pavlos Spyropoulos
“Individually, as service companies and syndicates, we’re all quite small, but collectively we provide a huge amount of support to the market.
“In Australia Lloyd’s is the fifth largest provider of general insurance. We underplay that support, that level of protection we are providing to policyholders in this market.
“One of the themes I see this group supporting is that collective market engagement. How we can more effectively collaborate and provide that syndicated proposition?
“The history, the roots, the origins of Lloyd’s are about sharing risk, working collaboratively across a platform. We need to ensure that we are bringing that to markets outside of London and providing that great protection to policyholders.”
Mr Newman says one of the group’s roles will be to accurately reflect the status of Lloyd’s within the region and correct some recent “mistruths and miscommunications”.
Lloyd’s Chief Executive John Neal early last year outlined his determination to tackle underwriting losses and retreat from “bad business”.
But Mr Newman says competitors seized on this and wrongly suggested Lloyd’s was “running for the hills”.
“I think Lloyd’s absolutely led the market globally in recognising that premium levels were unsustainable, that there were some poor underwriting practices taking place,” he says.
“Lloyd’s quite rightly in my opinion shone a bright light on parts of the market that were underperforming. “It is interesting to see that the company market has subsequently followed suit.”
He says Lloyd’s “took a fairly heavy toll from a communications perspective initially”, but has been shown to have been right in the stance that it took.
Clear messaging: from left, Pavlos Spyropoulos, Christian Stobbs and Mark Newman
Mr Dugand says a sustainable approach is the only responsible path for Lloyd’s to take.
“Critically we are here to service the needs of our clients by paying claims, and the only way we can do that is if we run sustainable businesses,” he tells Insurance News.
“It is the foundation of the concept of insurance.”
Mr Dugand also emphasises that Lloyd’s remains a natural home for hard-to-place business – even more so as local capacity contracts.
“Brokers are being forced to search for capacity elsewhere, and Lloyd’s has got a real appetite for that business,” he says.
“We have got the expertise in Australia, Singapore, in various offices around Asia Pacific, and of course in London as well. I would say the participation of Lloyd’s in that sector of the market has probably grown, not contracted.”
Lloyd’s General Representative in Australia Chris Mackinnon says that far from retreating from the market, Lloyd’s participation in the local market continues to grow.
“We’ve had around 7% compound annual growth for the past five years in Australia,” he says.
But he adds that it’s important to note “there is an element of business that just cannot be written profitably”.
He admits to “copping quite a lot of criticism” over withdrawal from some sub-categories and classes.
“The work we’ve been doing on remediation and supporting the market has been about identifying those areas where we simply should not be playing,” Mr Mackinnon says. “But you have to remember we were the only ones left writing them anyway, because the domestic [players] had all withdrawn.”
Mr Newman says that while the number of Lloyd’s managing agents, service companies and underwriting divisions in the region might have reduced over the past 18 months, “the strength, capability and commitment from those businesses that do remain is actually much greater”.
Guiding through change: Christian Stobbs and Pavlos Spyropoulos
“We have seen premium volumes grow, we have seen combined ratios improve and we’ve seen headcount from the most committed service companies and syndicates grow in the region.
“That is quite contrary to the belief swirling around the market, perhaps started by some of our competitors, that Lloyd’s is running for the hills. It is quite the opposite.”
While Lloyd’s has many traditionalists, there has been little resistance to the Blueprint One strategy, or the increased level of communication embodied by the Asia Pacific group.
Lloyd’s Head Of Market Development Asia Pacific Pavlos Spyropoulos says the amount of consultation has helped.
“When we came to launch the first Blueprint it wasn’t something that surprised the market,” he says. “There is widespread consensus in wanting this to happen.
“I’ve been at Lloyd’s for 12 years and I’ve never felt such a degree of support from the broader market for a strategy.”
Mr Stobbs says two years of challenging results makes it hard to argue against operational change.
“Timing helps here. The results of 2017 and 2018 were not good, and one of the drivers of that was the expense ratio,” he says.
“A lot of what the Blueprint seeks to address is, in the long run, to reduce that expense ratio. That surely is a good thing.
“For the traditional underwriters there who might have resisted this in previous years, off the back of a loss-making environment there is a greater willingness to embrace change that actually in the long run will reduce costs.”
As Lloyd’s looks to the future, key stakeholders are on board with its bold new strategy.
However, communication and co-operation will remain key to its effective implementation.
And while there will no doubt be challenges along the way, initiatives such as the new Asia Pacific committee will give this region the best possible chance of helping the market succeed.
Changing a dubious culture
The strategy group’s role includes a subject that has attracted unwelcome headlines for Lloyd’s in recent years – culture.
The market has already announced several initiatives in the wake of a survey which found about 8% of 6000 Lloyd’s passholders in London had witnessed sexual harassment over the previous 12 months, and that only 45% were comfortable with raising their concerns.
The Asia Pacific committee’s terms of reference say it will promote a “culture of integrity” as well as diversity and inclusion.
“I think Lloyd’s will put its hand up and recognise some of the criticism that has been levelled at it in the past,” Mr Newman says. “It has obviously taken steps to change that and act on that and make sure there is an open, inclusive and fair culture.
“I think we will adopt and mirror exactly the same standards and commitment to cultural change as the corporation.”
Mr Stobbs says that as Lloyd’s leads in underwriting discipline, it will also lead in terms of culture.
“I think one of the interesting and useful things about Lloyd’s in Asia Pacific is that there is greater diversity in terms of the people that work within it.
“We can learn from some of the good practices that exist out here already, and make sure that all the good work in London is being replicated out here as well.”
Blueprint for success
The Lloyd’s Blueprint One prospectus sets out four ways a new Lloyd’s ecosystem will enhance the current market value proposition.
Offering even better solutions for customers’ risks.
Customers will be able to choose from a wider and more innovative range of insurance products because Lloyd’s will promote and facilitate innovation, and will make it even more attractive for innovative underwriters to join the market.
Simplifying the process of accessing products and services at Lloyd’s.
Lloyd’s will work to redesign core activities, making it simpler and more efficient for customers and market participants to trade. The entire insurance lifecycle, from buying a policy to paying a claim, will be transparent and accessible.
Reducing the cost of doing business at Lloyd’s.
Lloyd’s will reduce significantly the cost of doing business. For the simpler risks, it will make the market more efficient by using standardised data, automated processes and administration, and IT solutions that allow market participants to plug directly into Lloyd’s ecosystem to trade. The costs of processing and settling claims will be reduced. A services hub will give access to high-quality shared and bespoke services.
Building an inclusive and innovative culture that attracts talented people to Lloyd’s.
The Lloyd’s market will be built on an inclusive culture, with all stakeholders playing a part in promoting the importance of diversity. A highly skilled workforce will comprise a combination of traditional skills (such as underwriting and claims) with newer skills (such as data science and technology engineering).
Local strength
Lloyd’s is a progressively more powerful player in the Australian market, and there is an increasing appetite for locally written risks.
Australia is now the fourth-largest territory for Lloyd’s anywhere in the world, Mr Mackinnon says, and New Zealand business has grown exponentially in the past few years as well.
Lloyd’s writes around $6.8 billion a year from Asia Pacific, and 40% of that comes from Australia.
“In Australia five years ago just under 50% of the business written on Australian-domiciled risk was written locally,” Mr Mackinnon says.
“That number has gone up to pretty much 60%. Given the scale of the operations here that is a huge increase in the amount of businesses being written onshore here.”
Mr Spyropoulos says Australian business is increasingly being written through the Singapore platform, due to
attraction of a similar time zone and access to Australian market expertise. “Lloyd’s managing agents can delegate authority from Singapore to Australia,” he says. “Now we have more coverholders being supported by service companies in Singapore.”
He says Australia’s coverholder model could be expanded across the region.
“Australia and New Zealand are arguably our most sophisticated coverholder markets, along with the US and Hong Kong, but that model doesn’t really exist elsewhere,” he says.
“We are looking to develop it and in the future that might be an opportunity for Australian coverholders as they are looking to expand.
“It’s another opportunity for the Australian market in the Lloyd’s ecosystem.”
Changing a dubious culture
The strategy group’s role includes a subject that has attracted unwelcome headlines for Lloyd’s in recent years – culture.
The market has already announced several initiatives in the wake of a survey which found about 8% of 6000 Lloyd’s passholders in London had witnessed sexual harassment over the previous 12 months, and that only 45% were comfortable with raising their concerns.
The Asia Pacific committee’s terms of reference say it will promote a “culture of integrity” as well as diversity and inclusion.
“I think Lloyd’s will put its hand up and recognise some of the criticism that has been levelled at it in the past,” Mr Newman says.
“It has obviously taken steps to change that and act on that and make sure there is an open, inclusive and fair culture.
“I think we will adopt and mirror exactly the same standards and commitment to cultural change as the corporation.”
Mr Stobbs says that as Lloyd’s leads in underwriting discipline, it will also lead in terms of culture.
“I think one of the interesting and useful things about Lloyd’s in Asia Pacific is that there is greater diversity in terms of the people that work within it.
“We can learn from some of the good practices that exist out here already, and make sure that all the good work in London is being replicated out here as well.”
