LONDON: 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 ($2.64-billion) loss last year and the news in June that CEO Inga Beale will step down, goes to the core of the 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. Precize 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 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 mutualizes 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 insurance losses 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?”
Lloyd’s of London reviews operations after losing $2.6 billion
Lloyd’s of London reviews operations after losing $2.6 billion
- Lloyd’s plans number of “workstreams”
- Issues include costs of doing business, use of technology
AI will never replace human creativity, says SRMG CEO
- Speaking to Maya Hojeij, senior business anchor at Asharq with Bloomberg, Jomana R. Alrashid expressed pride in SRMG platforms that had absorbed and adopted AI
RIYADH: Jomana R. Alrashid, CEO of Saudi Research and Media Group, highlighted how AI cannot replace human creativity during a session at The Family Office’s “Investing Is a Sea” summit at Shura Island on Friday.
“You can never replace human creativity. Journalism at the end of the day, and content creation, is all about storytelling, and that’s a creative role that AI does not have the power to do just yet,” Alrashid told the investment summit.
“We will never eliminate that human role which comes in to actually tell that story, do the actual investigative reporting around it, make sure to be able to also tell you what’s news or what’s factual from what’s wrong ... what’s a misinformation from bias, and that’s the bigger role that the editorial player does in the newsroom.”
Speaking on the topic of AI, moderated by Maya Hojeij, senior business anchor at Asharq with Bloomberg, the CEO expressed her pride in SRMG platforms that had absorbed and adopted AI in a way that was “transformative.”
“We are now translating all of our content leveraging AI. We are also now being able to create documentaries leveraging AI. We now have AI-facilitated fact-checking, AI facilities clipping, transcribing. This is what we believe is the future.”
Alrashid was asked what the journalist of the future would look like. “He’s a journalist and an engineer. He’s someone who needs to understand data. And I think this is another topic that is extremely important, understanding the data that you’re working with,” she said.
“This is something that AI has facilitated as well. I must say that over the past 20 years in the region, especially when it comes to media companies, we did not understand the importance of data.”
The CEO highlighted that previously, media would rely on polling, surveys or viewership numbers, but now more detailed information about what viewers wanted was available.
During the fireside session, Alrashid was asked how the international community viewed the Middle Eastern media. Alrashid said that over the past decades it had played a critical role in informing wider audiences about issues that were extremely complex — politically, culturally and economically — and continued to play that role.
“Right now it has a bigger role to play, given the role again of social media, citizen journalists, content creators. But I also do believe that it has been facilitated by the power that AI has. Now immediately, you can ensure that that kind of content that is being created by credible, tier-A journalists, world-class journalists, can travel beyond its borders, can travel instantly to target different geographies, different people, different countries, in different languages, in different formats.”
She said that there was a big opportunity for Arab media not to be limited to simply Arab consumption, but to finally transcend borders and be available in different languages and to cater to their audiences.
The CEO expressed optimism about the future, emphasizing the importance of having a clear vision, a strong strategy, and full team alignment.
Traditional advertising models, once centered on television and print, were rapidly changing, with social media platforms now dominating advertising revenue.
“It’s drastically changing. Ultimately in the past, we used to compete with one another over viewership. But now we’re also competing with the likes of social media platforms; 80 percent of the advertising revenue in the Middle East goes to the social media platforms, but that means that there’s 80 percent interest opportunities.”
She said that the challenge was to create the right content on these platforms that engaged the target audiences and enabled commercial partnerships. “I don’t think this is a secret, but brands do not like to advertise with news channels. Ultimately, it’s always related with either conflict or war, which is a deterrent to advertisers.
“And that’s why we’ve entered new verticals such as sports. And that’s why we also double down on our lifestyle vertical. Ultimately, we have the largest market share when it comes to lifestyle ... And we’ve launched new platforms such as Billboard Arabia that gives us an entry into music.”
Alrashid said this was why the group was in a strong position to counter the decline in advertising revenues across different platforms, and by introducing new products.
“Another very important IP that we’ve created is events attached to the brands that have been operating in the region for 30-plus years. Any IP or any title right now that doesn’t have an event attached to it is missing out on a very big commercial opportunity that allows us to sit in a room, exchange ideas, talk to one another, get to know one another behind the screen.”
The CEO said that disruption was now constant and often self-driving, adding that the future of the industry was often in storytelling and the ability to innovate by creating persuasive content that connected directly with the audience.
“But the next disruption is going to continue to come from AI. And how quickly this tool and this very powerful technology evolves. And whether we are in a position to cope with it, adapt to it, and absorb it fully or not.”
