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.

Lloyd’s has announced a target of 35% female representation in leadership positions as it seeks to fulfil its commitment to driving long-term culture change in the market.

The 35% target applies to the Lloyd’s market, and within that to company boards, executive committees and direct reports to the executive committee. It is expected to be achieved by 31 December 2023.  

In addition, boards and executive committees combined will be expected to achieve at least 20% female representation by the end of 2023. All new market entrants will be expected to meet these targets on arrival. 

Lloyd’s said it would also set a target for market ethnicity in Q2 2021, following extensive collection of ethnicity data in the market to determine a starting point.  

Lloyd’s today additionally published its culture dashboard, which provides a snapshot of the demographic make-up of the market, informed by the Lloyd’s culture survey last year as well as market participant data across key demographic characteristics.

The dashboard was one of five action points Lloyd’s announced in March last year following a Bloomberg article that reported instances of sexual harassment in the Lloyd’s market, citing anonymous female sources.

The dashboard shows that women currently hold 29% of leadership roles as defined above.  

However, there are still 12 firms with all-male boards and 12 with all-male executive committees.  

Out of this group, seven firms have all-male board and executive committee teams combined. One firm has all-male direct reports of the executive committee. 

Within the Lloyd’s Corporation, women fill 47% of leadership roles.

“The market [female representation] target will drive an improvement in the gender balance in leadership roles across the market in the short-term, with Lloyd’s committing to a medium-term ambition for parity over the next decade,” Lloyd’s said.

Other findings from the culture dashboard include that 88% of the market identifies as heterosexual, with 2% as lesbian or gay and 1% as bisexual. Around 8% preferred not to say.

Meanwhile, just 4% of the market have a disability, while 91% are able-bodied and 5% preferred not to say.

Lloyd’s CEO John Neal said: “Last year, we committed to building a much more inclusive market – one that we are all deeply proud to be part of, and one that welcomes and represents the diversity of our customers globally. In the Corporation, we have achieved parity in less than two years and we are all the better for it.

“While we have put in place a series of actions to accelerate change, it is abundantly clear that we have much work to do and we must be impatient in our resolve to get there. The Corporation will continue to do more in leading the market on all aspects of inclusion.”

Inquiry found rules to be “riddled with problems, unfairness and unintended consequences… the potential impact on the wider labour market has been overlooked by the government. A wholesale reform of IR35 is required.”

The report is critical of “numerous flaws” that “treats contractors as employees for tax purposes but do not qualify for employment rights, thus creating a class of zero-rights employees” and “places too great a burden on businesses”.

Summary of Lords Inquiry

It is right that everyone should pay their fair share of tax. But the evidence that we heard over the course of our inquiry suggests that the IR35 rules—the Government’s framework to tackle tax avoidance by those in ‘disguised employment’—have never worked satisfactorily, throughout the whole of their 20-year history. We therefore conclude that this framework is flawed.

Until the beginning of the COVID-19 pandemic, the Government had planned to extend off‑payroll working rules to the private sector in April 2020. The off‑payroll working rules build on IR35, and the new proposals were designed to mirror similar rules implemented in the public sector in 2017. Under the new rules IR35 itself will not change. Instead, large- and medium-sized businesses will be responsible for enforcing a regime which HMRC has struggled with.

The Government’s aim was to legislate for the new private sector rules in this year’s Finance Bill. But following the COVID-19 outbreak, and the Government’s assessment that introducing new rules was inappropriate at an extremely difficult time for the economy, the implementation of the rules will be deferred for a year.

We welcome this delay. It is right not to impose unnecessary burdens on business at such a difficult time. However, given the dysfunctionality of the existing system, we call on the Government to use the extra time to rethink fundamentally its approach to the legislation. We understand why, in order to improve compliance and protect the tax base, transferring responsibility for operating the rules to clients was deemed a remedy for the problems which have beset IR35. But the Government made this decision after considering the issue too narrowly, in terms of its tax take. It has severely underestimated the costs to business of implementing the changes. It did not take full account of concerns raised by stakeholders. And it did not analyse sufficiently the unintended behavioural consequences of the proposed reforms or their wider potential impact on the labour market, and on the gig economy in particular.

It is likely that the off‑payroll changes will cause widespread disruption. Many of our witnesses described how the proposals had already encouraged blanket status determinations and the early termination of contracts. We also heard that many contractors had been left in an undesirable ‘halfway house’: they do not enjoy the rights that come with employment, yet they are considered employees for tax purposes. In short, they are “zero-rights employees”. Separating employment status for tax purposes from employment status under employment law also fails to acknowledge that contractors bear all the risk for providing the workforce flexibility from which both parties benefit.

The Government should therefore take the opportunity afforded by the delay to analyse holistically the problems that we have uncovered. If the Government continues with its plan to introduce the off‑payroll reforms in April 2021, it should commission an independent review of the earlier introduction of the off‑payroll rules in the public sector to analyse how introducing off‑payroll rules to the private sector will affect the labour market. It should also, after two years of promising to do so, finally implement the recommendations of the Taylor Review of modern working practices: that the taxation of labour should be made more consistent across different forms of employment, while at the same time improving the rights and entitlements of self-employed people. We believe that the Taylor Review proposals offer the best long-term alternative solution to the off‑payroll rules, and provide an opportunity to consider tax, rights and risk together.

The UK economy is facing its most severe crisis since the Second World War. Even if the economy were to begin to recover in the next 12 months, the severity of the economic impact of COVID-19 is so great that it would be completely wrong for the Government to impose a new burden on business in the form of the existing off‑payroll proposals. However, business is likely to need considerably longer than a year to recover from the disruption caused by the COVID-19 pandemic. The Government should announce by October 2020 whether it will indeed implement the off‑payroll rules in April 2021, or whether any on-going impact to the economy resulting from the COVID-19 pandemic will require their implementation to be delayed further. In the longer term the Government should reassess the flawed IR35 framework, and give serious consideration to the fairer alternatives to the off‑payroll working rules which we lay out in this report.

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.

Charles Taylor InsureTech has emerged as the preferred partner in a project that will radically reshape the way cover holders pass data to London market carriers, The Insurance Insider understands.

Charles Taylor has fended off rival bids from IBM, Accenture, Verisk and Xchanging to take on the delegated authority project, a crucial part of the London market modernisation programme.

The tender relates to the data submission, access and transformation component of the delegated authority programme.

The insurance consultancy is understood to be the last vendor remaining on the shortlist, with the decision to appoint the contract to Charles Taylor expected to be finalised at a meeting of the Target Operating Model (Tom) steering board on 20 August.

Charles Taylor will deploy a software system called Tide, which was developed by Otak, a start-up that the consultancy acquired in February. The software aims to supply brokers and insurers with up-to-date premium and claims data, while cutting operating costs.

According to details on the Charles Taylor InsureTech website, Tide will use machine learning to read the documents submitted by MGAs, rather than data from spreadsheets being manually extracted.

Delegated authority underwriting is a vital element of the London market. Lloyd’s recognises 3,821 MGAs as coverholders, according to the market’s website.

But the level of paperwork associated with becoming an accredited coverholder presents a challenge to MGAs around the world.

London market coverholders face numerous complex and often duplicated data requests from carriers. MGAs must send both premium and claims data back to London, with different insurers requesting information in different ways.

If final approval is given by the Tom steering committee, the Tide platform will become a central repository for delegated authority data.

The delegated authority reform project is being spearheaded by Beazley chief operating officer Ian Fantozzi.

The delegated authority workstream of the Tom has already introduced single audits of coverholders by London market carriers. Formerly, MGAs faced audits by each carrier they worked with.

A spokesperson for the Tom said: “The selection process for a vendor for the delegated authority submission, access and transformation project is in its final stage but not yet complete. There is further work to do on contract negotiations and internal reviews and approvals, so no final contract has been signed.”

Charles Taylor declined to comment.

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