John Neal could be forgiven for looking enviously at the CEOs worrying about whether to order employees back to the office.
As head of Lloyd’s of London, Neal is struggling not only with a company’s future work habits, but those of the approximately 400 companies that make up the centuries – old specialized insurance market that provides coverage on everything from a supertanker sinking to a professional footballer breaking his leg.
After three separate pandemic interruptions, insurance brokers and insurers are gradually returning to the distinctive inside-out building on 1 Lime Street, which Lloyd’s has called home since 1986.
But the around 5,000 market participants that are now there in a week – disregarding the staff of the company that runs the market – are still only a quarter of the levels before the pandemic. Neal, who has run Lloyd’s since 2018, is optimistic that these numbers will rise, pointing to a doubling each month.
“My feeling is that it will take us through the spring to see the levels go down,” he told the Financial Times, putting the slower-than-expected return down to companies that are reluctant to force people back in the midst of uncertainty. the government’s Covid-19 containment strategy.
For those who go in, Tuesday, Wednesday and Thursday are the most popular days, and on a Thursday, the pub hums Lamb Tavern at Leadenhall, a popular destination, again.
Where the numbers turn out will not only define the future of Lloyd’s – and how large risks are signed – but also reveal how deeply the pandemic has changed a global financial center that has historically valued the value of face-to-face contact.
How many of their people insurance companies send back to the market is a matter for individual firms, and Lloyd’s cannot force brokers to enter. The market does not require masks, proof of vaccination or proof of a negative Covid test to enter the building.
Neal’s own expectations are that market participants should be in the building between three and four days a week in the new normal, arguing that some face-to-face interaction is essential for companies to collaborate, innovate and train junior staff.
The companies themselves are locked in a debate about whether the corona crisis should be seized as a rare opportunity to permanently revise practices.
Andrew Carrier, chief underwriting officer at Lloyd’s insurance company MS Amlin, said the pandemic had “accelerated a delayed development and stepped away from a trading model that we might all have been convinced we could only function and function effectively on. a way”.
The core of the debate is the so-called underwriting space – in practice four floors around an atrium with the historic Lutine clock and the Loss Book, where lost ships are registered. The trading floor has long been divided into boxes, where an underwriter sits and waits for brokers to open trades. These mimic the tables of Edward Lloyd’s 17th-century coffee shop, the roots of today’s market.
It is the job of the broker to find insurance companies to cover the risks for a particular customer, and it is the job of the insurer to choose what they will accept and on what terms. Lloyd’s reports the overall performance of the insurers in the market.
An announcement on how the warranty room will be reconfigured – part of an initiative ahead of the pandemic – has now been pushed back from the end of this year to the end of March.
The insurance companies say they are now back manning their coffers and sending out a mix of junior and senior insurers. Lloyd’s Market Association, their trading body, urges insurers in a given sector, such as credit risk, to promise that they will be on the floor on certain days to give brokers more reasons to enter.
MS Amlin’s Carrier said the insurance company now “operated a hybrid model with a fluid combination of senior and junior teams from all insurance and reinsurance classes available and present either at checkout at Lloyd’s, at our office or at home”.
Managers of both brokerage and drawing firms describe a “chicken and egg” situation, where each of them waits for the other side to commit to a larger number to the drawing room.
Neal admits it. “I saw some of the correspondence [in September], where the brokers said the insurers did not show up, and in fact the insurers said the brokers did not show up, ”he said.
The relatively small number that have migrated back so far reflects how well the market adapted during the UK’s repeated lockdowns.
Negotiations between insurers and brokers turned into video calls. Electronic execution took off, which is reflected in greater use of PPL, a digital platform for insurance transactions. While the market got a hit of £ 6 billion. from Covid due to business interruptions and other disbursements, it swung back to a profit in the first half of 2021.
The CEO of another Lloyd’s insurance company was more discouraged about the prospects for the space, saying some of the company’s senior insurance companies preferred working methods introduced during the pandemic, including direct video communications to key brokers.
“Do you want a bunch of our underwriters sitting in the room and catching passers-by?” said the board.
Senior brokers say the lack of insurers of the same rank is weakening the case to go into. “People will not return to the room unless the decision makers are in the room,” said Alastair Swift, head of global risk business and broker at Willis Towers Watson.
He believes that the days in the old drawing room are “finished”.
Barnaby Rugge-Price, chairman of insurance broker Howden Broking, said the space “can only be relevant if syndicates can field leading insurers with significant authority to set terms and negotiate at the moment”.
Neal said he “got a little resilient” in September regarding the seniority of employees who came in. “Everyone told me it’s the seniors who are coming to London and it was not,” he said, insisting the picture has since improved.
As a result of the larger number of remote agreements during the pandemic, Neal predicts that more companies will push for deeper changes in the subscription space. The boxes on the ground floor of the building could be replaced with a space that is more geared towards informal “serendipitous” meetings, broadcasts and events, he believes. Elsewhere, he envisions investing in technology that will allow for a mix of face-to-face and virtual commerce.
“I think if you have to re-represent the underwriting space, it has to be a fundamental change,” he said. “Should we continue to have warranty boxes on the ground floor? The voice in your head screams, ‘Why would you do that?’ ”
However, radical change will not be welcomed by everyone.
Emma Woolley, CEO of the insurance company Lancashire’s business at Lloyd’s, is among those warning of the dangers of losing the value of the warranty room.
“It’s the fact that brokers can come in and see more people and get really complex risks discussed and placed,” she said. “I still think it’s an effective place to do business, rather than piles of information going back and forth over emails and trying to get everyone to call Zoom.”
She added: “If we are committed to Lloyd’s, then we need to make a concerted effort to get back.”