The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have launched a consultation proposing measures to boost diversity and inclusion to support healthy work cultures, reduce groupthink and unlock talent.

Surging wage inflation is an increasingly pressing concern for insurance and broking executives in the London market, with competition to hire and retain top talent threatening to dent profitability at the same time as rating increases begin to tail off.

Numerous sources from across the London market said that staff costs had rocketed over the past year, with the combination of hardening market conditions, the broking “supercycle”, start-ups looking to hire top talent and macroeconomic pressures all combining to hike staff costs.

The sums required to hire the best brokers and underwriters has been variously described to this publication as “out of control” and “crackers”, with the situation most pronounced in strained lines of business where staff movement has been exceptionally high, such as D&O and reinsurance.

Given that most companies across the market are in growth mode, management is faced with the simultaneous challenge of hiring for new roles while defending their existing staff base.

“All of us are all both poacher and gamekeeper,” one London market CEO observed.

While it is difficult to put a precise figure on the wage changes – not least because of varying compensation structures in the market – sources estimated that wage cost inflation was running at between 10%-20%.

This is skewed by the pay rewards on offer for staff moving between firms, with 50% pay rises a common occurrence for those taking on new roles or taking counteroffers, while base pay increases are generally single percentage figures for existing staff.

All of us are all both poacher and gamekeeper

(Re)insurance is not alone in experiencing an inflationary environment for staff costs, with demographic and macroeconomic factors, exacerbated by the pandemic, leading to wage inflation across a host of industries, with pronounced changes in financial services such as law and banking.

The situation in (re)insurance is exacerbated by the sector-specific drivers outlined above.

Market anecdotes abound of offers and counteroffers, lucrative joining bonuses and companies “throwing money around” to hire.

In one scenario, sources told of an underwriter offered a pay increase from £90,000 to £200,000 to move to a large broker, eventually remaining at the existing employer for a salary of around £170,000. Such stories are common.

Wage inflation has been most dramatic in the broking market, as intermediaries look to hire quickly and capitalise on highly attractive trading conditions, where rising insurance prices and GDP growth have led to a spell of bumper broker earnings dubbed the broking “supercycle”.

“When you are in a situation where you haven’t got enough people to service your clients, and you are making a lot of money, then you throw money at it,” one source observed.

Additionally, consolidation in the broker market and the hunger of challenger intermediaries such as Lockton Re, Howden and McGill and Partners has disrupted the market, with expanding operations offering lucrative pay deals to secure top brokers or teams.

Margins impact

Executives at carriers bemoaned a “dearth of talent” for the roles they are looking to fill, with insurers willing to pay a premium for those that meet expectations.

Sources estimated that the increased wage costs seen in the past year could add around 60 basis points to a combined ratio, while at brokers, wages are understood to have a more material impact on profitability, with remuneration expenses accounting for a larger portion of the cost base for intermediaries.

Across the major brokers the cost of staff has largely reduced as a proportion of revenues in 2021, although this could in part be down to the double-digit revenue growth the brokers have enjoyed over the past year.

There are, of course, pros and cons to paying out significant sums to bring in broker talent. As sister publication Inside P&C has explored, broking sources believe team lifts in particular when executed well can deliver the highest returns, particularly judged on a cash basis. (See the full analysis of the team lift model on Inside P&C here.)

Team lifts in numbers II Red.jpg

In underwriting, some business leaders stressed that the rising cost of securing key talent was largely justified on business grounds, with the potential gains from a profitable, loss-free book dwarfing the sums of a salary increase.

However, as the costing landscape begins to transition, with the possibility of flatlining or declining rates in some classes of business, sources warned of a hangover effect on profitability caused by the wage deals that have been agreed at the height of the pricing frenzy.

In particular, there is a shortage of underwriters with the ability to move business, meaning bumper deals for those that can.

Also, technical back-room staff have seen wage increases far greater than in previous hard market cycles.

Such wage increases, it was suggested, were sustainable amid hard market conditions, but retaining such upwards momentum would be untenable.

Sources speculated that 2022 would continue to see wage inflation in classes which remained distressed, but a more benign pricing environment in other lines would lead to a correspondent cooling in the hiring market, although macroeconomic factors were likely to keep up the pressure to up pay.

Analyst questioning at the brokers

Analysts are watching the situation closely at the large publicly listed brokers, with Marsh McLennan CEO Dan Glaser repeatedly quizzed on the subject after the broker reported its Q4 results last week.

The operating margin at the broker reduced by 90 bps to 20.4% in Q4, reflecting “significant investments in the business”.

The executive said that the broker, which has hired over 5,000 staff in the past year, was “very wary” about wage inflation, but confident that rising expenses were being balanced out by strong revenue growth.

Aon CFO Christa Davies said in the broker’s earnings call last week that she expected to see wage inflation into 2022, but it would be offset by other improving efficiencies at the business.

On a conference call with Brown & Brown investors, CEO Powell Brown also said his firm was “absolutely encountering wage inflation”.

The CEO said the impact of wage inflation had not shown up in a meaningful way in Q4 but added: “We are absolutely subject to the pressures of it that anybody else right now is.

“I think that I’ve read recently that we’re in a somewhere between a 30- to 40-year low in terms of labour shortage across all industries. And I’m not going to say that’s indicative exclusively of our industry, but I’m saying the industry hasn’t done a very good job of reinvesting in the teams that are there.”

Driving factors

Sources stressed that wage dynamics at play in the market were shadowing those of previous market cycles, with improved underwriting conditions inevitably adding inflationary pressure to wages.

On top of that, the amount of private equity capital entering the insurance arena and the bumper valuations placed on brokers and MGAs in M&A deals was having a trickle-down effect on staff income.

“The result is that some MGAs are throwing money around like it’s confetti,” one source said.

There is a marked difference in approach between businesses, with big brokers and some start-up underwriters most willing to offer bumper pay deals, while other established underwriting shops are said to be “playing a long game” and allowing some level of staff attrition as a result, and others counteroffering to retain talent.

Some MGAs are throwing money around like its confetti

In reinsurance, the situation is said to be “ridiculous”, especially in the broking market.

Meanwhile brokers with over 15 years’ experience in the D&O market are said to commonly expect a salary “with a two at the front”, whilst competition is incredibly tight for staff with three to five years’ experience.

Pay growth for junior staff has also been boosted, with graduates offered more attractive packages than in previous years, although sources stressed that this followed a number of years of stagnation, and that insurance pay was still well below that of finance professions like banking and the law, in part reflecting the lesser workload.

The bigger picture

The insurance sector is not unique in its experience of surging staff costs, with macroeconomic trends and the pandemic having driven up wages globally, including in financial services.

In the UK, wage levels as of October 2021 were 107.8% of those seen at the beginning of 2020, with the financial services sector outpacing average earnings growth, with wages 113% of the January 2020 figure.

The pandemic has pulled forward retirement dates for a significant proportion of employees, creating a demographic challenge, whilst economies rebounding from the hits taken during the pandemic have led to a tight labour market.

Other mainstays of the City such as banking and law have also seen staff offered better pay deals, with competition for staff corresponding with a boom period for M&A activity, huge investment bank profits and record partner payouts at law firms.

Around a third of 2021 business plans being submitted to Lloyd’s at this stage in the planning season are unrealistic in terms of growth or profitability expectations, CEO John Neal has said.

Speaking at a press conference after Lloyd’s H1 results today, the executive said no business plans had yet been approved at this point in the year, with the first of four “waves” of plans now being assessed.

An early assessment shows there is still a misalignment of expectations between Lloyd’s and some syndicates.

There is a percentage of plans Lloyd’s feels comfortable with, and a further proportion where “we feel we will get to where we want to be in terms of premium expectation or performance”, Neal said.

These two cohorts and the light-touch syndicates – which get automatic plan approval – account for around two-thirds of the market, the CEO continued.

“About a third of the market we would say we don’t see a clear path yet to plans which are logical, realistic and achievable,” Neal said.

“I am not discouraged by that, it’s where we would hope to be, but there’s lots of conversations to be had.”

The CEO said Lloyd’s would grow in the “high single digits” for next year, with around £12bn-£13bn ($15.6bn-$16.7bn) of new business set to be approved and new syndicates set to join the platform.

“Two years ago we were talking about £7bn of new business,” Neal added.

“I think we are getting the balance right for giving the flexibility for business growth… I think that is pretty significant growth for 2021.”

The CEO’s comments came after a set of Lloyd’s H1 results which were battered by £2.4bn of Covid-19 claims but showed significant improvement in the underlying underwriting performance of the market, with the attritional loss ratio declining 7.1 percentage points year on year to 52.6%.

That improvement was mainly driven by the past three years of remediation efforts, Neal said, without giving further detail. Improving rates gave a further tailwind, while Lloyd’s also booked a small amount of benefit from reduced loss frequency from certain lines as a result of Covid-19.

The CEO added: “We are near to where we would hope to be on an underlying basis. We expect to see further improvement through 2021 as the market works on delivering plans which are logical, realistic and achievable.”

Lloyd’s CEO John Neal has said repricing “has to happen” following the substantial industry losses from Covid-19, and pledged flexibility in permitting additional growth to the market as rates rise. 

This morning, Lloyd’s released an industry underwriting loss estimate of $107bn for Covid-19. When including the expected hit to investments, this total industry impact rises to $203bn, Lloyd’s said.

The Lloyd’s market is expected to take $3bn-$4.3bn of the Covid-19 underwriting losses.

Speaking to Insurance Insider, Neal said: “You can’t put a potential $200bn loss into the non-life insurance industry and not expect the market to reprice.”

He added: “I hope we will learn from experiences of the past, whether that was 9/11 or another event, and realise that this has to be a significant pricing event.”

The Lloyd’s CEO said the Corporation would be as accommodating as it reasonably can be in permitting syndicates to grow in a hardening market.

Lloyd’s performance management directorate has been tough on growth in the past two years as it has sought to rectify market performance, a process which is still ongoing. The market has previously complained that Lloyd’s would not allow it to grow ahead of risk-adjusted rate.

“If there is growth that’s price-driven we will be very quick to support that,” Neal told this publication.

He said that Lloyd’s would do as much as it could to approve business plans quickly and simply, and “there would be forgiveness if the right opportunities are there within your plan to grow”.

The light-touch cohort of outperformers will gain automatic plan approval and therefore freedom to grow.

Neal said those which are not light touch, Lloyd’s had revamped the standard approach to business planning around some KPIs. Provided the plans are credible, and there is clear demonstration of how managing agents got to their forecasted loss picks, “we can fast track those approvals”, Neal said.

“I think the vast majority of syndicates will fall into those two buckets. If plans are sensibly constructed they will be approved,” Neal said. “But there is a third bucket, the high-touch syndicates, and if they have been a problem it will be a difficult set of discussions.”

The high-touch cohort is made up of both underperforming syndicates and those which are deemed material to the market – either due to their size or cat exposure. Lloyd’s 2020 planning documentation shows the high-touch cohort has around 20 syndicates and accounts for around 45 percent of market premium.

Lloyd’s will also be accommodating to new capital wishing to support Lloyd’s businesses as the market enters a period of opportunity, Neal said.

He pointed to the two new Lloyd’s entrants recently approved – Carbon and Ki – and said the syndicate in a box framework was generating steady levels of interest.

“Our ILS work continues, so there is no reason why that alternative capital shouldn’t come in,” he said. “There is still interest from those not yet participating in the market, who are thinking about when entry to Lloyds is the right time.

“As difficult as this pandemic is for our customers, and how devastating the broad impact has been, there is an opportunity for insurers.”

Lloyd’s is extremely well capitalised and will be able to shoulder the cost of Covid-19, Neal said, noting that the twice-yearly recapitalisation opportunities at Lloyd’s meant the market should also be able to bolster capital before the peak US wind season.

Neal also warned that the Covid-19 impact would drag out over a number of years, with the first year creating a catastrophe-type loss, then the effects of recession being felt on premium income in the following years.

“We have also got to keep a really strong eye on inflation probably for two years out,” Neal said. “I think our businesses at Lloyd’s have learned that we have got to adjust price to keep pace with the recessionary and inflationary impact that will echo through 2021 and 2022.”

Make no mistake, the sudden news that performance management director Jon Hancock is leaving Lloyd’s will send ripples across the London market.

He’s the man who stopped the rot and set the wheels in motion for a more profitable Lloyd’s. At a time when the future for 1 Lime Street looked bleak, he demonstrated that a firm hand and a risk-based approach to regulation could start to rectify the mistakes of the past, albeit slowly.

Lloyd’s had suffered from a crisis of confidence – even John Neal acknowledged when he arrived as CEO that the marketplace had lost its mojo. Restoring positivity in the market has been a big win for the Corporation in recent times, and Hancock’s role across performance and transformation was an important driver of that renewed confidence.

It goes without saying that his exit is a major blow for Lloyd’s, at a time when momentum around performance and strategy was just starting to gain pace.

Lloyd’s is keen to publicly show that there are no hard feelings. The transition will be flexible to suit both parties, they have said. There will be no cliff edge.

Both Neal and Hancock have stressed that this separation is nothing to do with differences of professional opinion – nevertheless market tongues will still wag on whether this departure is really to do with the fact that Hancock’s more measured view of how to implement change was at odds with Neal’s ambition to spark a big bang moment for Lloyd’s.

Departing before he has done four years in the role – and in a critical year for the Lloyd’s transformation work – certainly suggests there is more behind the move than just itchy feet.

When we spoke to him, Hancock stressed a desire to return to the commercial side of insurance, to be challenged in a way that only P&L business accountability can do.

This only works to emphasise a wider challenge that Lloyd’s faces in retaining and keeping the best talent. The best staff are reluctant to work at regulators long term.

Talent retention and turnover of staff has historically been a big issue within the Corporation, even if recently improved sentiment around Lloyd’s puts it in a much better position to recruit a highly credible successor.

The next question for the Corporation is who wants to take on arguably one of the toughest jobs in the global (re)insurance market.

Few individuals impact the performance of such a wide swathe of the market. The performance management director has a remarkable level of influence on both market profitability and pricing dynamics.

For the Corporation, performance is a key pillar of the strategy and it cannot afford to falter now that gains are starting to be made – and particularly with another calendar-year underwriting loss most likely in the pipeline.

Neal has stressed that the tone of performance management will continue with the new recruit, and the standards that Hancock has set will “100 percent” continue.

For the good of the market, this statement must prove to be more than just lip service.

But at the same time, there will not be complete continuity between the new regime and the old. The new performance management director will surely want to make his or her own mark in the role and will not want to live in Hancock’s shadow.

It will be a fine line to tread, while carrying a huge weight of responsibility.

As we have said before, the talent element is crucial to Lloyd’s ability to carry out the transformational change it is targeting.

With much more still to be done, the next performance management director will be one of the most important hires, if not the most important, Lloyd’s has made in recent times.

Anticipation of a harder market and the creation of an unrestricted light-touch cohort of syndicates has resulted in an increase in the aggregate Lloyd’s market stamp capacity of 6.4 percent to £33bn ($43.6bn) for 2020.  

The Insurance Insider’s annual stamp capacity survey found that overall the market is permitted to write £2bn more business for 2020 than this year.

The increase also marks a reversal of the contraction in stamp seen for 2019, when the Lloyd’s performance management directorate’s clampdown had led to the exiting of a number of classes and a tough stance on growth. Stamp for 2020 is also higher than that recorded in the 2018 survey.

Stamp capacity is the amount of sterling business a syndicate is authorised to write in a year of account. For the purposes of this survey, stamp capacity is calculated as gross of reinsurance and net of brokerage.

The measure is not a perfect indicator of the amount of business that syndicates intend to write, with carriers choosing to maintain different amounts of headroom at different points in the cycle. However, it remains a useful proxy for the business the Lloyd’s market expects to write in a given year.

This publication previously reported that planned premium growth for the market in 2020 would be a few points higher than the expected risk-adjusted rate increase of 5 percent.

The top 10 syndicates by stamp capacity also collectively grew their stamp by 8.9 percent to £14.1bn.

The largest syndicate in the market is now Beazley’s flagship Syndicate 2623, which has grown its stamp by 19 percent year on year to £1.9bn for 2020.

Syndicate 2623 is understood to be a light-touch syndicate, one of a group of 15 which are permitted unrestricted growth due to a good track record.

As previously reported, the light-touch cohort of syndicates grew planned premium by 14 percent for 2020, compared to 3 percent for the rest of the market.

Syndicate 2623 has replaced MS Amlin’s Syndicate 2001 as the largest syndicate in the market. In 2019, Syndicate 2001 had a stamp capacity of £1.85bn, but has reduced this by £250mn for 2020 to become the third-largest syndicate with a stamp of £1.6bn.

The de-emption comes after news that MS Amlin would exit nine business lines as part of remediation efforts.

Lloyd’s premium growth in 2020 will be heavily skewed towards better-performing syndicates as the Corporation seeks to incentivise the bottom quartile to improve performance and push the whole market towards more robust profitability. 

The outcome of the 2020 planning process is the strongest signal yet that the reality is matching the rhetoric on differentiated regulation of managing agents.

As this publication reported last week, the performance management directorate (PMD) has permitted a measured level of exposure growth for the coming year in the aggregate, with planned premiums a few points higher than the current projected risk-adjusted rate rise of 5 percent.

However, the 15 outperformers in the light-touch cohort – which gain automatic plan approval – will grow significantly more than the rest of the market.

Slides used by the PMD in the presentation show that the light-touch cohort will book 14 percent growth in 2020 planned premium, compared to just 3 percent for the rest of the market.

More than three quarters of light-touch growth will also come from increased exposure, while the rest of the market will actually reduce their exposure by 26 percent and achieve their premium growth via rate increase.

The rest of the market includes the high-touch cohort, which holds around 20 syndicates and accounts for around 45 percent of market premium. It is made up of both underperforming syndicates and those which are deemed material to the market – either due to their size or cat exposure.

The planned premium projections allay fears PMD would prevent syndicates from capitalising on rate momentum after taking a hardline stance last year.

However, it’s clear that only those who tick all the boxes on underwriting and operational excellence, including success against long-term performance standards, can fully embrace the current growth opportunities.

The long-term success of differentiated oversight will depend on how the PMD decides to triage syndicates, and too crude a methodology could risk choking smaller syndicates of the growth they need to underwrite profitably, given the structural expense issues at Lloyd’s. It will also depend upon the light-touch syndicates retaining their discipline now that they are operating with reduced oversight.

Lloyd’s market expense ratio is expected to see a 0.4 percentage point improvement to 38.5 percent for 2020 as a decline in acquisition costs is partially offset by a rise in admin costs. 

Slides from a Lloyd’s market presentation and seen by The Insurance Insider show that the projected acquisition cost ratio will fall 0.7 points to 25.9 percent for 2020, while the admin cost ratio will tick up by 0.2 points to 12.5 percent.  The two components add up to a rounded 38.5 percent, according to the Lloyd’s slide, down from a forecast 38.9 percent for 2019.  

The lower acquisition cost ratio is thought to be due to a changing business mix at Lloyd’s.  

Lloyd’s said in the slide deck that “no real progress” had been made on expense ratios, with actual expenses in sterling continuing to rise.  

The 38.5 percent total expense ratio is a projection based on 2020 business plans and could end up being higher or lower come the end that year. The forecast final expense ratio for 2019 is expected to be 0.3 points lower than that projected in 2019 business plans.  

The projected 2020 expense ratio is also 1.8 points lower than that booked in 2018.  

Performance management director Jon Hancock has previously made clear that 2020 business plans would not be approved without an improvement in the expense ratio year on year. 

He has previously told this publication that drive to reduce expenses was a “principle not a rule” and the performance management directorate would not enforce set targets on expense ratio reduction, as every syndicate is different.  

He noted that there were some syndicates in Lloyd’s which had “super competitive” expense ratios and it would be foolish to expect them to cut those even further. 

Research into admin costs at syndicate level has also found that there is no correlation between the size of a syndicate and its admin expense ratio, contrary to the popular belief that administrative costs decline as a syndicate grows.

Expense reduction is a major focus of the Future at Lloyd’s strategy. CEO John Neal has previously said Lloyd’s was targeting a 25-30 percent expense ratio within five years via digitisation, automation, simplification of processes and end-to-end processing at Lloyd’s.  

After the closure of three Lloyd’s syndicates since the start of the month – Vibe 5678, Pioneer 1980, and Acappella 2014 – there are plenty of reasons to feel bearish about smaller Lloyd’s players.  

These three syndicates suffered from a toxic cocktail of access-to-business problems reflecting poor competitive positioning, soft market growth and cost issues brought to bear by Lloyd’s expenses, their lack of scale and the Corporation’s cap on growth.

As if that wasn’t enough, there are structural shifts that make the future look bleak for small players: the move towards passive following capacity and the pending changes to the Lloyd’s lead-follow structure.  

With all of this bearing down on them, it is not surprising that the three syndicates suffered from persistently weak underwriting performance, and that they were not perceived by capital providers as a good short- or long-term bet. 

Some believe we are witnessing the dying days of small syndicates.  

But despite the closure of these three players, other syndicates faced similar challenges and yet managed to secure capital for another year.

Dale Underwriting Partners kept ProAssurance on board with a reduced line, and was able to add three new trade capital backers.

Probitas secured capital backing for 20 percent pre-emption, while Apollo, Agora, Verto and DTW 1991 were finalising their Funds at Lloyd’s as of last week.

Securing capital for 2020, of course, does not mean all those structural pressures and tough market conditions vanish overnight. It is, however, a sign that the situation is more nuanced than the “big is beautiful” cheerleaders may suggest. 

Perhaps it is not impossible for small syndicates to survive. There are other syndicates out there that do good business without the advantages that scale brings, with MAP, Ark and Atrium all consistently among the best performers in Lloyd’s.  

On the flip-side, there are larger businesses for whom it has not all been plain sailing.  

MS Amlin was in September obliged to shut down nine lines of business as part of a fresh round of remediation work. The firm’s Lloyd’s syndicate has not made an underwriting profit since 2015.

Similarly, Axa XL’s flagship Syndicate 2003, which wrote $3bn in gross premium in 2018, booked a loss $302mn last year – larger than the prior year’s loss of $259.2mn – and reported a combined ratio of 115.6 percent. 

The challenges faced by these businesses show that scale isn’t everything. 

A loss ratio problem is a loss ratio problem if you wrote £250mn or £2.5bn. 

And conversely, a business with good risk selection, intelligent portfolio construction and well designed outwards protections, should be able to continue to outperform on the loss ratio. 

It may be harder than it used to be and it may continue to get harder. But it’s just possible that the best entrepreneurial businesses will continue to thrive at Lloyd’s. 

In Brief

IG offers 5% rate rise as it switches to two-year deal

The International Group has offered 5 percent increases on the key layers of its programme, as it seeks to move the entire $3bn open market placement to a two-year deal, The Insurance Insider revealed.  

The IG has also notified the market that it expects the Golden Ray claim to come in as low as $115mn, while the Maersk Honam also experienced sizeable loss development within the most recent policy period. Against the backdrop of a turning marine market, and with fears of creep on the Golden Ray, (re)insurers have given a lukewarm reception to the deal, which incepts on 20 February 2020, particularly given the attempt to lock down two years of capacity. 

Swiss Re reports ‘strong’ corporate solutions pricing momentum

Swiss Re said pricing momentum in its corporate solutions unit  remains strong, with the greatest growth in loss-affected property lines, after the division achieved 10 percent rate growth in the year to date. 

In an investor presentation the reinsurer said it has cut $60mn of operating costs from its corporate solutions unit so far this year as it restructures the division to achieve a combined ratio to 98 percent by 2021, down from 110 percent in 2018. It is focusing on “de-commoditising” the corporate solutions business it writes, while growing its exposure in large property transactions, credit and surety, and accident and health. In the presentation Swiss Re also said it expects a casualty reinsurance combined ratio of 97 percent this year, down 1 point year on year, after cutting back in US liability and US commercial motor. 

Munich Re exposed to Chile riot claims through Suramericana treaty

Munich Re is among reinsurers facing riot losses in Chile due to a property treaty it leads for one of Latin America’s largest insurers, The Insurance Insider reported. 

Suramericana is facing at least $150mn in claims from civil unrest in Chile over the past six weeks, the company has confirmed. A representative from Suramericana said the company is continuing to monitor the situation. Munich Re owns an 18.9 percent stake in Suramericana, with the rest of the equity held by Colombian financial services business Grupo Sura. 

DTW Syndicate 1991 inches closer to 2020 capital deal

DTW Syndicate 1991 is in the final stages of securing capital for the 2020 underwriting year with around a week to go until the coming-into-line deadline, The Insurance Insider reported. 

Sources told this publication the Coverys-managed syndicate had secured business plan approval from Lloyd’s with a circa 10 percent reduction in top line, and the details are now being finalised on the capital arrangements after a challenging renewal. In a statement, Coverys confirmed DTW 1991 was in the process of finalising its 2020 underwriting capacity arrangements ahead of the 29 November deadline and said it is “grateful for the support of our capital providers and are confident in delivering on the syndicate’s 2020 plan”. 

CAC Specialty launches environmental liability group

Cobbs Allen arm CAC Specialty has appointed a trio of brokers and established an environmental liability division.  

The operation will be led by Gregory Schilz who joins the business from Marsh JLT’s San Francisco office, where he was an executive vice president. Grant Nichols and Brian Lu also join from Marsh JLT and become vice presidents at the new division. Nichols is based in Miami while Lu works from New York. 

Market participants who refuse to amend inappropriate behaviour must be removed from their roles even if they bring in large profits, the Lloyd’s CEO has said.

John Neal said at the Insider Progress event yesterday: “I don’t think there are ‘rainmakers’. The organisation is bigger than the individual.

“If they are not behaving and they cannot change, they should go.”

Neal’s comments came after Financial Conduct Authority CEO Andrew Bailey said in September that he had seen instances within the financial sector where management had quashed complaints about “loose cannon” individuals because of the profit they brought into businesses.

It also comes after AJ Gallagher UK CEO Simon Matson was forced to issue a public apology after a court case revealed him and commercial director Vyvienne Wade had used racist and abusive language about departing staff. Both currently remain in post.

The Lloyd’s culture study revealed that just over a fifth of respondents had seen people in their businesses turn a blind eye to inappropriate behaviour, and sparked a programme of measures from the Corporation that aim to create an inclusive culture within the market.

Neal noted that despite the figures in the survey and Lloyd’s messaging on diversity and inclusion (D&I) since then, some individuals were not yet on board with the initiative.

“I am genuinely worried that people still don’t get it,” Neal said.

“They say, ‘it’s not as bad as you think’. I don’t care how bad it is, it’s not a Richter scale of behaviour.”

Neal pointed out that the average age of the industry had been rising over the past two years, rather than falling, as efforts faltered to recruit the next generation.

Younger people do not consider a career in insurance to be fulfilling and, according to the executive, improving the culture was a key part of attracting in millennial staff.

Neal said that when the Corporation launched next year’s culture survey in early summer, he wanted it to attract substantially more responses than the 6,000 it received this year.

The CEO detailed Lloyd’s actions on culture and inclusivity so far, explaining that the Corporation was in the midst of checking D&I policies within each Lloyd’s business, and ensuring each had the ambition to change.

Lloyd’s has also set up an advisory group chaired by Fiona Luck, non-executive director for talent and culture. This board will include independent experts who will hold the Corporation to account on D&I and report each year on the market’s progress in Lloyd’s annual report.