Lloyd’s is ’at risk of becoming far less relevant in five years’ and losing its competitive edge unless it takes practical steps now, advises consultancy firm
Lloyd’s of London is at risk of becoming “far less relevant” unless it issues practical, company specific playbooks to support its Blueprint Two digitalisation work, according to financial services consultancy and software provider Altus.
Speaking at a London-based event at the end of June 2022, the consultancy firm emphasised that although Lloyd’s is currently engrossed in implementing digitalisation to create a better, faster and cheaper marketplace, it believes that tangible details are still missing around the physical output for individual firms arising from the Future at Lloyd’s programme.
Lloyd’s has instead adopted a broad brush, market-wide approach to its modernisation, rather than considering distinct market participants, Altus noted.
“Blueprints for transformation are fine, but they are nothing more than just plans and proposals. They will never execute anything on their own,” said Altus specialty markets practice director Matt Carter.
Altus therefore published a Specialty markets whitepaper on 29 June 2022, which outlines the need for Lloyd’s of London to create complimentary playbooks in alignment with its Blueprint Two activities.
Challenges
Challenges facing Lloyd’s in its route to digitalisation, according to Altus’ whitepaper:
- Challenger organisations are working on alternative models that will allow them to trade from a different baseline with lower operating costs and improved efficiency - these could potentially replace today’s market participants.
- The scope of transformation appears to have drifted from the structure of the Future at Lloyd’s initiative to become a vision for the whole of the London market – this raises the question of whether Lloyd’s believes it must align itself to the wider London market for fear of being left behind, or whether it can retain unique features that differentiate it from the rest of the market’s capital.
- In May 2022, DXC Technology, Lloyd’s and the International Underwriting Association (IUA) signed a $465m (£392m) contract extension - leaving transformation powers in the hands of one organisation comes with inherent risk.
- The diversity of brokers and managing agents in the Lloyd’s marketplace can become a weakness when introducing digitalisation because managing agents do not move as one while embracing change.
Losing the competitive edge
Carter continued: “In [Altus’] whitepaper, we’ve worked hard to set out our view of what comes next for Lloyd’s if it is to survive. Right now, it is at risk of becoming far less relevant in five years.
“Long gone are the days when it was just Lloyd’s that could handle the most complex, cross-border policies and claims. Its competitors can now do the same work cheaper and faster. It has simply lost its competitive edge and it needs proper playbooks to regain it.
“One of the biggest potential mistakes that Lloyd’s is making is that its blueprints are for the market as a whole. This will not work.
”With the market comprising of over 300 businesses, we argue that there is no one-size-fits-all solution to its challenges - every organisation needs an individualised playbook. Trying to create a workable playbook for the entire market is an impossible task.
“Lloyd’s needs to change tack and we set out a number of ways in our whitepaper for it to do that. Unless it adopts this approach, or something similar, we cannot see it lasting.”
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