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There are conflicts with Lloyd’s Blueprint One

Published in Insurance Day.

As Lloyd’s encourages new technologies and lowers the barriers for capital to enter the market, the corporation will see interests pull it in different directions.

Lloyd’s is at last embarking on significant, radical process reform, after many years of faltering modernisation initiatives and fall-backs to the status quo. The digitalisation of the Lloyd’s market outlined in Blueprint One, the first of many promised annual documents which map out the specifics, comprises an essential, and extremely ambitious, set of projects.

Execution won’t be easy, as many have observed, but if we get the minutia right, the Future at Lloyd’s will cement Lloyd’s global position as the leading international market for complex risks. Equally, it will boost London’s worldwide presence in the reinsurance and attritional risk markets. To succeed, we all will have to co-operate.

Blueprint One sets out a sound and sensible programme of change. In the claims arena, it proffers many of the initiatives I have propounded for several years. This is especially true in the area of bordereaux, which must become significantly more efficient or, better yet, be replaced altogether in favour of straight-through processing.

It is good to see Lloyd’s supporting change in positive, workable directions. However, to get these right in the complex subscription market with its global coverholders, multiple brokers, and an array of clients and risks from around the world, we will need to put our heads together, and include all the stakeholders in very focused conversations.

The Gemini claims expert management and settlement portal, developed and operated by Advent for the Lloyd’s Market Association (LMA), provides a model. It works because Lloyd’s listened to, and co-operated with, the managing agencies (brought together through the LMA), the claims experts around the world, and Advent as a private vendor to achieve the best possible outcome. A similar form of co-operation will be essential in multiple other areas of Blueprint One.

News that Lloyd’s will fund its Future at Lloyd’s proposals through a £300m ($392m) fundraise is positive indeed. It helps to overcome one of the big challenges: paying for reform. With this major initial hurdle dealt with, return on investment promises to be quick. Identification of specific individuals responsible for the work is another positive step forward. However, if they are to succeed, we will have to work together to help them overcome the remaining series of challenges that lies ahead.

According to Blueprint One, operation of the new technology platforms that will underpin the reform and, ultimately, support a digital-first marketplace, is several years in the future. But delivery of even the 2020 objectives will be complex, as the details of the Future at Lloyd’s continue to emerge and evolve.

One such area is a potential conflict of interest that could develop as Lloyd’s continues to carry out its role as the market’s regulator and executes intended control of the technological solutions that will underpin the Blueprint One systems.

This is not the only challenge of this nature. As Lloyd’s encourages new capital to enter the market through its low-barrier syndicate in a box structures on the one hand, it is bound to encounter conflicts with its Performance Management Directorate, which encourages capital restraint on the other.

It seems in this example that third-party syndicate managers may have an important role to play in overcoming those conflicts, through co-operation between new capital providers and their managers, Lloyd’s, and other relevant parties. This is the sort of co-operation that will be essential to the reforms’ success.


Similarly, when it comes to Blueprint One’s technology initiatives, experienced market vendors and others should play an important role. Co-operation – involving the cession of some control by Lloyd’s – is one possible answer. Such responsibility logically ought to fall to an interested third-party body owned by the market, such as the LMA and LIMOSS.

Without such third-party participation, Lloyd’s runs the risk of marking its own homework. The Corporation would have to walk a very narrow line to balance its responsibilities for imposition of governance, the maintenance of controls, and the acquisition of insights with the maintenance of independence and the minimisation of interference.

This is not the only Blueprint One challenge in the claims area. The drive to digitalise will seek to maximise automation, but also must minimise claims leakage, for example because of fraud.

It should look to squeeze value out of existing technologies – a proposition that Blueprint One outlines – but do so without frittering resources to upgrade historical investments or losing sight of the ultimate goals.

The objective of improving the claims process through simplification and automation is laudable, but Lloyd’s will have to take care to find the correct, possibly highly flexible dividing line between automation of everyday claims and the hands-on approach that complexity demands.

Here again, it would be sensible for Lloyd’s to consult widely, and see what the existing, operational technologies already in use by market participants can bring to the table. In some cases, it may not be necessary to reinvent wheels.

I don’t see any of these challenges as insurmountable. On the contrary, I believe 2020 will see Lloyd’s, under its current leadership, with the participation of the LMA and others active in the market, demonstrate the will, skill, and wherewithal to overcome the challenges of Blueprint One.

By working together, we can and will transform the market, for the enduring benefit of all its participants, and its customers around the world.



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